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Meet the Trainer: Gerry Gould

Meet the Trainer: Gerry Gould

AE met with Gerry Gould to get an in depth look at his approach to training. Learn how he got started in the business, the areas he trains on, and why Gould says he should be an agent’s go-to source for dealership training.

How did you get your start in the auto industry and how/why did you specialize as a trainer?

I had just gotten married and decided that reconditioning cars was not going to give me a bright future, so I went to the dealership my dad was running and said, “Pops, I wanna sell cars.” Thankfully, he gave me a shot and I’ve been in the business ever since. It wasn’t until quite a few years later that I was asked by the dealer principal I was working for to mentor new sales consultants. It was then that I realized I could really get a message across regarding the development of personnel. Soon, I was developing training programs for the dealer group while working as an F&I manager. I eventually took a job with a nationally known F&I training company.

What areas in F&I do you focus on with your training?

We focus on all areas of F&I development from compliance to lender relations. We place a lot of emphasis on presenting a menu/option disclosure in a manner that is telling, rather than selling, and in a manner that is direct and to the point. We leave any type of selling for the end of the menu/option disclosure. Our motivation for telling rather than selling is to keep the customers attention and make an attempt to gain a commitment to purchase when the customer feels less threatened. This way gaining a commitment becomes more conversational, rather than combative.

Why should an agent call you for a training assignment?

There are a lot of training companies and trainers trying to be different – trying to reinvent the wheel and train from a point of theory or what they think will work without having ever tried it. I can say I’ve been there and done that. We understand the business of F&I and our training is always facilitated from a point of reality with proven results. We also train from a point of opportunism, knowing some things work some of the time, but some things work most of the time; we choose the ones that work most of the time.

What are the top three messages you try to give at each of your training sessions?

1.) Knowledge is power and the more you know about our industry, your products, and your customer, the more success you will have.

2.) You need to look at things from the customer’s point of view and sell based on their criteria.

3.) Tell, don’t sell. Save the selling for when you have the customer’s attention.

What changes in the industry do you foresee impacting your training the most over the next few years?

There is a lot of talk about the Internet’s role in the total transaction. Developing a curriculum for an online transaction may be in order. Then there’s all the talk about the CFPB and their influence on the industry. So I guess that could hinder the rate hounds and we’ll be called to duty. After all, it’s product that drives PVR, not rate.

Tell us about yourself and the kind of activities, hobbies, and interests you pursue outside of training.

I am very energetic and get bored quite easily. Outside of training, I like fishing in the Gulf of Mexico, golfing and making leather wrist bands as a hobby.

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An Interview with Ken Shubin Stein of Spencer Capital Holdings

An Interview with Ken Shubin Stein of Spencer Capital Holdings

Ken Shubin Stein is the chairman of Spencer Capital Holdings and the founder and portfolio manager of Spencer Capital Management. As the force behind recent acquisitions within the industry, many have been curious about what they have in store going forward. Shubin Stein discusses the company’s philosophy and process that led them to where they are today, as well as what they see for the future.

  1. Tell me a little bit about your company, Spencer Capital Holdings.

Spencer Capital Holdings (Spencer) is a holding company, not a private equity firm. It was formed by myself and some other investors to pursue the model of Berkshire Hathaway, Leucadia, Fairfax, Marmon Group, and other great holding companies. We aimed to join the ranks of companies that have created a lot of shareholder value over time through their ability to invest in a variety of different businesses as well as buy publicly traded securities.

  1. Why did you decide to purchase Spencer Re and move into the finance and insurance (F&I) industry?

The original goal when we founded Spencer was to find great businesses run by great people and build a holding company with a diverse portfolio of businesses. Spencer has, for 15 years, outperformed the S&P by a pretty large margin, about 10% per year. That puts us well into the top 5% of money managers of all styles in the United States. However, during the recent credit crisis we experienced the impact of unstable capital and liquidity. After that period, I started to think more seriously about taking a page out of Warren Buffett’s book and develop a permanent capital vehicle which would provide the stability to generate better returns over time. Although outperforming the market by 10% each year for the past 15 years is something we are proud of, that number would be significantly higher had we had permanent capital going through the credit crisis. From here we decided that finding companies to put into a holding company structure was a more suitable model for us. The first area that we looked into was insurance because it is something I have been investing in for several decades. Within insurance, we looked at several companies and we ended up identifying a distressed reinsurance company. The company was in the vehicle service contract reinsurance space, which we believed to be a great line of business. Although the company had a lot of problems, it was operating in a great niche. We felt that intrinsically it was a good business and we could fix the problems the company was having, and that’s what led us to Spencer Re.

  1. Now that you have acquired SouthWest Dealer Services, what do you see for the future of your organization?

We are really excited about our partnership with SouthWest Dealer Services. It is a first class business run by first class people. They have one of the best reputations in the industry. Right now, they largely operate on the western half of the United States. We see a great opportunity to grow the business both organically and through acquisition across the rest of the United States. Our goal is to provide the management team at SouthWest with the support needed to do so and create a coast-to-coast footprint for our company. We can then bring these agencies into the SouthWest system.

  1. As a player in the F&I industry, how are you looking to expand and grow your business in this industry? Through further acquisitions? By expanding the reach of your current holdings?

Both. We plan on investing a significant amount of capital in growing the companies we currently own or are partnered with. Our plan is to help SouthWest grow organically in its existing markets. But we think there’s also a very significant opportunity to grow the company by buying up other independent agencies and adding them to the SouthWest platform. SouthWest is the largest and the most robust independent agency platform in the US. Many independent and other small or mediums sized agents would be more profitable and be able to service their clients better if they were part of SouthWest. We think there is a terrific opportunity to grow and create a coast-to-coast company with this strategy.

  1. What are the synergies between Spencer Re, USA Risk and SouthWest Dealer Services? How are you going to take advantage of these synergies?

All three companies, by themselves are growing quickly. One of the exciting things about our current platform is that we have three companies who are, all well known in the space, run by top executives, and growing independently. In addition, all three feed each other. They can all help each other grow and service their clients in new ways that they couldn’t before.

Beyond this, being a part of the Spencer platform is advantageous because we can contribute a significant amount of capital along with growth opportunities. We believe that this will help our companies execute on their plans and follow leads they couldn’t otherwise. Additionally, we have a very long investment horizon; our ideal holding period is forever. Most private equity firms buy a company, lever it up, and have to sell it in 4 or 5 years. That puts a certain type of stress on a company. As part of Spencer, we provide a permanent home for great businesses, and over time these businesses can help each other and work together knowing they are going to have a very long-term relationship.

Independent of us the executives at all three companies have expressed how excited they are to work with the other companies because they can help each other and they are intrinsically related. SouthWest uses a lot of financial products, such as captives and reinsurance. Spencer Re provides terrific reinsurance solutions and is the only company in the US that has dual domicile citizenship in Puerto Rico and Switzerland. Puerto Rico is an NAIC compliant domicile. No other islands are NAIC compliant, which makes Spencer Re’s placement in Puerto Rico very high quality reinsurance. We also have commercial status in Switzerland, which helps us do things you couldn’t do unless you were part of the Swiss-US tax treaty. We have spent a lot of time and money setting up these systems to make them effective and we think they are the best in the business in terms of quality and compliance with NAIC.

USA Risk is the largest independent captive insurance manager in the world. They have an A+ reputation globally as being one of the most knowledgeable captive managers. They already do a lot of things that work with Spencer Re and SouthWest because captive insurance companies are already part of the auto industry. Spencer Re provides reinsurance for several different types of structures and will also be working with SouthWest because their clients will need reinsurance in the future.

As you can see, these companies already work with each other and they are now further related through our capital management fund. Our efforts are dedicated towards helping them build a future. The leaders of all three companies have expressed their excitement about the fact that they can grow more quickly by being part of our platform. In fact, one of the reasons USA Risk group sold to Spencer is because they believed they would be able to grow much faster as part of the Spencer platform than on their own, while still maintaining complete independence.

The crux of our platform is that we don’t make any management changes when we buy companies. We want to buy first class companies run by first class people. We don’t want to put our own management in or make changes. Therefore we have to buy good businesses, like Spencer Re, USA Risk, and SouthWest Dealer Services.

  1. Are you looking to expand into other parts of the automotive industry, or is the F&I market your current target?

We are open to looking at companies or opportunities in any industry. We don’t have intent to expand into other parts of the auto industry, or into other potential industries, but we are open to looking at anything. Over time I expect us to have a diversified group of businesses in many industries. But yes we would welcome the prospect of another deal in the auto space.

  1. I noticed that you are a medical doctor and CFA, what led you to capital management?

My background is in molecular genetics and medicine. After I got my license to be a doctor, I realized that although I love medicine, taking care of people, and science, I am also very interested in investing and entrepreneurship. By starting Spencer Capital I was able to satisfy my interest and my desire to grow an investment company and build businesses while still having a foot in the health care world through public health. Public health is the intersection of business, medicine, and policy. Those are all areas I am interested in and to which my background is well suited. The idea was that I could do entrepreneurial things, run an investment company and also help in the area of public health to hopefully have an impact on a large number of people. As a doctor you see patients one by one, in a serial fashion. It is a very special thing, but with public health if we do something right, we can impact thousands, tens of thousands, hundreds of thousands, or millions of people. I see public health as a way to have a much more leveraged impact in helping society. For me, that is very exciting.

  1. I understand that you are also an adjunct professor, teaching an advanced investment research course at Columbia Business School. How long have you been doing that and what drew you to the world of academia?

I have been involved with Columbia University in one way or another since the 1980’s when I was a student there. Since 2009 I’ve been fortunate enough to teach the Advanced Investment Research course, which is one of the capstone courses in their Value Investing program. Columbia Business School is the number one business school in the world for investment management. By teaching this course I have not only enjoyed teaching and interacting with the students, but I have also had the opportunity to learn more as an investor myself. I have learned a lot by having to take what we do here at Spencer, making it explicit, and subjecting it to my students questions. On top of that, our class has also been fortunate to have several world-class investors come and speak with us in private. In total, it has been tremendously helpful to me. I have learned a lot from both the speakers and the students.

  1. Can you tell me about your not-for-profit initiative, Crutches 4 Kids? How did you get involved in this great program?

I thought of the idea for Crutches 4 Kids in 2009. There are approximately 50 million children in the world who need and do not have access to mobility devices and Crutches 4 Kids addresses this problem. These children are often physically and mentally abused and because of this abuse and lack of access to society’s resources, they often have shortened life spans. They are essentially the most disadvantaged human beings on the planet. In the United States we buy approximately 10 million new pairs of crutches a year. When people are done with their crutches they largely go into garages, closets, attics or dumps.

Crutches 4 Kids, simply put, helps collect crutches from people who have and don’t need them, and delivers them to children who need and don’t have them. The minute you give a child a pair of crutches, without any training, they learn how to use them, and pretty soon they are doing backflips and playing soccer. It is pretty amazing how quickly children adapt and learn how to use crutches.

It is really exciting to be a part of a group that is addressing one of the large global public health problems. To give you a sense of scale, 50 million children is about the same as the number of school aged children in America. This is as if tomorrow morning every child in America woke up and couldn’t go to school. We are also very lucky to be partnered with world-class medical institutions like the Hospital for Special Surgery (HSS), as well as several others. Today we’ve helped children in 25 countries and we’ve helped recycle and distribute over 15 tons of crutches.

  1. Is there anything else you would like to add?

There are two things I would want anyone who reads this interview to come away with. Number 1, if you run a great business and want to sell it along with the current management, give us a call. Number 2, if anyone wants to think about how they can immediately have a high impact on the most disadvantaged people in the world, go to crutches4kids.org and make a donation. For $10 you can buy a pair of crutches and change a child’s life.

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Meet the Trainer: Joe St. John

Meet the Trainer: Joe St. John

Meet Joe St. John, the director of training at IAS. His passion for the auto industry began when he was just in high school and has only grown since. Get a glimpse into the IAS approach to training that St. John believes in. See why St. John’s diverse background and his company’s position in the industry puts IAS at the forefront for dealership training.

How did you get your start in the auto industry and how/why did you specialize as a trainer?

At sixteen, I was hustling produce out of the back of my pickup, when the New Car Director at the store my dad worked at asked me if I’d be interested in selling cars. After my first paycheck, I was ruined. I actually remember, during a high school football game, the ref called me over and asked, “son, don’t I know you from somewhere?” I responded, “James, I sold you your Tundra!” He was flabbergasted, “you’re in HIGH SCHOOL???”

To my parents, higher education wasn’t optional, it was mandatory. I went to Oklahoma State University, where I served as student body President and studied abroad at both Cambridge and Oxford. In 2004, I was named a Truman Scholar, and continued my education with a Master’s in Accounting from the University of Southern California. I’m also a graduate of the NADA General Dealership Management Academy.

My specialization as a trainer really comes from a unique perspective derived from my distinct position at a cross roads between the car business and academia. On top of my vast front line experience, from Salesperson to General Manager, I was also a top rated lecturer in the Marketing Department at OSU, teaching Professional Selling and Sales Management to non-traditional college students. This helped me leverage the best techniques in modern higher education to help students have higher material retention and executable skills. My passion is translating tough concepts into digestible components that connect with my audience. I genuinely love repositioning ideas in order to spark students to develop new ways of attacking “real world” problems. I aspire to inspire, especially when it comes to unlocking results. I believe so strongly that the car business can be a path for many people to a better future for their families because I’m living proof of it.

What areas in F&I do you focus on with your training?

In F&I training, we focus on developing skill sets that translate to real results. We recognize that the F&I numbers on the financial statement are the result of specific behaviors that happen in the microcosm that is the F&I office. Our F&I training maximizes the probability of positive outcomes within this office. We strive to raise the profitable penetration with truly value added solutions to the end user. We do so in a way that is incredibly efficient and customer friendly. Being fast, being effective, and being customer positive is not mutually exclusive, in fact, in our training it’s simply the process.

Why should an agent call you for a training assignment?

The agent that would call us is the agent that is invested in the complete success of their dealers, from BDC to salespeople and from sales managers to F&I. That is where our strength genuinely lies. If an agent is happy with the status quo, and content with the way things are, then our training offerings might not be a good fit. If an agent is looking for real competitive advantages and values a partner that is relentlessly pursuing improvement, a partner that never settles, if they truly want to be on the cutting edge, as pace setters of our industry, then we will be perfect for them.

What are the top three messages you try to give at each of your training session?

The main thing we focus on immediately during training, is challenging students to understand that changing is not only necessary, but good for them. For them to understand this, we have to really zero in on the reasons for them changing being their own. Secondly, we help them to understand that what they’re learning is key to making their own situation better and advancing their career. And finally, that if they commit the right time, effort, and focus to what’s being taught, they can immediately apply these skills to their specific situation.

What changes in the industry do you foresee that will impact your training the most over the next few years?

The only consistent thing about our business is that it’s consistently changing. Outside of the constant rumblings about the CFPB threatening rate participation, the current hot topic is billionaires entering the retail dealership business. These extremely deep-pocketed companies have the ability to start and win wars of attrition against their small undercapitalized competition.

The biggest factor impacting F&I has nothing to do with these two things. The biggest thing impacting F&I training is that we are currently enjoying a warm fuzzy period of false security. This is the easiest environment to succeed at F&I ever. Interest rates are incredibly low, terms are the longest ever, and banks are giving huge carries. According to many sources, rates will increase by four to five hundred basis points by 2018. Combine that with contracting terms and lower carries, and the current profit center of most dealerships may well become the overwhelming sucking sound of dollars being removed from the bottom line. Our training prepares our partners with incredibly tight systems and processes, so when forces destabilize the industry, they are in a position of power instead of weakness. Our clients will be able to seize this opportunity to grow their enterprise, and those that aren’t prepared will evaporate into the history books.

Tell us about yourself and the kind of activities, hobbies, and interests you pursue outside of training.

The driving force behind everything I do is my family. We enjoy a vibrant life filled with music, food, and being outdoors. In free moments we head to the woods to camp, hike, hunt, fish, and forage. We love live music, and in our house, there is always something playing. If we aren’t preparing delicious meals at home, we’re always seeking that perfect ephemeral dining experience.

Is there anything else you would like to add?

Training is way more than a job for me. It’s incredibly personal. Everything I have, the degrees on my wall, the experiences of my childhood, the life I’ve been so blessed to enjoy; can be traced directly to the automotive retail industry. Helping our front line be the best prepared they possibly can is simply my way of giving back to an industry that has given so much to me and my family.

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The Great Debate: Recording in F&I

The Great Debate: Recording in F&I

We’ve all heard it before. “This transaction may be recorded for quality and training purposes.” In fact, we hear it so often; many of us don’t even give it a second thought. But those words are not the norm in many F&I offices. In fact, there are vastly different schools of thought on the use of video recording in F&I. Some companies in the F&I space are strong advocates, while others think it is too risky; they say there are better methods of training and demonstrating transparency in the F&I office. One thing is certain, however, companies on both sides of the fence have strongly held opinions on the subject.

Many of our readers at AE Magazine have inquired about the pros and cons of recording in F&I. In response, we sought out several industry veterans – agents, an attorney, a trainer, and a sales manager – to hear what they had to say on the subject. The staunch supporters swear by the training benefits, legal protection and increased revenue that recording provides, while others say the benefits just aren’t worth the risks.

The Benefits of Recording

Steve Veldkamp, district sales manager at Michigan-based Great Lakes Companies, has employed video recording in the F&I office since 2006. He believes it is “the most powerful training tool available,” and says it promotes compliance, increases PVR and takes training to the next level. Veldkamp also credits recording with putting customers at ease by showing them a dealership is transparent enough to record transactions. According to Veldkamp, recording can be useful in eliminating the “he said/she said” if a customer returns to the dealer, after the sale, believing they were promised something they didn’t receive. “Offering to review the transaction with a customer can quickly calm what may have been a volatile situation,” says Veldkamp.

Ron Reahard, president at Reahard & Associates, Inc., based in Tennessee, is also a big proponent of recording transactions. “It protects the dealer, protects the F&I manager, and protects the customer. And we almost always see an immediate improvement in both performance and customer satisfaction.” In addition, Reahard emphasizes its usefulness as a training tool for determining “any part of the F&I process not adding value for the customer, and thus not enabling the F&I manager to maximize their product sales.”

For those still not convinced, Veldkamp adds, “The fear of customer attorneys using the videos against the dealership is unfounded. Matt Nowicki, vice president of retail software for IAS Smart Dealer Products says that since 2001, SmartEye has captured over 3.5 million transactions. In that time, only two transactions were ever subpoenaed. In both cases, the dealership was exonerated. In our society today, every financial transaction, from bank deposits to buying groceries or even a 25-cent pack of gum is captured on video. It only makes sense that the closing of a car deal would also be recorded.”

Recorders Beware

Virginia attorney, Patty Covington, is a partner at Hudson Cook, LLP. Her legal practice focuses on all areas of consumer financial services law, including auto finance, privacy, data security and information management, electronic commerce, marketing, and matters involving the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). She was the president of the National Association of Dealer Counsel (NADC) for more than a decade and has served as deputy general counsel for CarMax. She is a sought after advisor for both motor vehicle dealers and service providers.

Covington says video recording “cuts both ways.” She cautions dealers who are considering the process of video recording in the F&I office to do so “with his or her eyes wide open.” She says recording “is not a failsafe strategy or tactic that can be used in response to compliance challenges;” in fact, she says relying on recordings in the instance where a transaction is challenged, rarely works out for the dealer. She urges dealers to “consider the reality that their employees may not always be compliant. Recordings could capture employees violating a law or regulation, instead of complying with it.”

Covington says her top recommendation for dealers is to have a compliance program in place. “The new term being slung around is a Compliance Management System, or a CMS. A CMS is a compliance program on steroids. It’s on steroids because there are three parts to it. One of those other parts is an ‘audit’ function. The audit function is the part that goes back over the dealer’s actual practices to make sure they are doing what they say they are doing, and also what the law requires them to do. Dealers have not traditionally considered audit to be a part of their compliance programs. Nor have dealers always included a monitoring component in their compliance programs.  These are two additional components of a CMS that make the compliance program actually work.” She says, “It’s no longer a ‘best’ practice to have a compliance program, but a ‘gotta-do’ practice in this current, highly aggressive, legal environment.”

“You can have all kinds of written policies and procedures, fancy documents and training – but if you’re not doing what you say you’re doing, you’re going to get in trouble.” That’s why Covington says she has been using the term CMS, “because it makes for a better, more complete and definitely more effective compliance program.”

Brian Crisorio, is vice president of marketing at Clearwater, Florida-based United Development Systems (UDS). He says UDS does not promote the video recording of F&I transactions for several reasons. “We believe that it is better to focus on hiring quality personnel, providing consistent training and development to promote a compliant culture that attains results, and implementing processes to stay the course. Doing these things effectively offers a better chance at success ­– without the cons that come with video recording.”

Crisorio says video recordings add an unnecessary burden to an F&I office that is already buried in responsibilities. “Understanding state-specific recording laws, proper notification to the customer, remembering to hit the record button, the time it takes to properly evaluate and train from the recording archives, and the fact that an innocent mistake could be used against the dealership (not to mention the intentional misconduct), are all reasons against recording. The alternative is to manage the F&I office into a high-performing department by doing business the right way. Proper training, policies, and processes all work towards that.”

Michael Tuno, president, Philadelphia, Pennsylvania-based World Class Dealer Services, says you should run from anyone recommending the use of video recording in the F&I office. “It’s evidence, hard evidence, if a mistake is made.” There are many other downsides to recording, according to Tuno, “Who has time to properly review the recordings? Most dealers are not that savvy with technology and they don’t have the means to keep up with all it requires. Nor do they have a good command of the legal environment. There are other better means of documenting what goes on in the F&I office; ways that don’t put you in a worse position. Videos are hard to dispute what was said.”

“There are other forms of transparency and disclosure you can use to make sure customers understand everything in the transaction,” says Tuno. Instead of recording, he uses what he describes as a “robust menu system” that tracks every keystroke and documents every product that was offered and the time the F&I manager spent explaining each option. At the end of the transaction, the menu system compiles all the information on the transaction, time and date stamps it, and the customer and the F&I manager sign off on all of it. It is then stored on a secure server. A paper copy of the transaction is also placed in every deal jacket. “We have had situations where a customer shows up with an attorney after the sale saying (for example) they had a bunch of damage from potholes and they were never offered tire and wheel coverage, claiming the dealer was anti-selecting people. Once we show their attorney our record of the transaction, they literally leave.”

Steps for Effective Recording

 Veldkamp suggests the following six steps for establishing a successful video recording process in the F&I office:

  • Record every transaction – If recording is used, there will always be many reasons and excuses for not recording ALL transactions. Picking and choosing transactions to record creates a compliance issue. Any time a dealership has one process for one customer and another process for the next, it’s putting itself at risk of a discrimination suit. Dealer support is crucial to making sure every transaction is captured. Don’t employ video with a client who is not completely on board, because it will result in more time spent debating which deals to record than actually training. I recommend offering some type of incentive for employees who go along with it — or a penalty for those who don’t.

Producers who know they’re being watched are more likely to abide by the 300% rule: Present 100% of the products to 100% of the people 100% of the time. For that reason alone, it only makes sense to record every single transaction.

  • Review the videos – I recommend for agents to watch at least four transactions per F&I manager, per month. If that’s too much to handle, your provider can probably provide a professional reviewing service. Your agent may also have someone at their agency who can review the recordings. That individual must have rudimentary knowledge of the F&I process to ensure that there is no disconnect between what the viewer and the agent are trying to accomplish.
  • Establish a grading system – This is the most important step. It must reflect everything you want to see accomplished during each transaction. I use a review sheet that includes twelve items broken into two categories: sales and compliance.

The grading system also should reflect your store’s training system. For example, I train F&I producers to establish the need for each product before showing how the product solves that need. So my grading system follows what we think makes for the best presentations. After reviewing the videos, scores can be compiled and stored in a database for performance-tracking purposes.

  • Provide feedback – Producers should see the review sheet once it’s completed by the agent. Both the producer and the dealer should sign off on the feedback sheet. Watch the recordings with each producer, so the trainee can see what he or she did right, as well as areas where the F&I manager can improve. Offer praise before making any recommendations.
  • Hold review meetings – Do this at least once a month for clients that have more than one producer. The goal of these monthly meetings is to share what’s working with the rest of the organization. Bring all the producers together to watch transactions from the previous month. These recordings should always be highlights, never a blooper real. You want to praise the producers in public and correct them in private. It should last no more than an hour, with time allotted for a review of at least five successful transactions.
  • Use the videos – Use the videos in training. Use them to share new closes and compliance initiatives. Video-recording transactions can be a powerful tool for increasing PRU, but you must be committed to it and you must support your agent’s efforts for it to be a success.

If a dealer still wants to record F&I transactions, despite Covington’s warnings of the risks, she offers a few recommendations:

  • Use it for quality assurance purposes (legal and business).
  • Review the tapes, or a random sample of them, frequently, very frequently.
  • Identify legal and business issues/violations.
  • Fix the issues/violations both internally in the dealership and externally with the customer.
  • Destroy the tapes after the quality assurance/monitoring/auditing has occurred, according to the dealer’s written document retention policy.

Reahard suggests imposing a requirement that all recording is mandatory, if it is going to be used successfully. “There has to be severe consequences if any F&I manager regularly fails to record their transactions. At least two to four transactions need to be reviewed by the GM and/or an independent company to identify any process, procedure, performance, compliance, or customer satisfaction concerns.  Finally, videos where an F&I manager did a good job discovering the customers needs, engaging the customer in the F&I process, using a visual aid or a close to overcome their concerns should be shown to the other F&I managers to help them improve their skills.”

Storage

Whether they record or not, all of our experts agree – limiting the time recordings are stored is imperative and can eliminate many of the dealer’s legal concerns.

Reahard says keeping recordings on a secure server for 60 days is “more than sufficient for training and customer satisfaction purposes. It also allows sufficient time to review the transaction whenever there is a misunderstanding to determine if there was any misrepresentation on the part of either party.”

Covington says dealers need a document destruction policy in place that covers the videotapes. “The videotapes should be destroyed, truly destroyed, after they have served the quality assurance, monitoring, auditing purpose, subject, of course, to any federal and/or state document retention requirements. That way there isn’t a big tall pile of videotapes that can be used against the dealer.” To ensure recordings are truly destroyed, she recommends seeking out the expertise of an IT professional.

What to Record?

If recording is being used in F&I, at what point in the transaction should the recording start?

Reahard and Veldekamp both say the camera should be turned on when the F&I manager goes and gets the customer, so that the entire transaction is recorded, from the moment the customer walks into the F&I office, until they moment they leave.  “You never want an F&I manager to be able to only record what they want you to see,” says Reahard.

Covington says how much of the transaction is recorded depends on how the dealer is going to use the recording. “If the dealer is using it for quality assurance, monitoring and audit purposes, then it should be recorded from the moment the customer walks in the door.”

In Conclusion

Whether you employ other means of training and monitoring in the F&I office or you record every transaction, one thing is clear; those who do use recording can’t stop singing its praises, and those who don’t, feel just as strongly in their reason for not recording transactions.

“Every professional monitors their performance,” says Reahard, “Professional athletes watch the game film to see how they can improve. That’s what separates amateurs from professionals. Professionals use every tool at their disposal to improve their skills. And there is no better way to see what you’re doing well, and what you need to do better, than to watch yourself on video.”

Tuno couldn’t disagree more. He says recording is “nowhere on the spectrum of best practices.” He likens it to opening up Pandora’s box of all that was said. “There are simply better formats for accomplishing what video was designed to do that don’t involve the risk.”

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Meet the Trainer: Ron Reahard

Meet the Trainer: Ron Reahard

Ron Reahard’s career in the auto industry has been shaped by his desire to do it right. As he worked his way up from sales, to F&I, and into training, he noted along the way the characteristics and skills that were lacking in many of those he worked under, as well as the characteristics of those who were effective at their jobs. In each scenario, Reahard saw a job that could be done with excellence and he made it his goal to do it better.

Reahard got his start selling cars in Fargo, North Dakota. It was summer break and he was a college student studying business and working at a manufacturing plant. When he learned that layoffs were imminent at the plant, he began searching for a new job. Seeing a routine ad in the paper for a car salesperson, Reahard applied and was hired on the spot. He sold cars for two and a half years and recalls his experience working with an F&I manager he couldn’t stand. “The guy was a jerk. Before taking customers to his office, I actually told them they did not have to buy anything from him, but they had to go back there or I would lose my job!”

Working with a bad F&I manager, Reahard experienced firsthand the traits that caused him to be ineffective and disliked by the salespeople. He determined that if he ever got the chance, he would be everything that F&I manager was not; a knowledgeable, personable and professional F&I manager. This led to a successful six-year stint in the F&I office.

As an F&I manager, Reahard soon concluded that much of what he had been taught was really not applicable in the real world. That led to his next career jump – into the role of trainer. “I decided I wanted to go into training because I thought that it needed to be done right – better than most of the training I had experienced – and I felt very strongly that I would be able to do that.” And Reahard has been training ever since.

In 2001, Reahard started his own training company, Reahard and Associates, Inc., of which he is the president. The company began as a one-trainer operation but has grown to seven employees. He attributes the business’s success, in part, to the fact that training is all they do. “We don’t sell any F&I products or provide menu software. So we have the same agenda as our clients – to help F&I managers help more customers.”   This has allowed Reahard & Associates to work with agents, finance companies, product vendors, vehicle manufacturers, dealer associations, individual dealers, as well as some of the largest dealer groups in the country.

The focus of Reahard’s training boils down to three things: adding value to the customer’s experience, ongoing training, and helping people. “If you aren’t adding value, you are adding aggravation. If your services and products don’t help people then you are not adding value. Our goal is to help improve F&I managers’ ability to help customers. A good F&I manager must possess needs awareness and product knowledge. You can’t sell a service contract if you don’t know anything about a car.”

Success, according to Reahard, is achieved through hard work and the continual improvement of your skills. “Training is never over; it is a process – not an event. The most important job F&I managers have is helping people. Knowing how your products work and being convinced they are going to help the person on the other side of the desk is key. It’s important for customers not to feel they are being coerced to buy something they don’t really need. F&I products have real value and customers will pay good money for them when that value is demonstrated to them. You have to be a champion of your products. If you don’t believe in your products and buy them yourself then you shouldn’t be selling them.” Reahard says that too often F&I managers don’t believe in their products; they just want to make money. “If you want to make more money, help more people. That is how you become more successful in any business endeavor.”

Issues Facing the Future

As income generated in the F&I office grows, Reahard predicts that the industry will see an increased scrutiny of all F&I practices. “Higher profits from F&I are drawing the attention of regulatory authorities, such as the CFPB. Honda and Toyota are both being challenged by the CFPB with regard to their lending practices based on the theory of disparate impact. If like Ally, they settle, I think financial reserve will probably go away. If they decide to fight this unproven theory, which is full of holes, then it may not happen. Either way, I think we will see increased focus on F&I sales practices, the mark-up on financing and maybe on products too, if no one reigns in the CFPB.”

Reahard says F&I managers generally need to know more about their products so they can be an important resource for their customers. “Customers today think they know everything and can find the answer to any question by using Google. If we can’t give them more information than what is readily available on the Internet, we aren’t adding value.”

While there is constant talk about how to speed up the process in F&I, Reahard has a slightly different perspective. “An auto purchase is a major investment. While I agree that customers don’t want to listen to a 20 minute canned sales pitch, our experience is that it is not the time spent in the F&I office that drives customers crazy, but the time spent waiting to get in the office! However, if customers are forced to endure multiple presentations or watch infomercials for products they’re not interested in, five minutes in the F&I office is too long.” He believes if the F&I manager is doing his or her job properly, customers appreciate having someone who can explain their options, answer their questions, and provide them with the information they need to make the right decision for them and their family. The end result being that the F&I manager will sell more products.

Down Time

When Reahard is not busy training, you are likely to find him in his shop working on his 1971 Chevelle Malibu. “I love cars and I love working on them. My very first car was a 1971 Chevelle, just like the one I am restoring.” When it’s done, he says it will be identical to the one he bought brand new when he was 17. Reahard also enjoys attending NASCAR races with his wife Ann, and makes it a point to go to several each year. He also has two grandkids whom he enjoys spending time with.

F&I Changing Lives

Reahard shared the story of a former customer who was killed by a drunk driver. The customer had purchased credit life coverage from Reahard when he purchased the car. When his widow came in with the policy, she was distraught and in tears. She shared that she really needed to go back to college in order to support her three kids, but she couldn’t afford it.

Reahard realized at that point the true impact of what he was doing working in F&I. “I was able to tell her she did not have to worry about the car payment; it would be paid off. And because it was being paid off three and a half years early, she would get a refund of $1865 in interest. For her, that meant she could go back to college. When she came around the desk, hugging me and crying, it struck me like a bolt of lightning. That day we changed a human being’s life . . . for the better. We have an opportunity to do that every day in F&I.”

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Selling Appearance Protection

Selling Appearance Protection

As dealership reserve shrinks, the pressure is increasing on the F&I office to find other avenues to enhance and replenish overall profit margins. Shoring up dealers’ bottom line in F&I is more critical than ever before. Historically, the focus in F&I has been on big-ticket items, but as lease penetration reaches new highs and reserves shrink, ensuring that a balance of products are being offered could be the key to maximizing profit. Offering and being well versed in appearance protection products might be just what the doctor ordered to stay ahead in today’s changing market.

Andy Parvich, national sales director, Siskin, has found that dealers are often unaware of their lack of focus on appearance protection. He believes the job of a general agent is to make the importance of this clear to the dealer on a profit level. “You have to reopen their eyes sometimes. At the end of the day, appearance products are the products the customer will benefit from on a daily basis.”

Lease and Cash Customers

The recent growth in luxury vehicle leasing is having a positive impact on the sale of appearance products. The benefits appearance protection products offer are especially applicable to cash and lease customers. They can enhance customers’ trade in value by keeping the car looking new. They can also prevent the customer from being charged for minor damages at the end of a lease.

When dealing with lease customers, Stan Starnes, executive vice president, Dent Zone Companies Inc., recommends being proactive. “Ask the customer why they would want to live with a dent for the entire term of their lease and then get the covered repair fixed just before they trade the car in?” Instead of selling protection that works this way, Starnes recommends offering protection that the customer can take advantage of as soon as a dent occurs.

“They want a new and fresh looking car every day,” added Jerry Biller, president, Usbergo Inc., “So ask them, ‘Would you like to look at a dent for three years (until the end of the lease term) or get it fixed right away?’ If you can get dealers to focus on enhancing the customer’s ownership experience, F&I will be more profitable.”

Aaron Cooper, director of F&I, Dent Wizard International, agreed, “Why get a program that doesn’t benefit them until the end of the lease? Customers like that approach.”

The Appeal for Dealers and Customers

Biller recommends including appearance products as a part of the core offering in F&I. “You want the customer to consider these products first and not just present appearance protection as an afterthought.” Biller says it’s the relevance to the customer that makes them core products. “A dealer needs to make sure that they are offering ‘actual products’ in the finance office – and not just contracts.”

Jeff Phillips, account manager, XPEL Technologies Corp., sells a protective film that he says works everyday ­­– unlike some products, such as theft recovery, that customers may never see the benefit from. “As people keep cars longer, products that maintain the vehicle’s appearance not only result in greater profits when a car is eventually traded in, but also improve the entire ownership experience.”

Cooper sees appearance protection products not only as revenue generators, but also as tools for increasing customer retentions. “When we sell appearance products and the customer comes back to the dealership, it provides another opportunity for the dealer to provide a positive experience for the customer that will hopefully result in them being a repeat customer.”

Appearance protection products can also be sold after the vehicle sale. Offering appearance products in the service drive and when a customer files a claim can be a successful strategy that give customers something of immediate value.

Despite the added value of selling in the service drive, Cooper says the greatest success comes from a well trained F&I manager who is knowledgeable about both the products and the disclosures. The panel agreed, adding that while service drive selling is an option, the F&I office is the best fit for offering these products.

Appearance Protection and the Sales Department

By training the sales department about product options, they can be the first to expose a customer to appearance products. By pointing out areas in which a new vehicle is not protected and then reassuring the customer that the dealership can provide a solution, the sales department whets the customer’s appetite, so to speak. Then, when customers arrive in F&I they are more interested and receptive to hearing about the products.

Phillips says he has seen the most success when the dealer takes advantage of the downtime after the customer selects a car and the sales department does a soft sell presenting the products. “Often it is as simple as exposing the need for products earlier to the customer. Point out dents and dings on the customer’s trade-in when they first bring the vehicle in and let them know that those dents and dings will lower their trade-in value.”

Pavich agreed that there is an advantage to involving the sales department. “They need to know what the products are and what the coverage is. Sit down with the sales team and make sure they know the ins and outs of the products. Training them as well as F&I can make a big difference.”

Another way the sales team can facilitate the sale of F&I products is by giving the customer a live demo. “Make it fun,” says Pavich, “If the sales team can involve customers in a way that is fun, that’s great.”

“You can only present so many things,” added Starnes, “We talk about needs awareness. You have to develop this and set the stage. Our value proposition is, ‘You will get a dent. What will you do?’ You only have to get three dents and the product is paid for.” Starnes says their products “play well with others” and also do not require a lengthy presentation when it comes down to the array of products offered on the menu.

Menu Selling and Price

The placement of appearance protection on the menu is a factor worth considering. Pavich says that F&I managers are often trained to present service contracts first on a menu. However in his experience, Pavich says this can turn customers off. He recommends presenting appearance products first. “Appearance matters to everyone. Whether they are a Chevy buyer or a Mercedes buyer, people want their vehicle to look nice. It is a matter of opening their eyes and offering products at a reasonable price. When you do this, they will see the value in it.”

“It goes back to what is important to the dealer.” said Cooper, “Sit down with them, evaluate the customer base and decide if appearance protection should be a product that is presented third, sixth or higher on the menu.”

Pavich pointed out that pricing coverage right is a critical component when presenting product offerings. The customer’s monthly payment needs to be taken into consideration when offering appearance products. “It would be tough to bump a payment up $40 for someone with a lease for $199 per month. The payment increase for the product needs to fall in the $6 to $10 range.”

To Bundle or Not to Bundle

Cooper reports he has seen better penetration with bundled product presentations. “A customer can choose if they want to add products to a bundle. We see this as a better play for dealers, and what customers gravitate towards.”

Pavich, on the other hand, reports seeing huge success when products are sold individually. “What benefit is the customer getting with a bundle? Windshield is not going to cover full replacement, it is repair only. The benefit is going to be actual replacement. Some packages of dent protection only provide $250 of dent.”

In a few states, where contracts are now cancelable, bundling products may come with added risk, warned Pavich. He thinks other states may soon start following this practice. “Putting everything on one form could make the whole thing cancelable.”

Understanding and Explaining Coverage

Making sure the customers understand the limits of coverage as well as the F&I managers is very important. Starnes says someone could have a giant scratch keyed across the entire car door and assume it is covered if they weren’t fully informed of what the product covers when they purchased it.

Biller added that the F&I manager must explain what is included and excluded, and note the limitations, deductible, and out of pocket costs. “Paying attention to the benefits when presenting to a customer is important.”

“Lay out the exclusions,” recommends Cooper, “You don’t want something [incorrect] being said when the product is sold and it coming back to you later. If the car comes back with the customer having lots of issues, guess what? The F&I department is not going to sell the product anymore! It sounds like a no brainer but it goes back to getting the correct picture painted with the F&I manager of what is and isn’t covered. It’s critically important in that process.”

In the event that a customer did not understand the coverage and is obviously upset about something not being covered, Pavich suggests that in certain situations, it may be worth it to oblige the customer and eat the cost. “If we need to pay extra to keep that customer coming back and telling their friends, then it’s worth it.”

Making sure that all of a dealer’s F&I managers not only understand the coverage, but are on board and convinced of a product’s value, as well as it’s reliability and effectiveness is crucial. “There is always one F&I manager who sells everything except for one product.” says Phillips, “They have to be convinced that the product is not like ones they have seen in the past that were not quality products. For example, they may have seen a coating in the past that eventually yellowed or became hazy. They need to see and be convinced that the products they are selling are quality products. And we have to show them that they are top quality.”

Technology and Sales

As the push for electronic and digital training and presentations grows, the panel discussed how they are meeting these demands. Cooper emphasized that having cutting edge technology for presentations can make a big difference in capturing customers’ interest.

Biller agreed and expects the demand and appeal to continue to grow. He recommends making technology available to facilitate the process of selling appearance protection products. He believes technology can also offer a means for including the sales department in the process, “If the sales department is part of the process, are they given tools, such as a mobile app, to present products?”.

Taking advantage of the latest advancements technology has to offer is a must as everything becomes more digital, says Starnes. In response, his team, as well as other appearance protection companies, are investing in digital training modules and iPad presentations. “More and more, our clients are leaning towards electronics and are asking for technology.”

Technology can also be used to provide frequent and effective training in the actual application of products. This method is especially valuable in light of the high turnover in the F&I office that dealers face. Most appearance care companies offer various electronic training and videos that can prevent the agent representing the products from having to visit a dealership every time the dealership experiences employee turnover.

If you have not done so already, this panel says it’s worth giving appearance care products a second look. Offering customers a variety of products beyond the service contract can be a great way to shore up the dealer’s bottom line. And that is something all agents want to cash in on!

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