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How to Harness the Surging Ancillary Market

How to Harness the Surging Ancillary Market

At 3:30 p.m. on Monday, May 21, attendees of Agent Summit 2018 crowded into a packed ballroom at the Venetian & Palazzo Resort Hotel Casinos in Las Vegas for “The Surging Ancillary Market.” The highly anticipated panel discussion was led by Ron Reahard, president of Reahard & Associates and one of the nation’s leading F&I trainers and consultants.

Shortly before the event, Reahard expressed hope that agents would leave his session with a clear idea of the value ancillary product sales represent to their dealer clients as well as car buyers.

“Virtually every purchase experience now begins online. Consumer demand for transparency and F&I products that offer genuine customer value requires dealers to continuously evaluate their product offerings to determine how those products are best presented and sold,” Reahard said. “Every agent needs to assist their dealers in maximizing customer acceptance rates for multiple ancillary products.”

Reahard was joined onstage by Scott Hendrix, IAS’s senior vice president and head of national accounts; Garret Lacour, CEO of RoadVantage; David Neuenschwander, president of National Automotive Experts (NAE)/NWAN; and Tony Wanderon, president and CEO of National Auto Care.

With much ground to cover and only 45 minutes in which to do it, the group started off by attempting to answer a concern common to the subject: Does adding ancillary products to the F&I menu overwhelm customers and create resistance that could derail production and profit per vehicle retailed?

How Many Products Is Too Many?

Asked for the appropriate number of F&I products to offer a given customer, RoadVantage’s Lacour suggested five or six for finance deals and three to five for cash deals, lease customers, and short-term financing. “This includes VSC, GAP, and maintenance,” he noted, adding that ancillary products should make up the balance.

“The other question is how many products the F&I manager has access to,” Lacour said. “I have seen groups reduce their ancillary offerings from 12 to four, and it resulted in much higher penetrations and PVRs and reduced the presentation time in finance. Choose the highest-value proposition products and focus on penetrations.”

Neuenschwander of NAE/NWAN said the right number is “hard to determine,” noting he considers expediency the most critical factor. “The amount of time it takes to present and educate a customer should dictate how many products is too many.”

National Auto Care’s Wanderon agreed, saying there is no “magic number” other than that arrived at by weighing such considerations as the dealership’s process and customer base. He advised agents to focus on whether the products their F&I teams present will bring value to car buyers in their times of need, are necessary to protect the financing deal, and are presented in an efficient, legally compliant manner.

“Dealers and agents need to spend more time focusing on the needs of their specific customer base, all while building consumer loyalty and retention-based products — which ultimately drive profits not only today but in the future — instead of the number of products offered,” Wanderon said.

“Even with menu selling, there can be too many options. Bundles can help,” said Hendrix of IAS, who believes customers are most concerned about mechanical breakdowns, financial risk, and appearance, in that order. That means agents and  dealers must first dispense with the service contract, GAP, tire-and-wheel, paint, and dent.

“Once those products are covered on the menu, you have enough products to address a customer’s concern,” Hendrix said. “Manufacturers want the F&I process to be completed in 45 minutes or less. Ultimately, the goal needs to be to reduce the number of contracts that a customer has to sign and speed up the F&I process.”

Which Are More Profitable: Standalone Products or Bundles?

Making the profitable choice between multiple standalone products and a bundled offering requires agents to dig into the specifics of each dealership’s operations, Wanderon said. He suggests agents present a pro forma breakdown of how each model could play out for each client.

Lacour acknowledged that bundles are the trend, despite the common sentiment that bundling requires agents and dealers to give up multiple profit centers in exchange for one. So why do it?

“The simple answer is the four standalones never penetrate equally. So you’re not giving up four profits, and the bundle value proposition can support a higher margin,” Lacour said, advising agents who bundle products to focus on penetration rates.

“McDonald’s sells Happy Meals for a reason,” Hendrix said. “They don’t just like to sell a burger, then fries and maybe a Coke. They package it for a reason: higher perceived values for a reasonable price.”

Hendrix believes that, by building more value more quickly, the customer’s time in F&I is better spent. The bundled product also multiplies opportunities for fixed ops revenue. “The retention aspect today is huge for our dealers. Bundling creates more opportunities to get someone back to the service drive and maintain lower loss ratios.”

Neuenschwander suggested agents pay close attention to the way each bundle is structured. If it can be customized by the business manager during the presentation, profit and commission can be protected.

“Bundled products are much more common today because of ease of presentation, but if coverage is simply ‘thrown in’ to help close the deal, margin will shrink,” Neuenschwander said.

Do Banks and Finance Companies Support Bundles? 

Asked whether lending guidelines affect the sale of bundled products, Lacour was unequivocal. “Ancillaries have not reached the level of equal consideration with the OEM VSC programs that independent VSC providers fought for years. It’s going to require more pressure from the industry and dealers to push for an even playing field.”

Despite that, ancillaries have risen “from the bottom shelf to the top shelf” in the F&I product library, Lacour said. But for independent providers to reach an equal footing with factory programs, agents will have to do their homework. “Dealers have a choice of what VSC provider they offer, and equally should have a choice of what ancillary product provider they choose to offer.”

“We need to look at this from the viewpoint of a dealer as a four-legged stool,” Hendrix said. “You’ve got dealer reserve, VSC, GAP, and ancillary products. You have state regulations that are always changing, and you’ve got lender rules that are always changing. If you spread your profits and your look across those four different areas, you’ll protect yourself and your dealer as time goes on.”

The proliferation of advanced in-vehicle technology puts the onus on providers to adapt and evolve their offerings to maintain value, Hendrix added, noting that, “About four or five years ago, cars were being totaled in a ratio of about 2-to-7. Now it’s 4-to-7. As cars get more complex, we need to look at more ancillary products that fit customers’ needs.”

Neuenschwander said banks and finance companies “definitely” impact the sale of products and said dealers and business managers must work with their finance sources to understand their requirements and limitations. “Dealers can influence lenders’ willingness and acceptance of these products, but it comes down to open communication.”

“In most cases, lenders are very dealer-friendly as it relates to most products,” Wanderon said, allowing that there are exceptions. “Once a product is submitted for approval, some providers send in their sales team to ask the dealer why they are not using their products. In those cases, it almost seems like the approval process is delayed until they can try to sell the dealer on their products.”

If dealers feel their approvals are being blocked, he added, agents should join their side, get a clear understanding of why the denials or delays are occurring, and refuse to tolerate it.

“If the reason for denial is due to not meeting the lender’s requirements, that needs to be addressed with the agent or TPA. If the reason does not point to clear guidelines not adhered to, then the industry should do all they can do to not allow this to ensure fair practices for all,” Wanderon said.

Are Sales of Bundled Products Safe? 

To ensure sales of bundled products are sanctioned in each of the markets you serve, Wanderon advised agents to do whatever legwork is necessary.

“Make sure the companies have proper licenses to do business in the state, that the underwriter has the product filed and approved – typically when they use a ‘follow-the-form’-type clip – and, most important, make sure that the underwriter will pick up dollar one risk in the event the administrator goes out of business,” Wanderon said.

Neuenschwander listed years in business, experience with ancillaries, and a sound process backed by a compliance department as key provider considerations. Hendrix suggested agents have a conversation with each provider’s compliance director and ask to which industry associations each provider belongs and whether they employ in-house counsel. Lacour added that each ancillary benefit “must have defensibility” in whichever product category it falls.

“Ancillary regulations are fairly new and still developing. The regulations are numerous, not uniform from state to state, and require careful navigation,” Lacour warned.

When Should the Customer Be Introduced to Ancillaries? 

Acknowledging the growing appetite among consumers for information about F&I products on dealer and provider websites, Reahard asked the panel how agents can help promote the existence and value of ancillary products.

“Today’s customers do more research and are more knowledgeable than ever before,” Neuenschwander said. “Dealers need to provide information about products to customers as they are ‘shopping’ before they enter the F&I office. Making videos and digital material available to customers is necessary.”

Wanderon suggested adding information about every available F&I product to each dealer’s website, providing customers with point-of-sale materials, and training the sales team to tee up the sale for F&I. Hendrix concurred, saying showroom staff must provide “enough information to transfer the authority to the F&I manager.”

Can Ancillary Products Be Preloaded? 

Theft, identity theft protection, prepaid maintenance, chemical treatments, and key replacement are high-value, low-cost products that “lend themselves” to preloading, Hendrix said. Neuenschwander said preloads also should give F&I an upsell opportunity and be noncancelable to protect front-end profits.

Lacour described theft as a “low value proposition” for which penetration rates are on the decline. “Also, when you read about a state attorney general fining a dealer, etch is generally the culprit.”

The key, Wanderon said, is to be sure your ancillary benefits drive value and retention.

“This sometimes is hard to determine upfront,” he noted, “so tracking their impact on customer satisfaction, retention both on the service and sales side, and whether they drive higher closing ratios need to be looked at each month.”

When ancillary products are preloaded, Hendrix suggested, they should be offered, explained, and sold “at time of first pencil” to maximize sales.

What’s the Big Deal? 

In the final analysis, where should agents rank ancillaries on their “big board” of F&I products? Higher than some may think, said Lacour, who believes sales of ancillary products are just as important to dealers as the service contract.

“Ancillaries are the second most profitable category of products in F&I and are the primary reason PVRs are reaching new heights,” Lacour said. He listed service contracts, ancillary products, GAP, and prepaid maintenance in declining order of profitability and estimated that ancillaries are responsible for about 25% of F&I profits today. “Without ancillaries, PVRs would be 15% less that what we are seeing today. In today’s market, ancillaries are contributing between $175 and $250 to PVR.”

Considering the recent surge in popularity for leasing, Lacour added, door ding, key replacement, windshield protection, interior/exterior coverage, and a lease-end benefit should be on every agent’s radar. Hendrix said ancillaries drive value in every deal by promoting a lasting relationship between dealers and car buyers, contributing to service retention and higher profits. Wanderon agreed, noting that the customer is exactly where the conversation around these offerings should be focused.

“Our job — from the dealership to agents and TPAs in this industry — is to understand our customer,” Wanderon said. “When we understand the needs, desires, and goals of our client base and then provide the solutions for them, we are all in a win-win situation.”

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An Interview with Jose Fleites

An Interview with Jose Fleites

In March, AUL Corp. named Jose Fleites as the company’s new chief information officer. He joins a growing company that will rely on his expertise to continue the expansion of its product lines and industry footprint. In the company’s announcement, President and CEO Jimmy Atkinson praised Fleites’ leadership and communications skills and said his experience working with agents and in information technology will be critical to realizing AUL’s near- and long-term goals.

Agent Entrepreneur met with Fleites shortly after NADA 2018 to retrace the path that led to AUL, learn how he transitioned from finance to IT, and how that department can help — or hinder — a company’s progress.

AE: Jose, congratulations on the new job. Are you in California now?

Fleites: I am in California, sitting here in beautiful Napa. I’m a bit new to the area.

AE: How did you connect with AUL?

Fleites: Through our president and CEO, Jimmy Atkinson. I spent about 20 years with Assurant in Miami, during which Assurant bought United Service Protection. My boss at the time said they had bought this new company and would love it if I could help bring them onboard. Jimmy was their head of sales, and that’s how we first met.

AE: How did the opportunity to join the company come about?

Fleites: I was working for a competitor when Jimmy reached out. He said they might have an opportunity here at AUL. We talked, and it was a perfect fit for what I wanted to do in my career and what they wanted to do as a company. Having worked for a carrier, a broker, and a third-party administrator, having been in all three verticals, I have a perspective a lot of people don’t have, and this was a unique opportunity to leverage that experience to make a real difference.

AE: You mentioned you worked in Miami. Is that your hometown?

Fleites: I did, and it is. I was born and raised there and attended Florida International University.

AE: What was your first job out of college?

Fleites: American Bankers had a booth at my college job fair. I had studied finance as an undergraduate, and American Bankers was one of the top employers in Miami at the time. I got recruited from the fair and had a job coming out of college.

AE: It must have been an honor to be selected from all those applicants.

Fleites: Well, timing is everything. I applied in 1992, shortly after Hurricane Andrew. American Bankers lost their headquarters and a third of their workforce, many of whom had lost their homes, packed up, and moved elsewhere. So I certainly benefited from their need to bring in new talent.

AE: Was it a culture shock to go from academia to Corporate America?

Fleites: Actually, for seven years, starting in high school and throughout college, I worked in retail. I truly valued that experience, and the recommendation I give to young people is to work in customer service once in your life. It teaches you to listen.

AE: And you had some understanding of how big companies work.

Fleites: I did. The company I worked for had 70 retail stores. But in joining American Bankers, there were some firsts. Having a desk was new. I was hired to work in credit insurance customer service, which is where I got my first taste of the dealership world. And, somehow, it seems automotive has always been in my background.

AE: Are you a car guy?

Fleites: Interestingly enough, I am not a huge car guy, but I certainly appreciate luxury vehicles. But my father and brother are both mechanics, so automotive certainly runs in the family.

AE: How did you choose to study finance?

Fleites: I fell in love with Wall Street in the movies and wanted to be a big investment banker in New York. But you soon realize that a lot of blood, sweat, and tears goes along with that profession. But American Bankers offered me an excellent opportunity, and it was serendipitous, because they were replacing all their call center equipment after the hurricane, and they chose to use my approach to customer service as the model going forward. I worked with the IT team on developing all of the interactive voice response and email responses, then returned to managing consumer feedback.

Shortly thereafter, the head of telecom came up and tapped me on the shoulder. He said, “We were just talking about you at a meeting. Would you like to join IT?” And my immediate response was I didn’t know anything about IT. But I knew the advantages that department could provide to operations and customer service.

AE: It’s a start.

Fleites: It was a great start. And it was really a new department within IT. They understood call centers were the way of the future. I was Employee No. 1.

AE: What did you have to do to get the department going?

Fleites: First and most obviously, I had to find smarter talent than myself. That’s a buzzword now, but I didn’t know that’s what I was doing then. I knew what I didn’t know and I hired people who did. We built that line of service up over eight years. By the end, we had eight call centers, including ones in the Caribbean and Canada.

That’s when leadership knocked on my door and said, “Jose, you’re getting pigeonholed as the ‘call center guy.’” They had a new opportunity with a VSC company they had just purchased. I’m not one to ever shy away from a challenge, and it was exciting. There was a small team initially, only 13 people at the time. After three years, they asked me to lead the credit card and credit insurance team. That was a team of 60 people.

After another three or four years, I was again tapped on the shoulder, which was always very humbling, but it let me know I was doing something right. They were looking for someone to head up their international operations, exporting U.S. products abroad. I knew credit insurance and I knew service contracts. So I did that for a while before leaving Assurant.

AE: What’s the secret to advancing the way you did?

Fleites: Nobody likes talking about themselves, so I am blushing a bit here, but I will say one thing people have said about me: They say I’m probably the least IT-type CIO they know — more of a “business CIO,” to coin a term. I really look at IT from a business perspective. How can IT enable the processes and help realize goals? If you only look at IT from a technical perspective, it’s easy to lose sight of the bigger picture, resulting in lost customers.

AE: And what’s the secret to succeeding once you get that tap on the shoulder?

Fleites: The first is to listen, listen, listen. Understand your customers and their strategies. I don’t make changes for change’s sake, only when it fits the business. It takes a lot of assessment and listening. Hire the best people and get out of their way. I realize everyone says that, but not enough people actually do it.

AE: Are you still getting settled or do you have new initiatives underway?

Fleites: I have been on the job three weeks, and the first big project was attending NADA. That required a lot of preparation, including a lot of talking with customers and employees, which I love. Now, I am spearheading the implementation of an entirely new underwriting system that will increase workflow efficiencies and reduce costs from the issuance of new policies all the way through to the processing of claims — ultimately driving future growth throughout the organization.

AE: Did you move from Miami to Napa?

Fleites: No. After Assurant, I was with Aon in Chicago for three years, then moved to Phoenix.

AE: Could Napa turn out to be the best of them all?

Fleites: I certainly believe so! I’m still getting to know this region, but I’m already garnering an appreciation for Napa and the people here, the food — it’s amazing. I can’t complain. And all the wine-tasting really helps.

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An Interview with David Neuenschwander

An Interview with David Neuenschwander

In 2017, David Neuenschwander was named president of National Automotive Experts (NAE)/NWAN, the company he joined in 2010. Agent Entrepreneur caught up with Neuenschwander to discuss his expectations for the year ahead, the importance of agents to his company’s success, and the demands we place on student-athletes.

AE: What are you working on, David?

Neuenschwander: I have been very busy. I’m working on some very large strategic relationships that came together last year. 2018 looks to be a big year based on dues paid in years past. We’re just trying to get our hands around what to expect in the retail industry this year — our anticipated volume, “Woe is me” from some corners — and how that will impact our core business.

AE: What do you expect from your agency partners this year?

Neuenschwander: Listen, at the end of the day, it all comes down to relationships. That’s who we are and what we do well. While growth is great, and everyone aspires to have growth, the relationships we have the privilege of maintaining allow us to do bigger and better things.

AE: How did you build your network?

Neuenschwander: There’s a high price tag on that secret sauce! I will say that we look at our distribution model and we go about building a value proposition that’s unique in our space. We are in friendly, healthy competition with a lot of companies.

Every TPA will tell you they provide world-class service. When I started back in 2010, I saw a void in our industry. Maintaining and building a relationship with an agent is not all that hard, because there’s a sale involved. You’ve got to like me, I’ve got to pay attention. I wondered what we can do as an administrator to truly help that agent build their business.

We have paid attention to that very deliberately. Are you growing with us? Great. If not, that’s OK. If we can help them stay polished and improve their selling skills, that will promote loyalty to us. Looking back, that’s how we’ve built our business. We have the competency and skillsets to truly help them grow their agencies. We like to build sustainable relationships.

AE: It may be just as true of prior generations, but relationship-building seems to be critical to effectiveness as an executive today.

Neuenschwander: I hang my hat on that, philosophically, every day. We have an opportunity to bring change. With the advancement of technology and the customer’s expectations and demands — that’s not a negative. Customers today are very different from customers two years ago. Forget 10 years ago. I don’t think we have the luxury of slowly changing over the next 10 years. The customers won’t stand for it.

I think that it’s always going to come down to a relationship. In terms of scalability, we’re never going to be a big-box company like Zurich or Resource. We are going to rely on the independent agent who owns that relationship with the car dealer. It’s almost unbreakable when it’s built the right way. I don’t think we’ll ever move away from that philosophy. Agents cater to dealers. Help them get out of their own way. Tomorrow’s customer will be different from today.

And before you ask your follow-up question, no, I have not figured it out yet! But we’ll keep asking ourselves how we can help everyone in our channel deliver a better customer experience.

AE: Do you feel agents are doing a good job of keeping up with the changes you described?

Neuenschwander: Yes and no. There is a good percentage of the agent body that is progressive. They are doing everything they can to put things in place to keep pace with the evolution of the customer.

And, of course, there is a lot of consolidation going on. Mega-agencies are buying smaller agencies. This can be looked upon as a negative, but with the big agencies, those agents have the wherewithal to buy or build the tools dealers need.

Many, but not all, of the one- or two-man agencies don’t have any desire to completely reinvent themselves. So yes and no. Certainly, a large percentage are. But some just want to relive the glory days of old.

AE: Where were you before you joined NAE?

Neuenschwander: I was actually an independent agent, for less than a year. My career started out of college with Universal Underwriters, which is now Zurich. I was an account executive and then regional sales manager. I had P&C and F&I all reporting up to me, 16 direct reports in three states. I never thought I would do anything else but climb the ladder and maybe one day run a company of that size.

They gave me an unbelievable opportunity. But as with everything, things change. In 2008 and ’09, the economy got bad and the company’s strategies changed. I’m a principled guy. I couldn’t buy into the new mantra. I didn’t have a Plan B when I left. So I became an independent agent. I reached out to industry friends, looking for products. Someone told me that, if I wanted ancillary products, I had to talk to Kelly Price, who you know is our CEO.

I made the phone call. I got to know who Kelly is and how she built the company. Six or so months after that, they called and said, “We need somebody. Do you know anyone?” It was extremely fortunate. I don’t even look at it as coming to work. I feel fortunate to have had the success we’ve had.

AE: I know you were promoted to president last year, but I must have missed the announcement.

Neuenschwander: I was, in April. I downplay it. It’s a big deal but not a big deal. Kelly and I work hand in hand. But it was important for she and I to be able to clearly articulate a succession plan for our employees and agents. But I am humbled and honored beyond belief. I pinch myself every day. Has this really happened? But my day-to-day job responsibilities haven’t really changed. If I have to sweep floors, I’ll sweep floors. If I have to meet with an agent, I’ll get on a plane. It all has to get done.

AE: You have worked with a direct sales force and with agents. What are the advantages of the agency model?

Neuenschwander: A couple things jump to mind. One is the expense load. The old adage always proves true: You get what you pay for. As a direct marketer, to increase business, you’ve got to pay good money to get good people. There’s a cost to that, a game to be played. And how many people work out, and how many don’t? The cost of turnover is high. It only works if you have the deep pockets and you’re going to do it on a big scale.

Another point to make is the relationship piece. An independent agent typically does business within a three- to four-hour radius from home. Not that they don’t fly across the country for work, but for the most part, they’re going to stay fairly local. They have the time, without the pressure of corporate objectives, to “waste” building that relationship with the dealer. Not all agents care to do that, but that’s an advantage the agent has over the direct writer.

Here’s an example: I left Zurich as regional manager. We assigned and managed activity by person, by day. We knew how many doors our people had to knock on. Most companies think it’s a volume game that makes you successful. Is it effective? I don’t know. But if I was mandating that my field reps knock on 20 doors, their time to build a relationship would be cut short, and it’s relentless.

An independent agent might knock on one door, five doors, no doors. He or she can take their time. Direct writers typically cannot. It’s a significant advantage to build through agents.

AE: Are you looking for new agents?

Neuenschwander: We are looking. Over the last six or seven years, we have maybe grown by six new agencies. We are very particular. This is, perhaps, a detriment, but it helped us become who we are. We look for a partnership fit. A one-off deal is not a deal for us. We’ll pass. We don’t do it unprofessionally. We just pass. We want to grow with people we would invite to a barbecue with our families and spend the day with us. We’re slow and steady with the agencies we do business with.

AE: Your company has a reputation for giving back. How much of your week is spent on charity work?

Neuenschwander: I don’t know if I can quantity it in hours, but I will tell you this: Being giving and having a caring heart is really a core part of who we are. It goes back two decades. When we hire, we are specifically looking for a cultural fit. Not a working day goes by that we ware not talking about helping others.

Kelly would say it’s not our money; it’s God’s money. That’s who we are and what we do. And it’s also OK if people don’t know. The last thing we’d want is for people to think we do what we do for the attention. If you spend any time with us, you can tell something special is going on here.

AE: What do you do when you’re not working?

Neuenschwander: I don’t have a lot free time, but I spend as much time as I can with my wife of 20 years and our three daughters. The youngest is an exceptional athlete. She plays basketball and soccer. I am very much a supporter of hers. I don’t have time for a big social life. I don’t play golf. I enjoy the game, but not if it means giving up time with family. I do exercise, mostly by riding a bike. I’m always doing something.

AE: Kids’ sports take a lot more time than they did when we played.

Neuenschwander: You know, I played varsity football for three years in high school, at one of the most successful programs in the country, and four years at the University of Central Missouri, all as a full-time student-athlete. I thought we were dedicated. I thought we knew what it meant to sacrifice for a sport. The amount of time demanded of our youth for athletics blows me away. There’s no comparison. It almost makes it not fun.

AE: What position did you play?

Neuenschwander: I was an outside linebacker. The good Lord challenged me heightwise but gave me some wheels. I played at 5’10½” and 210 pounds. If I were 6’1”, we’d be having a different conversation.

AE: Do you still follow the game?

Neuenschwander: I watch college football as much as I can. I’m a huge fan. I still get chills when I see the players running out of the tunnel. I’ve been there, and I know what it means to them to perform and do well in front of a crowd. But I sat out NFL football this year. I have gotten into soccer more, now that my daughter plays at the club level.

AE: Are you looking forward to Agent Summit?

Neuenschwander: Very much so. The Agent Summit has come so far. It was so small the first year, and now, the content, the agenda, the participation … The way it’s turned out, for us, it’s the No. 1 event we attend all year. And we like to learn as well. We sit in on the different courses and try to share that experience. It’s an unbelievable venue, a chance to network with peers who purely and unselfishly want to help each other succeed.

AE: When David Gesualdo started that event, a lot of people told him he was crazy.

Neuenschwander: I recall, and I was one of them. And after attending, I realized that was insanity. He has done a really great job of allowing it to become exactly what the industry needs. None of us are growing without the agent progressing.

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How to Sell to Dealers in 2018

How to Sell to Dealers in 2018

Last year’s Agent Summit included a highly anticipated tag-team presentation featuring Jimmy Atkinson of AUL and Eric “Frenchy” Mélon of IAS. In “Selling to Dealers,” the executives leveraged their combined decades of experience to share advice for independent general agents seeking new ways to open dealership doors, create a value proposition for their agencies, and execute the kickoff for new clients.

The session was a hit, and with Agent Summit 2018 around the corner, Agent Entrepreneur circled back with Atkinson and Mélon to revisit the topic.

A New Kind of Agent

Our executives agreed that the agent body has, for the most part, done a commendable job of adjusting to a shifting retail landscape. Taking no prospect or relationship for granted, Atkinson says, agents have made a greater effort to research dealerships and groups online, customize their product lineups, and seek out niche products that can get them in the dealer principal or general manager’s door.

“Dealers get hit with a million people a day. You have to differentiate yourself,” says Atkinson, who serves as AUL’s COO. “Be thoughtful, be prepared, and ask questions. That seems to work for some of my best agents.”

“If you’re just a product vendor, it’s not going to fly,” says Mélon, IAS’s president of sales, who advises agents to think in terms of solving problems, such as advanced training for underperforming F&I professionals and compliance certification for front-end managers and staff.

“There are two types of agents: One type is just riding it out, while the new, up-and-coming agents are trying to find solutions they can bring to dealers,” Mélon adds.

Your Foot in the Door

Getting the all-important face-to-face meeting with the man or woman in charge remains the principal goal of dealer prospecting. Atkinson recalls a favorite story of AUL’s founder, Luis Nieves, who achieved the impossible many years ago, when he landed an appointment with legendary Southern California dealer Cal Worthington.

Known for his commercials featuring a rotating menagerie of household pets and wild animals, all named “Spot,” Worthington finally bit after Nieves sent him a giant bottle of Tylenol for the dealer and a small bottle for “Spot.”

“I don’t think the success rate for gimmicks is super high anymore,” Atkinson says. “I think the key now is to have a good plan once you get in front of the dealer.”

Mélon suggests approaching the meeting as a consultant would, creating intrigue for your agency while uncovering the dealer’s objectives and qualifying them as a client.

“I hate to tell you, but the main thing I look for is the drive and ambition of the dealer. If they are happy and content, they will have no desire to grow. After one meeting, I’ll know.”

Atkinson reminds agents that dealers will “reflexively” object to whatever they’re pitching. Persistence and follow-up are the cure for rejection, and no matter how rough the exit is, it doesn’t have to be your last. “If it’s a key dealer in your market, it’s worth pursuing the business.”

Seal the Deal

When IAS signs a new dealer, Mélon sends in his “recon” team to hit every department in one coordinated attack. The “transfer” of trust is immediate and unmistakable, and it’s more effective than meet-and-greets with small groups, which can open the door to resistance.

“If you go in to pitch, they’re going to look at you and say, ‘It’s not going to work,’” he says. “When you go in fast, you get an instant lift and they get instant results.”

“Scheduling the kickoff should be the very first thing you do after the ‘Yes.’ Get started as soon as you can and get your competitor’s stuff in the dumpster,” says Atkinson, who advises agents to hold a save-a-deal meeting with managers, register staffers for F&I school, and take turns in the box — all on Day One.

“You probably won the business because you promised the dealer a higher PRU,” Atkinson says. “You’d better roll up your sleeves and make it happen.”

Parting Advice

Anyone who has worked in sales long enough can think back to a prospective client whom they probably could have landed if they had just asked one more time. So says Atkinson, who suggests a quick mental review of the fundamentals of selling before your next dealer call.

“You’ve got to always remember to ask for the business. Make them say ‘No.’ Overcome their objection and make them say ‘No’ again,” he says. If you can close the sale, he adds, close it. If not, set up the next appointment. “It’s basic sales. But sometimes we forget the basics.”

Mélon advises agents to look down the road, 10 years from now, and ask whether their agency will still be in business. The auto finance industry has evolved, he says, and in addition to patience and persistence, selling dealers requires a sophisticated approach.

“So you offer F&I training. That makes you special? No. You have to help dealers succeed and stay competitive,” Mélon says. “The independent agent who relies on golf trips is going to be vulnerable. Provide solutions and surround yourself with people who can deliver, or you’re going to be left behind.”

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An Interview with Craig Robinson

An Interview with Craig Robinson

In November, Craig Robinson accepted an offer to join American Auto Guardian Inc. (AAGI) as the company’s new president, propelling friend and associate Tim Brugh to the position of CEO and setting the stage for a partnership Robinson believes will pay dividends for the organization and its network of agents. Agent Entrepreneur met with Robinson to trace the steps that led him to AAGI and what it’s like to be in competition with your own father.

AE: Craig, the end of the year is upon us, and you’re in a new job. Are you still catching up or are you ready for 2018?

Robinson: Holistically, as an organization, we are absolutely ready to finish 2017 strong and we are really excited about our prospects for the coming year. Me specifically? I’m still trying to get the lay of the land. But I have been around this business long enough and grown to know Tim Brugh well enough that we’re in sync strategically.

AE: In the announcement, you were quoted as saying AAGI is the best company many people have never heard of, and you pledged to change that.

Robinson: That’s a big part of the reason I joined this organization. The feedback I have heard from people working in the industry and uncovered in the course of my due diligence was all fantastic. That said, when I landed, I must have had several hundred people reach out to me — some from outside the industry, some from inside — and roughly 10% of them congratulated me on working for a competitor of ours located about 10 miles southwest of us.

It was interesting to see that even those well-versed in our industry can be confused at times. But the company is investing in an overarching rebranding effort as “AAGI,” which should help further differentiate us. Rebranding aside, we have tremendous aspirations for our growth in the industry, organically as well as inorganically.

AE: I know a rebranding can help convey the impression that a company has evolved or is moving into a new phase.

Robinson: That’s what we’re hoping for. If it was just to differentiate our name from another company, it wouldn’t be worth the effort. We are a lean organization. We have a staff of 82 producing a high volume of business that many other companies need significantly more employees to reach. And we are launching new products and doing new things, all in an effort to get our name back to the forefront of potential clients’ minds.

AE: I understand you recently did some work for a dealer group after a long stretch with The Warranty Group.

Robinson: I was hired by an entity that is part of one of the largest non-publicly traded dealer groups in the U.S. I was hired to help them round out their vertical integration strategy and acquire various companies that fit within their mid- to long-term plans. Unfortunately, the transaction for which I was specifically hired was not consummated.

AE: Judging by the reports we’re seeing from Kerrigan Advisors, that may be the one dealership merger or acquisition that didn’t happen.

Robinson: I think you’d be surprised by how many transactions don’t go through. You don’t really hear about them. I spent a fair amount of time consulting in the M&A space over the summer. I would estimate that upwards of 30% of the transactions aren’t finalized. However, you’re right, there’s an extraordinary amount of activity. There continues to be a lot of dry powder on the sideline as private equity companies and other strategic buyers are looking at how to deploy their assets. I don’t see that slowing down anytime soon.

AE: Dry powder?

Robinson: Money, sorry! “Dry powder” refers to the nearly $1 trillion sitting on the sideline while they look for the right investments.

AE: The last report we saw indicated dealer angst is helping fuel M&A activity. The premise is that dealers are not sure whether they fit into the auto retail industry of the future, so they’re selling now rather than take the chance that they or their descendants could be stuck with an unprofitable business. Is there any truth to that, in your experience?

Robinson: I think there is some truth to that. When you look at the long-term planning for an individual — and not just dealers but owners of agencies or administrators or really any company in the automotive sector — you see that the world is changing. The subscription economy is here to stay. You’re going to see the Ubers and Lyfts of the world become a larger component of the fleet industry. Their No. 1 expense is drivers, so naturally they’re going to look at the autonomous space.

Our country’s infrastructure and various other obstacles in the path will not allow driverless vehicles to happen overnight. If you’re looking at a three- to five-year timeframe, I don’t think you should be that concerned. But 10 years out, yes, the world is going to change. We need to prepare for it or be passed by.

AE: Tell us about your experience at The Warranty Group.

Robinson: Great company. I wouldn’t be where I am if I hadn’t spent my time there. We took our bumps and bruises along the way, but I had a great experience. I started as the powersports guy, handling motorcycles, ATVs, RVs, boats, things of that nature. I got promoted and took over a relatively small program we had at the time called CarMax. That was a phenomenal ride. Many people don’t know CarMax was started by Circuit City.

AE: You’re kidding.

Robinson: They had this idea to create a car-buying experience based on how you treat your customers. Many of the executives were a little apprehensive, but one guy, Austin Ligon, believed in it and took it over, and the rest is history. Circuit City eventually went away, and CarMax is still this massive enterprise.

At the same time, I had a handful of third-party administration clients, and I lobbied for the TPAs to have a standalone division. I became the assistant vice president of the automotive TPAs. We did a great job growing the business and adding clients, and I parlayed that into running all the TPAs, including furniture, medical devices and electronics and appliances, among other industries.

In 2011, I was promoted to run all of Latin America. I had five local CEOs throughout the region and 600 people reporting to me. And I spent an extraordinary amount of time in Latin America, upwards of 1,000 days over a five-and-a-half-year period. I traveled to Mexico, Colombia, Peru, Argentina, Brazil and Chile.

AE: That must have been an incredible adventure.

Robinson: It was, and it was also challenging at times. Every country was different. I learned a lot, and those years helped continue to mold me into the executive I am today. But there was a lot of time away from my family, which was tough. It was a great experience, but I got burned out, and the organization was looking for someone who lived in Latin America to run the region. We had a mutual separation in August 2016.

After I took a couple weeks off, I went to work with that dealer group. I did that for nine or 10 months and then enjoyed about four months off this summer. I played golf virtually every day. Then I would come home, do some networking for a couple hours, then gather my wife and two kids and hang out at the pool every afternoon.

My rationale was that my son was three months old when I got promoted into Latin America. I was barely able to see him. He won’t remember that I was gone, but I will. Now that he’s nearly 7, I hope he will remember the summer he spent with Dad. We will likely never have an opportunity like that again, or at least until I retire. It was a great summer and I would never trade it for anything.

AE: How did you connect with AAGI?

Robinson: I was doing some consulting for Tim. I had a significant number of opportunities presented to me, and I was evaluating them when Tim asked me to join the team. My first response was, “Thanks, but I’m not interested at this time,” but we continued to talk about what the role would look like. Once we put a tighter frame around it and I knew more about what he was thinking, I was incredibly excited to join. So far, it’s been everything I could have hoped for and more.

AE: Does working for a smaller company change the way you operate as an executive? Is there a difference in your personality or your tone?

Robinson: Yes and no. There are strategic and tactical components of my role that don’t change. You still have to look to the future, plan for the future, put the right pieces in place, and tactically execute against your strategy. At a smaller company, you might have to go about that a different way. I mentioned I had 600 people reporting to me in Latin America. We pared that down to 475, but compare that to a total of 82 employees. Mathematically, that’s fewer resources. When you’re setting goals and objectives, you have to take into account what’s available to you.

The other thing is that, sometimes, in a bigger company, you might feel like you’re just a number. There’s a less personal approach. One of the things we’re most proud of is that, although we have sprinkled in some newer employees like myself, we have many people who have been here since the beginning — with tenures of 15 to 20 years! They would tell you they have stayed because of the family-type atmosphere we have here.

We truly care about our employees and our clients. We take a partnership approach to everything we do. We’re not interested in being the lowest-cost provider or buying from the lowest-cost provider. This company has a heartbeat, and as one of the leaders, it’s my responsibility to make sure those core values never change.

AE: Do those values extend to your agents?

Robinson: Absolutely. One hundred percent of our distribution — other than our OEM business — is through agents. I think all of our agents will tell you they can call anybody in this building and they’re going to get the information they need. In sports, it’s the “next (wo)man up” philosophy. You’re not going to find someone here who says, “That’s not my job. Go find this person.”

Everyone here is empowered to help our clients. We don’t want to do business with every agent. We want to do business with agents who want to partner with us. Any agent who has partnered with us can tell you the approach we take to servicing their business is a very familial, jovial, inclusive approach. One of our taglines is “We succeed only when you do.” We live it and breathe it every day. Everything we do is to help make our agents successful. If they’re successful, we’ll be successful.

AE: Where are you from originally?

Robinson: I kind of grew up all over but I consider myself to be from Northern Virginia. That’s where I went to high school and where my parents lived through my time in college. I went to the University of Miami. Miami being what it is, I got an itch for international business, so I got my degree in international finance and marketing.

AE: How did you get into the car business?

Robinson: I’ve grown up in this business. I’m 40, but I consider myself as having been in the business for 38 years. That’s how long my father, who is currently the head of Resource Automotive, has been in it.

AE: Charlie Robinson?

Robinson: That’s my dad! After I graduated, I moved back to Virginia. I got a job waiting tables and wound up as the head waiter at a McCormick and Schmick’s. I was making a ton of money, which made it harder and harder to move on to something else. I thought about restaurant management, but I really wasn’t sure what my next move would be.

That’s when the CEO of what was then Aon Warranty Group called me up. We had an interview and they offered me a job. I told them I would take it under one condition: I wanted to be judged on my own merits, so I would only work on something other than what Charlie was doing. At the time, he was still in Virginia, working as a regional manager for what many know as the old Pat Ryan & Associates.

So I moved to Chicago, not knowing a soul in the city, and just as my career trajectory took off, Charlie left to become the F&I director for Asbury Automotive. You may find this funny, but, when he left, I was still “Charlie’s son,” but when he came back to The Warranty Group, he was “Craig’s dad.” And when I was running the TPA division, we were effectively in competition. And our offices just happened to be right next to each other.

So we were competitors then and once again we’re competitors. We wish each other the best of luck in our professional lives, and at the end of the workday, we go back to being a family. And we’ve both been in this industry long enough not to wish anyone ill will. As long as you’re working above board, I call it “coopetition.” Let the best man or woman win. I don’t like losing, but it’s always nice to see people who have put in the time and effort have some success. And after all the changes that have happened, I for one look forward to what’s to come.

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Agents Wield the Power of Compliance

Agents Wield the Power of Compliance

On Monday, Sept. 11, 2017, agents, dealers, F&I professionals and other attendees of Industry Summit packed into a ballroom at the Gaylord Texan Hotel Resort & Convention Center for Compliance Summit, a one-day educational slate followed by the Automotive Compliance Specialist certification review and exam proffered by Automotive Compliance Education (ACE) the next morning.

After months of planning, the first half of the Compliance Summit agenda had to be rebuilt onsite. In the week leading up to the event, Hurricane Irma swept through the Caribbean, heading northwest and forcing attendees from Florida to cancel their trips to Dallas. The list of those affected included Compliance Summit’s first two speakers: keynoter and famed sales trainer Jim Ziegler and Terry O’Loughlin, the attorney and former regulator who now serves as director of compliance for Reynolds and Reynolds.

Enter John Vecchioni, director of sales training and business development for American Financial & Automotive Services. Also known as the “F&I Professor,” Vecchioni wasn’t scheduled to speak until the next day. But he was primed for action, having helped propel American Financial to its second consecutive first-place Diamond award for Compliance Training in the 2017 Dealers’ Choice Awards. (The company also was voted by dealers as the nation’s leading F&I and sales training provider in this year’s contest.)

With very little notice and no time to prepare, Vecchioni stepped up to deliver a rousing keynote address with a clear message for anyone involved in F&I training — agents included: Our industry is heavily regulated and facing stricter enforcement, and those who follow the rules will prosper — not just by staying out of trouble but by acknowledging that customers expect and deserve a transparent sales and finance process.

Be a Professional

“Some of those who have heard me speak before know that I’m a huge proponent of professionalism in our industry,” Vecchioni said. “We have a minority of people out there that just don’t seem to get it. This is a professional business.”

Meeting the standards of a professional requires those who are invested in F&I — including dealers and agents as well as finance directors and managers — to know exactly what their responsibilities are, he added.

“It’s not a question of what I think I can get away with,” Vecchioni said, adding he is constantly amazed by the number of industry members who are still looking for ways to get around longstanding rules. “We talk about Regulation Z like it’s something new. I mean, the Detroit Tigers won the World Series in 1968, and that’s when Reg Z came out. … We’ve been through four generations of people in the finance office and we’re still working on a 1968 regulation.”

The cure, he said, is effective training paired with a commitment to excellence. F&I pros who are new to the industry or just graduated from sales should know that doing things the wrong way leads to constant anxiety over getting busted — “a very difficult road,” as Vecchioni described it — and a lack of trust paired with a negative perception of the dealership on the customer’s part.

Agents, Trainers and Coaches

Vecchioni encouraged agents and F&I trainers in the audience to think of themselves more as coaches. Trainers teach by telling, he said. Coaches teach by doing.

“Coach your people up. Somebody somewhere saw some talent in them and thought they could be somebody. It’s our job to coach them to succeed in that position. … This is how we won the Diamond award. We coach by doing. We don’t coach by telling.”

Whether an agent visits a given F&I department on a daily, weekly or monthly basis, Vecchioni would advise them to focus on the task at hand. Conversations about anything other than performance in pursuit of personal and professional goals should be kept to a minimum. He said F&I coaches should strive to remain students themselves, mastering the art of learning and being open to new ideas and tools.

“You don’t necessarily have to agree with all the innovation that comes down the pike. I might be one of those old school guys who can do F&I on a legal pad — but only because I don’t know how to turn the computer on,” Vecchioni said. Customer satisfaction should come first, he added, and if new hardware or software can make the process more efficient, the benefits will be twofold: Customers will spend less time waiting to get into or out of the finance office, and they will get the sense the dealership is not stuck in the past.

After all, we live at the “pinnacle of information,” Vecchioni said, and car buyers who do research online are bombarded with negative messages about the dealership experience, particularly the F&I portion. This is true even of so-called consumer advocates who should realize the wise investment protection products represent.

“They don’t say, ‘When you go there, you’re going to meet some of the friendlier sales people in the industry. … And then they’re going to put you in this little white room, and in there, you’re definitely going to want to know these people, because on Sundays, they have a front-row seat,’” Vecchioni joked. “You know what they get? ‘Negotiate the trade separate from the sale. Come with your own financing. Never purchase that day. Don’t buy any of that stuff in the finance office, because, Lord forbid, they’re just making money on you.’”

Overcoming Objections

Vecchioni stressed that agents and F&I professionals must always remember that F&I products do, in fact, have merit and value. When customers don’t purchase, he said, it’s because they don’t understand how a given product works or the value it holds for them.

The cure is an approach Vecchioni calls “logical conversational selling.” Have a conversation with customers, not a sales pitch, and start that conversation not by telling but by learning.

“Let’s find out exactly what they’re trying to accomplish,” he said. “Once I know what you want to accomplish, it becomes much easier for me to attach my products to what could benefit you.” Needs-discovery word-tracks are essential, he added, but only if they further the discussion. “Once we learn our word-tracks, we’ve got to start internalizing and personalizing them so they become a part of the conversation we’re having with customers.”

Much has been made of the need to constantly shorten the financing process. Vecchioni said he sees the logic in not wasting customers’ time, but he reminded the audience that, considering the amount of money at stake and the finality of the paperwork customers sign, F&I-by-stopwatch benefits no one.

“I’d like to find the individual who said it’s got to be 20 or 25 minutes. Where’d you come up with that? We’re signing legal contracts here. We’re committing to thousands of dollars. But you’ve got 20 minutes to do it. Seriously?”

Vecchioni said that, in his experience, the only way to expedite the process while simultaneously acknowledging and overcoming objections is to “communicate with good information.” Few customers will buy on features and benefits alone, he said, and even fewer will respond positively to “Everybody buys this.” Each customer must believe it will benefit them and protect their investment, and to truly believe it, they have to say it themselves.

“If I say it, it’s disputable. If they say it, it’s the gospel. If I repeat it back to them, they’re going to quantify it with more information. … If I build enough value, they’ll rationalize the affordability.”

Compliance in the Digital Age

Vecchioni closed the session by reflecting on the progress of compliance training and his pride in American Financial’s new partnership with ACE, which relies on a challenging certification process that doesn’t end with the first exam. Automotive Compliance Specialists must recertify on an annual basis, ensuring they will be up to speed with changing legislation.

It’s a critical component of F&I success, Vecchioni said, and an empowering step for any producer.

“I don’t think anyone should sit in an F&I office unless they can pass compliance certification, quite frankly,” he said. “My experience has shown me that somebody is going to tell them how to do it. I want to be the coach that directs them where to go and how to do it. I want to make sure our finance people have the ability to rule it right or wrong if they have to.”

Compliance training can help keep dealerships out of the regulatory crosshairs, he added, but it also enhances the skill of every F&I professional, no matter how long they have been in the industry.

“The more compliant you are, the easier it is to close deals, believe it or not. I want to do business with someone who knows what they’re doing. I want them to be able to take the time to explain everything to me.”

Vecchioni said he has never shared the concerns some trainers and industry experts have about millennials, a group many believed would have no appetite for the time, pressure and intangibility of the F&I experience. Young car buyers are still human beings, he explained, and many of them are in the dealership to make the first major investment of their lives, often without the help of their parents.

“So how about we take a little more time to explain to them how it works?” Vecchioni asked. “One thing I’ve found out about millennials: They ain’t dumb. If it makes sense, they’ll move. If it makes no sense, they’re not moving.”

Whatever drove the customer the select their vehicle — and whatever their age — uncovering the trigger behind that selection is key. Whether it’s the value, the horsepower or the paint color, the ability to uncover and understand each customer’s motivation gives the F&I manager an edge. But that edge is hard-earned, Vecchioni stressed, and it won’t materialize out of thin air.

“Build a foundation, build the fundamentals, have a good process. Make sure we’re asking the right questions when we’re asking questions,” he said. “Walking out, I know what my objective is: I gotta find out why they would have any need for my product, and then I need to show them their ability to afford it.”

In conclusion, Vecchioni encouraged his audience to spread a message of positivity among trainees: Don’t let millennial customers scare you. Don’t let cash deals or outside financing discourage you or upset your rhythm. Success depends on the F&I professional’s ability to close the next customer, not the last one.

“The attitude I show up with that day is the attitude of a winner. I’m not going to let cash, credit union or lease deals mow me down,” Vecchioni said. “The next customer I face is the most important customer I’ll have that day. And that customer deserves the opportunity to have my best presentation.”

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