USAA’s Digital Shift Is Saving Millions Of Dollars

[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.)

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 |

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 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?





WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. I think that as the last comments of Deserat point out we seek different levels of service and approach banking and investing with far different levels of expectations. I use Naval Federal for all my banking and cash management needs, have financed 3 houses with them. I do not now, nor ever have seen them, much like a USAA, as an investment or wealth management vehicle, as I have never taken out a mortgage with Vanguard, I do not expect the same level or degree of asset management with Navy Federal as I do with Vanguard. It strikes me as common sense, good business sense to choose one or a few things to do and do will well to excellent. I think you get lost in a business sense when you try to be all things to all people and diversify too much just for market share. Is USAA on that path? Who knows, again they are an insurance company first, and that’s how I treat them, and how they have treated me for over 30 years, and we have got along fine. Capital, money will always flow where it is treated the best, has been that way for about 5,000 years, do not expect that to change.

  2. I’m like the first commenter in that I never used USAA’s financial planning services. However, pretty much all of their banking services are going on line and becoming *dependent* on your mobile phone. I’ve had quite a few conversations with them about the underlying assumption with that. I am not tethered to my mobile phone and I don’t want them tethering me to it and their mobile app in order to get service. The last few conversations with their staff have not been very customer friendly-they expect me to talk and find an obscure code buried in their app on the same phone to verify that I am who I am after they were the ones who told me to call them-still scratching my head over that one. Of course, they will only give me their first name, so the trust is truly one-way.

    However, this is the future and I realize they don’t see me in that future long term so I have to ‘deal with it.’ That’s OK-I’ve started to minimize my exposure to them and they *don’t have* any ties to the majority of my assets, thank goodness.

    USAA has definitely gone from great to merely good in my estimation, however, I think that was their intention – more market share for the price of changing their reputation from excellent customer service to merely good customer service. Unfortunately, I’ve yet to find any other insurance company/bank that is excellent any more. So I’m stuck….for now.

    Thanks for the update-it confirmed in factual terms my anecdotal experiences of late.

  3. Have had a 30 year relationship with USAA as applies to life, home, auto insurance. Outstanding services and relationships. In insurance they the gold standard. Not close. Never affiliated with their money management, investment arm. I can say from the 30 year relationship I have with Vanguard that unless you have around 1 mil under management you can meet face to face, at no cost, with a CFP at their Valley Forge or Charlotte offices, but all other services will be phone, mobile app, remote. You will be affiliated with a designated CFP, but there is a cost associated depending on AUM. I have never found it a problem or issue in terms of either counsel when needed or working out a plan if need be. I have had most of my financial planning with them via Skyp. Again, no issues.

    In the world of investing you have 3 types of people with different needs. The high net worth types, the mass affluent, (typical Vanguard client) and everybody else. Its the every body else that need competent, professional, sound financial advice at a low cost to the investment house, without the abuses associated with selling products on commission, such as a Wells Fargo in the news now. And that is done via what can be called automation, robo, algorithms and fee for service based financial services. Brick and Mortar, stand alone branches or offices simply cost too much in the new reality of passive money management and indexing, which the world is going too, like it or not. You can pay 1.5-2% at some mutual fund houses in an attempt to beat the market or go have coffee with a person. And some need and want that, I get that. I choose to pay .015-.02%, which over decades adds up to some serious money.

  4. I attempted to meet with a CFP in person in Colorado Springs and was told I could only do so online. If I have a physical location to go to, and they’re planning on keeping that facility in place, why not assist those of us who live in town with in-person support??

  5. I’m the most enthusiastic, loyal USAA member on the planet and I love the mobile app.

    I’m hopeful they’ll continue to serve members less able to use the app and website, possibly at a charge. Many traditional banks now charge customers who walk into branches, shifting the cost of providing those services onto the customers who use them.

    • I’ll ask about this next month. I wonder if there are so few walk-in customers that the charge would have to be prohibitively high to pay for the fixed expenses of a branch & employees.

    Comment? Question? What's on your mind?