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USAA’s Digital Shift Is Saving Millions Of Dollars

by Doug Nordman

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[Nords note: I’m in San Diego at the Sheraton Marina Hotel for Digital CoLab and FinCon16. If you’re in the area then stop by for a free FinCon Wednesday evening 21 September at Your Money Meetup with Jason Vitug of Phroogal.
  If you’re not in the area then you can still follow the week’s activities at #FinCon16.]

First I wanted to title this post “Shift Happens”.

Then I wanted to say:
[in my deepest Dr. Evil voice] “USAA is saving its members one BILLION dollars!” [/Dr. Evil]

But the fact is that USAA is shifting its strategy away from brick-and-mortar member service centers and going with even more features in its mobile app. I expect to learn a lot more about that next month at their Digital MilEx conference.

As recently as five years ago, USAA built a number of member service centers and expanded their real estate across the country. They’re in military concentration areas like Virginia Beach, Killeen, and Colorado Springs. I was eagerly anticipating the announcement that they’d be opening one in greater metropolitan* Wahiawa at Schofield Barracks.
(* Sorry. If you’ve ever blinked while driving through Wahiawa, you know this is hyperbole.)

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Now USAA is going in a new direction, and over the next few months they’ll shut down 17 of their 21 member service centers.

Image of the USAA eagle logo | The-Military-Guide.com
More change.

In retrospect, we had a hint about this. One of the services that USAA offered through their website (and their member service centers) was personal financial advice through their network of Certified Financial Planners. One of the readers mentioned nearly six months ago:

“I met with my CFP today at USAA. A one-hour appointment turned into two hours as we were shooting the breeze. He said that as of August there will be no more face-to-face wealth management meetings. USAA had decided they’ll move to online/Webex as that was what the 30-50-year-old demographic wanted.
“That demographic has no money. It’s the older folks who have the assets and want the face-to-face discussion to build trust. I’m not sure our customer relationship would be as open if I was starting over without a face-to-face meeting. My CFP said that once we start talking online it will have to be all business as it’s a recorded line. (No more shooting the breeze.) That just means more stand-off distance in our transactions.
“He said a lot of clients had been with them for over 30 years, and some with large accounts were not going to be happy with not being able to see him in person. He also told me that USAA used to have a goal of opening a certain number of CFP offices. We did a quick back-of-the-envelope estimate and came up to a $6M infrastructure bill before any salaries.
“I suspect all this is a major cost cutting exercise to improve the overall bottom line.”

I checked with USAA’s Communications team and learned:

“The Wealth Management team is transitioning to a new model powered by more digital and personalized member experiences. The enhanced offering will feature more video, phone, and mobile solutions and a new digitally based personalized financial planning tool.
With this transition, we are centralizing and relocating some of our wealth management staff to seven main locations in San Antonio, Addison, Tampa, Phoenix, Colorado Springs, Atlanta, and Washington DC.
Our Wealth Management members have indeed been informed of this change. Members will continue to enjoy our wealth management benefits, including personalized, dedicated financial advice and planning relationships, comprehensive financial planning, insurance and risk reviews, trust, banking, asset management, and estate planning guidance.”

This week USAA shared more of their plan.  By next April there will only be four member service centers in the San Antonio headquarters and in Annapolis, West Point, and Colorado Springs. There’s no official word on whether that’s for the benefit of the midshipmen & cadets or for the (older, Baby Boomer) staff.

Hey, I’m a USNA alumnus. I have my opinions.

You can read USAA’s FAQs at this link.

USAA’s Communications team responded to our blogger questions about the announcement.

Over the last few years, mobile online use has exploded. (I’ve seen it more than triple on the blog’s readership.) USAA’s mobile access has surpassed all other channels, and member data shows that the majority of us no longer need a bank with a physical branch. Today, over 97% of the bricks-and-mortar transactions can be done online. For the next few months, USAA’s financial center employees are helping members do business through the app or on the USAA.com website.

Frankly, I think this choice will leave a few members in the lurch. They’ll either have to figure out how to do their business online or they’ll have to revert to old-fashioned telephone & postal mail. (This is particularly a problem among members with declining vision and hearing. As a Baby Boomer, I feel our pain.) However the decision will save the rest of the membership a meaningful sum of money.

USAA has also documented that only 2.5% of the members still visit the financial centers– and mostly to use the ATMs. Over 99% of their transactions at the financial centers could be handled online or through an ATM. Meanwhile, 85% of the members are already outside the footprint of the existing financial centers. The centers are expensive to operate, they do not scale, and mobile is cannibalizing their business.

One Communications exec noted that just the presence of a financial center diverts members from learning how to do their business on the app. This creates a problem when active-duty members inevitably transfer to an area without a financial center. USAA is already doubling the number of deposit-capable ATMs in the 17 areas where the financial centers are closing.

Personally, I wish I could have enjoyed a cup of USAA coffee at a financial center near me. Over the last few years it’s been increasingly difficult for me to deal with fine print and phone conversations, and I suspect those annoying physical harbingers are only going to get worse. However I can zoom my iPad (or my 23″ monitor) to whatever font size I need. It’s been almost a decade since I’ve had to visit an ATM to deposit a check. I only write a couple of paper checks a year, and they’re both to the antiquated manual systems in our Hawaii state tax agencies.

Hanging out at a financial center is a sentimental fantasy, but I’m not willing to pay for it. Instead I’m looking forward to the new features on the mobile app. I’d like to automate even more of my insurance… while reducing the expenses.

What’s your opinion?

I’m going to spend 26-27 October at USAA’s Digital MilEx. (FTC disclosure: they’re buying my lodging, meals, and lots of their yummy coffee. I’m paying for my plane tickets.) This is my chance to interrogate their execs with your questions. Is there a problem that needs fixing? Have you wondered how USAA handles the insurance or finance business? What else would you like me to investigate for you?

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