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An Interview with Brad Blizzard

An Interview with Brad Blizzard

F&I is evolving rapidly, but 35-year industry veteran Bradford “Brad” Blizzard believes the core concepts of effective processes and superior customer service will serve it well in the Digital Age. Agent Entrepreneur caught up with RoadVantage’s national vice president of sales to take a look back at his career as an F&I professional, agent and executive, predict the future of the industry, and learn what life is like in a subtropical paradise.

AE: Brad, where am I reaching you today?

Blizzard: I’m here in St. Augustine, Fla., where I’m based.

AE: I have visited St. Augustine. Isn’t it America’s first city, or something along those lines?

Blizzard: It is the oldest city in the United States. We just celebrated our 450th anniversary. Of course, I’ve only been here for a segment of those.

AE: Are you from Florida?

Blizzard: I am. I was born in Miami. Where I grew up in Miami, there wasn’t much there, apart from a few ranches.

AE: It must be something to see your hometown change so much in your lifetime.

Blizzard: It’s crazy. And we do see it fairly often. We still have quite a few friends in Miami, and one of our three kids lives in Hollywood, Fla. My wife and I moved to St. Augustine seven years ago. North Florida is a little less fast-paced.

AE: How did you get into the auto industry?

Blizzard: Almost on a whim. I had always gravitated toward insurance-related businesses. I was working for a large insurance company in the early ’80s when my nephew started telling me about his job as a finance manager at JM Pontiac. He told me about the work, how he got involved in it, and the money aspect of it. One thing led to another. I went down and interviewed and, two or three weeks later, that was the start of my career.

AE: Did you go directly to F&I?

Blizzard: I sold cars for a very short period of time. JM Pontiac had 16 F&I managers. It was quite the operation. We sold 450 to 500 cars a month from a single-point Pontiac store, including used cars. And I learned so much there. Working at JM Pontiac was almost like going to Automotive University. And if you weren’t aware, JM was the founding place of what is now Jim Moran & Associates.

AE: That store?

Blizzard: That store, that setup, the way we handled people in the F&I department. They started spreading the word, reaching out through 20 Groups. Other dealers would send people to JM Pontiac. They would spend the day in the training room upstairs, then sit with an F&I manager for the balance of the night.

AE: What did you know about F&I when you started?

Blizzard: I don’t think I even knew what “F&I” stood for. But I learned, quickly. It was an extraordinarily quick fit for me. Whether it was meant to be or dumb luck, that was the beginning, and it’s moved on from there. I’m very blessed with the career I’ve had.

AE: We talked about how Miami has changed in your lifetime. How about the degree to which F&I has changed during your career?

Blizzard: It’s really extraordinary. When I started, we had credit insurance, disability, service contracts and a little bit of GAP. Finance terms were 48 months at the most. The scope and size of it was nothing like it is today. And the way we handle customers has changed as the product availability has exploded. I really enjoy talking with my kids about it, although sometimes I’m still not sure they understand what I do.

AE: How long were you with the JM group?

Blizzard: I was at that store for a couple years. I was actually slated to go straight from that store to working at JM&A. It didn’t quite work out. I had a vacation coming up they wanted me to forego. We put it on hold and, in the meantime, a friend called from Atlanta to tell me about a consulting firm called Gill & Associates. It was like JM&A — training, consulting and sitting in the dealership and taking care of business when someone is gone. I interviewed and wound up moving from South Florida to Atlanta to get into the consulting side.

AE: I have met a number of F&I specialists. They all seem to enjoy the combination of training, consulting and taking turns.

Blizzard: It’s exciting. You get to do some travel, and it’s not the same thing each and every day. It’s a wonderful piece of the business to be in, and it’s very rewarding. I stayed with Gill & Associates for three years. Then they merged with Voyager Life out of Jacksonville, and we formed Voyager Automotive Group. That took it to a different level. They moved me to Denver to be Western regional vice president. I had seven regional managers, and we had business from California to the Mississippi. But that company was eventually sold to American Can, a cannery. They were part of Primerica Financial. They essentially bought the assets.

AE: How did that work out?

Blizzard: It unraveled in about six or seven months. We had 35 or 40 people at that time. We were guaranteed one year’s salary, but we had to stay out of the business. So I took some consulting jobs and then eventually got back into retail. I did a stint with a large Ford dealership, and that was a great refresher course. I relearned F&I at the grassroots level. After that, I ended up relocating back to South Florida from Denver, and I started my own agency. I called it “Bradford Consulting Group.” My wife thought it had a ring to it.

AE: How much did you know about running an agency?

Blizzard: Not much, to be honest. But I had been around agents, and I thought I could apply my business acumen to it. And, quite frankly, it worked out very well. It’s a unique scenario to start from zero — no accounts, no employees — and build it to where I got it. I’m proud of that and I really enjoyed it.

My product provider at the time was Safe-Guard, and I got to know Doug Duncan very well. He offered me a position with Safe-Guard as national vice president of strategic accounts — clients like AutoNation, Sonic and Mercedes-Benz of North America. We had seven regional managers. I lived in planes and hotels, lots of travel. I oversaw that for several years.

After Safe-Guard, I initially went back to consulting, then basically ran into the opportunity with RoadVantage. A friend of mine came up with an idea for a product he thought would work. He needed to find a provider to underwrite and back it. I had known Garret Lacour for some time, and he had just started RoadVantage. We took the product to Garret and he helped us take it to market. Garret and I started talking about his vision for the company and where he wanted it to go. He offered me a position when the company was in its infancy, and I took it. It was an opportunity to be involved in something great from the ground up. That was almost six years ago.

AE: RoadVantage has really raised its profile. You have those big ad campaigns. And I like the meter panels you put up at Agent Summit, with photos and testimonials from agents and customers.

Blizzard: That is directly attributable to our marketing department. It’s unparalleled in terms of what Melissa Anderson and her team do to get us into the marketplace. There are only a few major national product providers. Garret knew RoadVantage had to be different if we wanted to make some kind of an impact, so we took that and ran with it.

AE: Having worked as an entrepreneur and as part of a company, would you say you have approached those roles in different ways?

Blizzard: Yes. On the entrepreneurial side, you wear so many hats. You’re doing accounting, marketing, sales, HR — all the things that go into running a company. But essentially it still boils down to my background in the auto industry. From selling cars to F&I to sales management, those components are connected to everything I’ve done in my career. You hear folks say it gets into your blood and stays. I couldn’t get out of this business if I tried.

AE: Will digitization change that? Would you have fallen in love with the industry if your experience was closer to what the next generation of dealership personnel can expect?

Blizzard: I believe I would have, and I believe more people will. It’s a fantastic industry, and everyone gravitates toward something they like to do. And it can still be a high-paying, lucrative career path. But I think we have done a less-than-stellar job of introducing it to the next generation. We need to show them what our industry is about and how it fits with what they’re looking to do. That will be paramount to keeping it going.

And since the next generation has grown up with digitization, they will in turn help the industry evolve with customers’ shopping habits. From a digital aspect, the auto industry is like an ocean liner: It turns, but it turns slowly. But at the end of the day, it’s still about the basics. It doesn’t matter what industry you’re in — it’s about the customer experience, and doing things in a way that meets consumers where they are. That part of F&I hasn’t changed, it’s just the tools that we use to reach the customer that are evolving.

As we continue to move into the Digital Age, we’re utilizing as many things as we possibly can to help dealers engage customers as shopping behaviors evolve. RoadVantage is producing informational videos for consumers. They enable our agent partners to help dealers get F&I product information to customers, who can then see these videos on the dealer’s website or on monitors on the showroom floor. So the first time the customer hears about these F&I products isn’t when they sit in front of the F&I manager. That sets the F&I manager up for an easier, more productive meeting with the customer, moving the focus from education to determining what the customer can afford to buy to protect their purchase.

AE: What are you working on right now?

Blizzard: From a company standpoint, we have a couple big things we’ll be talking about in the not-too-distant future. We think they will create new opportunities for our agent partners. That’s how we view them, as partners. We are ultimately a product provider and administrator. What happens beyond that is up to agents, and we won’t lose sight of that. We can’t thrive without our agent partners. They have a customer experience with us, their dealers have a customer experience with them as well as with us, and then the car buyer has a customer experience with the dealership and also, again, with us, when they call in a claim. Each of those pieces has to be perfect, and that is our focus — providing the best experience for everyone involved.

AE: If an agent was struggling with a dealer client and asked your advice, would you suggest they look downstream, at the end user’s experience?

Blizzard: I would, and I’m going to steal that from you. (Laughs) But it is, absolutely, it’s the big picture. An agent might say, “My dealers are all happy.” But it goes way beyond that. As a former agent and knowing agents, I believe a key element is having the best product provider for you. One size does not fit all. And it’s important to look at those relationships: What kind of service am I getting from my provider? Do they assist in field installations and all those other pieces to the puzzle? How do they handle my dealers’ claims, and what is the consumer’s experience when they call in? So yes, I would certainly offer that advice, to look at it from that perspective.

AE: What do you do in your free time?

Blizzard: Interestingly, my wife is the managing partner in a company that owns six vessels in the Bahamas, British Virgin Islands and Indonesia. They host one-week, live-aboard dive cruises, on 65- to 105-foot boats. It’s part scuba diving, part eco-adventure. My wife and I also enjoy going to the beach and sailing, and I play golf. I like to say our biggest hobby is our children, but we don’t get enough time with them for that to be true. But all three of them still live in Florida, so it’s easy to see them when we can.

AE: If you want to keep your kids around, raise them in Florida, where there’s no state income tax and houses are affordable.

Blizzard: Yes, that has made things much easier!

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An Interview with Rick Meinke

An Interview with Rick Meinke

This year’s Agent Summit will include “Capitalizing on Lease Opportunities,” a panel discussion devoted to F&I products for lease customers. One of the panelists is Rick Meinke, a nearly 40-year veteran of the auto retail and finance industry who currently serves as national sales manager at ECP Inc. On the eve of the event, Agent Entrepreneur caught up with Meinke to retrace the steps that led him to ECP, talk about the state of F&I, and learn how trainer humor can sometimes be lost in translation.

AE: Rick, what does your work entail?

Meinke: I wear a number of hats. My primary responsibility is increasing the business we have and adding new business through new agents.

AE: Do you have agents in every state?

Meinke: We are in every state, as well as Canada, Puerto Rico and just opening in the Dominican Republic.

AE: Have you traveled to Puerto Rico?

Meinke: I go at least once a year. I work with our agents and I’ll go in and talk to dealers and salespeople. I’ll do a sales meeting, and, in most cases, I have a translator. I like to interject a little humor, and I hope it works in Spanish. Sometimes they don’t laugh, and I wonder, “What is he really saying?”

AE: Are the basics of F&I training universal?

Meinke: I’m sure you’ve talked to a lot of F&I trainers, so you know everyone has their own concepts and approach. But I believe basics really are basics. Our national director of training, Carter Abel, has been a trainer for Penske, Pat Ryan and EasyCare. Basics are basics, but we may have a different approach to menu selling, for example.

AE: Where do you stand on the issue of presenting F&I products online?

Meinke: I worked for a Toyota store when Scion was launched, and Scion was all online. You had to have not just information but pricing online, as well as on menus posted in the Scion showroom. It worked out fairly well for us, once we understood the concept and made adjustments.

I don’t see an issue with that. I think it’s a good idea. When you’re that transparent with the consumers, I think it’s a positive. The hot button for most is usually rate. As there is no value to the consumer in rate, you still have many other products that can be sold and will add to the profitability of the store and give the consumer value. It can, however, affect the profitability if you don’t have a strong aftermarket program and a strong F&I department.

AE: Do you worry online F&I gives the consumer an opportunity to just say “No”?

Meinke: I think it gives the consumer a choice. If they don’t like what they see, they’ll go to their bank or credit union or possibly another dealer. But it forces dealers to put up conservative numbers, earn their business, and have a chance to marry them to your dealership and your service department. That’s a long-term goal for any dealer today.

AE: How did you get into the car business?

Meinke: I got into it in 1979. I sold cars at Gerald Olds Jeep Renault AMC in Naperville, Ill. I grew up in Joliet, right next door. It’s a funny story. My father-in-law worked in that store. He came to me and said, basically, “If you’re going to support my daughter, you’re going to be able to do it in the car business.”

AE: Was it something you wanted to do?

Meinke: You know, it always seemed like it might be a fun thing to do. It got in my head when I purchased my first new car in 1977. And when I did it, I enjoyed it.

AE: How much training did you get?

Meinke: Not much! I spent two full days watching Betamax videotapes of Joe Girard. From there, most of my training was just working with my father-in-law. He was the top guy until I got there.

AE: You passed your own father-in-law on the leaderboard?

Meinke: After 30 days, I started driving the Toronado, which was for the salesman of the month.

AE: How long were you in sales?

Meinke: Only for about 18 months. I wanted to get into F&I. We had a young man in that position and I didn’t really care for how he was treating the salespeople and customers. I felt I could do a better job. The dealer didn’t want to take me off the floor, so I went to work for Pat Ryan. This was in 1981. And of course, back then, all you had to sell was credit insurance and service contracts.

AE: How did the opportunity with Pat Ryan come about?

Meinke: My brother- in-law worked for them. He put the idea in my head. He put me in touch with the right person. I called him up, we had the interview, and they hired me. As I understood it, back then they made an exception, because they preferred to hire college grads and put them through their program. They didn’t think they’d be able to keep the retail guys.

AE: What was the job?

Meinke: I was a specialist. We called it, back then, a “Rent-a-Ryan.” I would go work F&I at an underperforming dealership or fill in for someone who went on vacation. It could be a week or two or up to six months.

AE: Did you travel all over the country?

Meinke: I wasn’t in that position very long. The furthest I went was Wisconsin.

AE: How was the pay?

Meinke: The pay was not good. But I didn’t have any kids at that point and figured going backward was OK as long as the opportunity was good and I enjoyed it. Selling cars wasn’t enough of a challenge at that point in my life. But then, I didn’t like being cooped up in an office either. I liked to see deals being made and talk with customers on the showroom floor.

I did that for six months and then got promoted to district manager. At that point, I felt like I was basically an agent. My job was to go in, raise expectations, and show them how to exceed those expectations, and to increase my district be putting on new dealers. I did that for a little over a year, then I was promoted to area manager for Northern Illinois.

AE: Did you get to know Pat Ryan?

Meinke: I won’t say I knew him very well, but I certainly had the opportunity to be in the same meetings on occasion. Once a year, we had a corporate meeting. He would always make those meetings and make time to have a drink with us.

AE: Was there a sense at that time that you were doing something special?

Meinke: Yes. The big thing is, Pat was a genius. He understood the retail automobile business and the training aspect of it. He started the first real training class in the industry for finance.

AE: How long were you with the company?

Meinke: I left in 1986. With a partner, I started a training company specifically for protective coatings. We didn’t sell any products, and we didn’t care what the dealer carried. We just applied training concepts to what we saw as a new profit center. Nobody was doing really well with protective coatings at that point. We Ryan-ized that industry.

I ended up selling the business to my partner in 1990 and went back into retail. I went in as a sales manager and moved up to general sales manager and general manager. I worked in several stores, mostly Toyota, Honda and Hyundai. I spent a lot of years with Toyota, and it was a lot of fun. We had good product and it was an exciting time.

So I did retail throughout the ’90s and into the 2000s, then left around 2009 to come to work with ECP.

AE: What prompted that move?

Meinke: The hours. When you’re working five days a week, and your head is in the game six days a week, you don’t see a lot of your kids growing up. In her senior year of high school, my daughter was the captain of her cheerleading team. She had an awards banquet. I had to be there, so I took the night off, but someone got sick, so I had to go in. A few weeks later, I quit, and shortly after that, I joined ECP.

I’ve known ECP since the ’80s. They ran an ad, I saw it, I called the president, and I went in the same day. I went in as a regional manager, did that for about a year, and then I was promoted to national sales manager. Looking back, I wished I could have done it 10 years earlier.

AE: It sounds like you’ve had success at every stop.

Meinke: I don’t know that I have. I think “success” is a very broad word. No matter how successful you are, you can always be more successful. I’m learning every day and getting better. I’m still striving to hit the pinnacle. But I’m happy, and I love what I do. That’s more important than anything.

AE: What are you working on now? What gets you up in the morning?

Meinke: What gets me up in the morning? Incomplete business from the night before. (Laughs) No, really, the challenge growing the business and seeing the results materialize is what really gets me excited. I’m proud to have a good team around me at ECP that does a really good job. They are the folks who make everything happen. We are like a family and everyone loves what they do. The passion is what makes it all worth doing.

AE: Do you plan to retire with ECP?

Meinke: I will, yes. I have no intention of going anywhere. It’s a great company. When I stop enjoying what I do, then I’ll retire. When it becomes work, then I might take up golf.

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An Interview with Jim Ganther

An Interview with Jim Ganther

James S. Ganther Esq. is the cofounder and president of Mosaic Compliance Services and, in partnership with Gil Van Over, one of the driving forces behind Automotive Compliance Education (ACE) and its certification program, which was offered to attendees of Agent Summit in May.

Agent Entrepreneur sat down with Ganther to discuss the need for compliance education, his scotch-soaked application to Notre Dame Law School, and the inspiration behind the wave of nationalist movements in the U.S. and Europe.

AE: Jim, you’re everywhere these days. You’re writing for Agent Entrepreneur and Auto Dealer Today. You and Gil Van Over are offering ACE certification at Industry Summit, Agent Summit and Compliance Summit. Are you busier now than ever?

Ganther: That is a fair statement. Throughout much of 2016, I had the sense that, the harder I worked, the further behind I fell. That has been cured by the recent hiring of well-known compliance attorney Randy Henrick, late of Dealertrack. That was an incredible blessing for us. Finding a guy that well-qualified is difficult. There aren’t that many out there. He joined us this month and I have been pushing projects onto his plate.

AE: In fact, Randy wrote the cover story for this issue, and it’s terrific.

Ganther: He did a better job than I could have. We are delighted to have him on board. He is one of the three best-known compliance attorneys, up there with Tom Hudson and Terry O’Loughlin. He wrote Dealertrack’s compliance handbook, which has over 200,000 copies in print. I don’t know that 200,000 people have necessarily read it …

AE: It’s a reference.

Ganther: It’s a reference, yes. I’m not waiting for the movie. Having said that, he is very, very accomplished in the dealership compliance space.

AE: You have mentioned that Tom Hudson has been a major influence. How long have you known Tom?

Ganther: I remember taking him and his wife and Michael Benoit out to dinner during one NADA convention, and that was probably 10 years ago. But his influence is hard to miss, and that extends back at least another five years. I credit Tom with creating the term “car law.” He made that a thing. If car law wasn’t a thing, we wouldn’t have the National Association of Dealer Counsel. Car law is now a recognized subspecialty. He is a prolific writer, and that extends his influence. He has great knowledge and experience and a folksy way of conveying it.

AE: Would you say he has influenced your writing as well as your work?

Ganther: I aspire to write that way. I emulate his style. And I aspire to his impact.

AE: How did ACE come about, and why should agents get certified?

Ganther: We wanted to create a certification that would be easily accessible and would keep you current. We also felt it was important to tailor the content to specific job functions within the very broad dealer space. We wanted to reach automotive professionals who work outside the F&I box.

The average store has two or three F&I managers and runs through 48 salespeople a year. Shouldn’t you have compliance training for salespeople? Federal law says you have to have a compliance officer — referred to as a “program coordinator” — so we offer compliance officer certification as well. In addition, ACE offers, or will offer, certifications for sales managers, general managers and automotive compliance specialists. That last certification is tailored to those who support the retail automobile industry from outside the dealership, such as F&I product provider personnel.

And we have updates. You have to recertify every year. The cost for recertification is 10% of the original course. So if you spend $495 to achieve F&I specialist certification, it will cost you $49.50 to recertify. Sales certification costs $95 and recertification costs $9.50. We will reach out in the 11th month and ask you to log in to take the annual update module as well as any modules we have added since you took the test. This year, for example, the used-car buyer’s guide has been changed. The change went into effect in January, meaning it has changed since you were certified at Industry Summit in August.

AE: Why bring it to Agent Summit?

Ganther: I believe everyone in this industry should have a basic working knowledge of the legal framework in which we operate. That includes agents and F&I product providers. If you don’t know where you’re going, any road will get you there. If you want to get to compliance, training is the surest route.

AE: What was your route to the legal profession?

Ganther: Well, my father said he always knew I was going to be a lawyer.

AE: Was he a lawyer?

Ganther: No, my father, grandfather and great-grandfather were all builders. I worked in the family business for years, every summer. If you want inspiration to stay in school, spend a few summers pouring concrete.

AE: How did your father know you would be a lawyer?

Ganther: He said my nose was always in a book. As a kid, I would rather read than do almost anything, including going outside and playing like normal, well-adjusted children. Law school favors strong writers, and the way to become a good writer is to read good writers.

AE: Stephen King once said you can’t call yourself a writer unless you read four hours a day and write four hours a day.

Ganther: Wow. Well, I also have to work for a living. But law school is perfect for a bookworm with a big mouth. You spend three years reading, writing, thinking and arguing. That’s a really good skillset.

AE: You grew up in the Midwest, correct? Did you always want to go to Notre Dame?

Ganther: Correct, and yes. I grew up behind the Cheddar Curtain in Oshkosh, Wis. Despite now living in Tampa, Fla., I remain a diehard Packer fan. We got a new puppy just before Christmas and named him “Lambeau.”

As for Notre Dame roots, my dad and his brother both went there. I only applied to two schools as an undergrad: Notre Dame and Georgetown — as I tell my Hoya friends, everyone needs a backup school! I got into both and chose Notre Dame. I actually wanted to get into Notre Dame Law School more than I wanted to get into their undergraduate program. It was and remains a Catholic law school, and they take very seriously the moral aspects of the profession. That formed who I became as an attorney and a business owner.

AE: Do you have a moral foundation because you attended Notre Dame, or did you attend Notre Dame because you have a moral foundation?

Ganther: The answer is yes. Many people go to Notre Dame to go to Notre Dame, the prestige, the football games — last year excepted, of course! Others want the Christian tradition. But no matter their motivation, the people you’re surrounded by are very competitive, very sharp people. Iron sharpens iron. And the loyalty of the alumni — the Irish Mafia — is legendary. That loyalty never hurts.

True story: I graduated with a degree in finance in 1984. That was the year following the American intervention in Grenada. In June of 1984, I traveled to Grenada with three other guys to serve as a volunteer teacher. It was from Grenada that I applied to law school. Everything then was done by snail mail, so I asked my father to collect the law school application packets from Notre Dame, Georgetown and three others and mail them to Grenada.

Well, in addition to the applications, he threw in a fifth of Dewar’s White Label scotch. The bottle broke in transit and soaked the papers. They had dried completely, but they still reeked of scotch. I had to roll those pages through a typewriter, complete the forms, put them into envelopes, and send them to the schools.

AE: Did you include a note of explanation?

Ganther: I did not.

AE: As an attorney or as a Catholic, would you consider it improper for an agent to discuss religion with clients in the pursuit of common ground?

Ganther: That’s really up to the client. I would never lead with it. But we’re all made out of whole cloth, and you are who you are. Eventually, even clients will figure that out. I have met clients at church. But I have also been asked, on many occasions, “Jim, can you find me a good Catholic lawyer?” And I always reply, “Do you want a good Catholic or a good lawyer? It’s more important to me that I find you a good lawyer.”

I’m not saying that the Catholicism or the Christianity is not important, but I’m not marketing my faith. We market our technical competence and we operate in a moral fashion.

AE: As long as we’re talking religion, let’s talk politics. In your most recent article for ADT, you discuss President Trump’s Mexico policy and the realities of a border tax. It seems to me that, in the business world, we all used to keep our politics to ourselves, but those doors were blown open by the 2016 election.

Ganther: In that article, I write that people are saying this was the most acrimonious election ever. Not even close. Breathe into a paper bag, people. To quote Aaron Rodgers, “R-E-L-A-X.” But it was an important election cycle, and the significance of the choice we faced makes people want to talk about it.

I’m sure you’re familiar with the term “zeitgeist.” It refers to the spirt of the times. There is a zeitgeist all over the world. And it’s “fissiparous,” another fancy word that comes from “fission,” meaning “the action of breaking apart.” We are living in a fissiparous zeitgeist. Take a look at Brexit. The “Leave” camp won, shocking all the experts, the politicians and the pundits. “Remain” was five or 10 points ahead in the polls. The Remain camp should have won, but it lost. Politicians are always the last to know.

The British wanted their country back. Seventy percent of Britain’s laws were being passed in Brussels. Brexit was the common man’s last chance to vote and say, “I want my country back.” The elites of the European Union have more in common with one another than the people they claim to represent. The Five-Star movement in Italy. The National Front in France. Alternative für Deutschland. All of these nationalist movements are drawing from the same stream.

The average Joe does not believe that the media, the politicians or the corporations have their interests at heart. And, oh, by the way, they tend to be correct. When you are part of the elite, you want to maintain your power and your prerogatives. During primary season, I told anyone who would listen that, if Donald Trump won the Republican nomination, and if he was within five points of Hillary Clinton in the polls on the eve of the election, he would win. It was a repeat of Brexit — a reflection of our fissiparous zeitgeist.

The only group more frightened of Donald Trump than the Democratic Party was the Republican Party. The “Never Trump” movement was a Republican movement. Hillary Clinton was the candidate for the status quo. In the United States, as in Europe, the status quo is at risk. Trump came in as the man the Democrats couldn’t beat and the Republicans can’t control. He came in owing no one. So keep an eye on France’s elections in April and May of this year. If Marine Le Pen wins — and she currently leads in the polls — the European Union will fragment within 24 months. We live in interesting times!

AE: I understand the appeal of an anti-establishment candidate who promises to fight for the common man. But when I picture that person, they don’t look or sound like Donald Trump.

Ganther: Neither did Winston Churchill. Churchill understood the soul of the British population better than anyone. He was a brilliant man, and a scion of the aristocracy. But he had a nearly pitch perfect ear for the common man. For example, he spoke French, but always mispronounced it. That ticked off the French, but it delighted the working man at home.

AE: So Britain got Churchill and we elected Trump. What’s going to happen?

Ganther: A lot less than he promised. For the purposes of the article, I focused on one narrow thing: What can he do in regards to trade with Mexico? And the answer is not much. We haven’t backed out of a trade agreement since the Johnson administration — Andrew Johnson. So we don’t have a lot of jurisprudence or precedent to follow.

Trump arguably has that authority, and arguably does not. If he were to declare the North American Free Trade Agreement null and void, lawsuits would immediately follow. But as a practical matter — as opposed to a strictly legal matter — he can’t do that, nor can he put a 35% tariff on Mexican goods. And the president of Mexico, Enrique Peña Nieto, has a reelection coming up. He can’t afford to let it happen without a strong response. He can’t be seen to kowtow to the U.S. It’s a matter of national pride, and that can’t be trifled with.

So what Trump is doing is brilliant. He’s threatening a 35% tariff, which would be mutually assured destruction. But it’s a useful negotiation technique. Scare the crap out of people, and then the compromise seems great by comparison. And Peña Nieto will look like a hero. But Trump is already halfway home. He’s seen as the champion of the unemployed toolmaker. He has achieved his purpose.

The elites should know this. The New York Times shouldn’t be screeching. If I know this stuff, they should know it too. Their histrionics are why nobody believes the mainstream media. And they don’t deserve to be believed. They’ve blurred the lines between reporting and editorial.

AE: Is there an unbiased source out there? Where do you get your news?

Ganther: What I object to is authors who pretend to be unbiased. “All the news that’s fit to print”? That’s not true. They have an agenda. They spin everything. I don’t mind getting my news from people who are open about their bias. I understand where Fox News is coming from. I understand CNN.

Where do I get my news? Stratfor is an open-source intelligence service I subscribe to. Another one is Geopolitical Futures. They look at events from a geopolitical standpoint. How do all these things connect?

AE: How did you choose which type of law to practice?

Ganther: Sometimes the practice chooses you. I graduated law school in 1988. I received a job offer from DLA Piper, which is currently the largest firm in the world. It wasn’t at the time, but it was definitely Big Law. I was set to go into the corporate law department. However, in October 1987, we had what I will kindly refer to as a “market correction.” The stock market tanked, M&A work dried up, and everyone going into corporate had to find a different home.

I was offered a slot in the bonds department, because when stocks go down, bonds go up. I thought I would hate it, but I enjoyed it. I was in that department for a year. Working at that particular level of government financing requires one to be very detail-oriented, and you get to work with big numbers. It was a good way to cut my teeth on the law and it got me involved in the tax code as well.

But then I got engaged. I was in the Baltimore office and I got engaged to a girl from Northern Virginia. She had no desire to move to Baltimore. So I requested a transfer to the Washington, D.C., office, and that was granted. But, again, I had to take what was available, and the government contracts department sounded like the best fit for me. But I had no idea what that meant.

It turned out it’s a business litigation practice that focuses on companies like Boeing or Westinghouse that sell things to the government. It is pretty much entirely governed by the Federal Acquisition Regulation system. So understanding the relationship between federal regulations and companies trying to make a profit was incredibly useful for someone destined for car law.

AE: How did government contracts prepare you for car law?

Ganther: It was the perfect training for a budding car lawyer. It’s a litigation practice that derives heavily from federal regulations. That understanding of a regulatory scheme and how it impacts your clients’ behavior, how to counsel that behavior, and how to defend it when it’s challenged is a tremendous education for what I do now. I could hot have had better training than that.

Now, at this point, I’m still in D.C. I’m a beltway bandit. I was doing well with the law firm, and I loved the work, but I hated the career. I was working seven days a week. I was afraid it was going to cost me my marriage and my relationship with my children. So I announced I was going to leave the firm, and I ultimately moved the family to Tampa.

I had accepted a job in Tampa that looked good, but when I got down here, I quickly discovered the managing partner was unethical. He actually counseled us to double-bill. Uh-uh. So I quit that job and hung my own shingle. That was 1994. I went a year without a paycheck.

AE: With a family? How did you get by?

Ganther: That is a really good question. You get the second mortgage, you drain your savings, you do what you have to do. I was convinced we were doing the right thing, but it also happened to be the hard thing.

AE: Were you successful?

Ganther: We were. At its peak, Ganther & Fee employed five lawyers.

AE: Hold on. You worked with a lawyer named Fee?

Ganther: That’s right. Attorney Fee. We were trying to find another partner named “Outrageous.”

AE: Amazing. And wasn’t that the office that was hit by an airplane?

Ganther: It was, in 2002. It was a Saturday, and I was on a retreat at the St. Leo Monastery, about an hour north of Tampa. Our IT guy was with me. He owned a pager that displayed a headline scroll. I noticed him staring at it. His jaw dropped and his eyes got big, and he read the headline aloud: “Downtown Tampa High-Rise Hit by Aircraft.”

We knew it had to be our building. It was the tallest building in downtown Tampa and thus the biggest target. A troubled teenage boy had stolen a Cessna 172 in St. Petersburg, overflown MacDill Air Force Base — where the U.S. Central Command and Special Operations are headquartered, which had to be incredibly embarrassing for them — and then plowed his aircraft into our building. He was killed instantly.

Now, we took our computer data security very seriously. We didn’t have a cloud or secure server farms back then. We had a series of cassettes. At the end of every day, it was my job to pull out that day’s cassette and put in the next one, so if there were a fire, all our data would be preserved.

The aircraft was fully fueled and the gas went everywhere. And even though it broke through the ceiling grid, even with all those sparks, it didn’t ignite, and the sprinkler system didn’t go off. So our computers weren’t damaged, but I felt extremely virtuous knowing all our firm’s data was in my briefcase.

AE: Indeed. Were you practicing car law at that time?

Ganther: By then, we were doing work for a local F&I agency. One of the things they wanted me to do was help their dealership clients develop compliance programs. I billed the agency for my time, and when that became too expensive, they hired me full-time.

AE: Had something happened to one of their dealers?

Ganther: Yes, but I’m not at liberty to talk about it. I will say that, at that time, we were much more concerned about plaintiffs’ lawyers than regulators. There was no CFPB. Elizabeth Warren was still teaching law at Harvard. The challenge in that environment was, “How do we protect our dealers from becoming low-hanging fruit?”

AE: How long were you with that agency as in-house counsel?

Ganther: About three years. When I left, we wanted to make the transition as smooth as possible. We started telling clients a couple months ahead of time. One client asked if he could refer me to Robert Shimberg, an attorney who had a robust dealership practice. I knew Robert, and he also happened to be a neighbor of mine.

We had lunch. Mosaic was his idea, not mine. We are the cofounders. He needed someone willing to quit his day job to run the thing. He wanted to create a compliance program for which 100% of the content was written by NADC attorneys. We wrote everything and it has been rewritten several times since. Eventually, three years into Mosaic, Robert had to sever ties to devote himself to his law firm; he saw some potential conflicts ahead.

AE: And you kept it going, and now we have ACE certification.

Ganther: Exactly right. And Agent Summit is just around the corner, and I would encourage all agents to take advantage of the certification component. You should never stop learning. I’m 55 years old. I love to read. I love to think. I love to learn. That article I wrote about geopolitics and the car business? I couldn’t have written it 10 years ago. I didn’t understand the topic 10 years ago.

But I kept reading, and now I know how international politics and geography impacts what Trump can do and how what he does will affect the industry I serve. You want to be better for yourself and for your clients. F&I agents get questions. “Whom should I hire? Should I do reinsurance?” If you’re looked to for advice, it might be wise to know something.

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An Interview with Patrick Brown

An Interview with Patrick Brown

In September, IAS expanded its leadership team by appointing Bob Corbin to the role of executive chairman and hiring Patrick Brown as president and CEO. Citing Brown’s experience as an entrepreneur and executive, Corbin describes Brown as “the right person at the right time.” Agent Entrepreneur caught up with Brown less than a month into his tenure to learn more about his personal and professional background and what made IAS the right move for him.

AE: Patrick, it’s nice to meet you. Where are you from?

Brown: Nice to meet you as well. My mother is from Bolivia and my father is from Oklahoma. They met in college. My father got a Ph.D. in economics and joined the U.S. State Department, and that’s where I was born, in Washington, D.C. Then we moved overseas. We lived in Brazil, Bolivia and several other places in Latin America. Most recently, I lived in Charlotte, N.C., and Austin, Texas.

AE: Your father was a diplomat?

Brown: He worked in USAID, the development arm of the State Department. So his work involved going into different countries and helping with projects, generally in the agricultural world. In Bolivia, one of the biggest projects was developing the technology and infrastructure needed to grow banana plants and plantains.

AE: What is it like to grow up in more than one country?

Brown: I think it just broadens your horizons. Living in Bolivia, the second poorest country in the Western Hemisphere, opens your eyes to the realities of poverty and the fact that not everyone thinks the same. How do you bridge that gap? The answer is language, food and culture. I have a passion for traveling and connecting with people, and I think it’s because of that background. I had to learn how to get to know people and how to embrace other cultures.

AE: How’s your Spanish?

Brown: I still speak Spanish as fluently as I speak English. We go back to Latin America every couple of years with the family and the kids.

AE: How big is your family?

Brown: I met my wife in college and we have three kids: a daughter in high school, a son in eighth grade and another son in third grade. I do play golf and I ran a half-marathon this year, but most of my free time is centered around the kids’ activities. My son was just texting me earlier today about his football practice.

AE: Do you have any reservations about football, particularly in light of the concussion crisis?

Brown: I don’t. First of all, it’s about the coaching and the techniques. I help coach my third-grader’s team. You’ve got a tremendous amount of protection and technology going into the headgear. What folks don’t really realize is there are so many more concussions in other sports. I played soccer growing up, and I can tell you that, between all the headers and contact, I’ve seen more concussions playing soccer than I have watching football.

AE: How far did you take your soccer career?

Brown: In my high school years in Latin America, I thought I would be a professional soccer player. I went to Wingate University in North Carolina. I played there and realized there are a lot of good soccer players out there, even at the Division II level. I quickly figured out I needed to study, and I graduated with degrees in economics and finance.

AE: How did you choose your major?

Brown: I was always interested in the social sciences, including political science, but I took a macroeconomics class and it opened my eyes to the importance between people’s behavior and business and how they’re connected. I learned that, if you talk to 10 economists, you get 10 different opinions. That field is more nebulous than you might think. So I decided to couple that with a more technical degree, and that was finance.

AE: What was your first job out of college?

Brown: I was actually able to start my own company soon after graduating. I was fortunate enough to meet a gentleman in Charlotte named Wayne Cooper who believed in a business plan I presented to him. He is still a great mentor to me now. He put up the money, I put in the brains and 24/7 sweat equity and, together, we succeeded.

AE: What company was that?

Brown: Continental Transfer. It was a money transfer and bill pay company. Think of Western Union and MoneyGram.

AE: You graduated college and went into competition with Western Union?

Brown: You don’t need to put a man on the moon to be successful in business. Look at industries and products that have been around a long time but are not very efficient.

The remittance model has been around for hundreds of years in some form. Before starting the business, I experienced this personally, sending money back home. You have to fill out a form at a customer service desk and someone has to retype that into a DOS-based computer. It’s very inefficient. It can take 20 minutes to do a transaction. And some of the folks sending money are illiterate or don’t speak the language on the form.

Our business plan called for streamlining the registration process on the front end. We took it from 20 minutes to 10 seconds. We grew that company and ultimately sold it to a publicly traded company.

AE: Any growing pains?

Brown: All the usual growing pains a startup has. There were times I told my wife to make sure the groceries lasted an extra week.

AE: Do you ever reflect on those early days and think, “If I knew then what I know now …”?

Brown: I do. If I had the financial backing and the experience I have now, that kind of thing. But I did have Wayne, who was a seasoned businessperson and really a guiding light. And it was during that time that I went back to school and got my MBA at the University of North Carolina in Charlotte.

Growing up, my grandfather instilled in me that there are two things no one can take away from you: your education and your last name. Understand that, when there was a regime change in Bolivia, and you were on the wrong side, you could get thrown in jail. But they can’t take your name, and they can’t take your degrees. Therefore education and integrity are very important to me.

When we sold the company in 2004, I signed on to run the money transfer and bill pay division of Euronet, the company that acquired us. We wanted to be No. 1 and we couldn’t do that with organic growth, so we started acquiring a number of companies. The last acquisition made us the third biggest provider in the industry.

AE: Having been an entrepreneur since Day One, was it a big adjustment to join a company and adapt to their culture and their way of doing things?

Brown: There was some adjustment, but the reality is they were very good about allowing me to run the business. Euronet had three divisions and each division had almost a president or general manager for that business. So I was able to stay in Charlotte and execute my strategy. I reported to the chairman and CEO and they essentially allowed me to run it as a standalone.

That was a phenomenal opportunity, but I did get to the point where I wanted to get back to a smaller, entrepreneurial environment. I decided to leave Euronet and start Procesa, another company in the cross-border bill pay world. Instead of sending money to the family member, we wanted to create the opportunity to “directionalize” — to pay that family member’s electric bill, phone bill or tuition bill, for example. It was successful, and in 2008, we sold Procesa to NetSpend and I joined that company.

AE: When you were building Continental Transfer and Procesa, did you do so with the goal of being acquired, or did the companies that bought them come to you?

Brown: We were not looking to sell the first company. We had offers from General Electric and NationsBank, but we were still growing it. Euronet brought a growth strategy to the table. You need a sender network and a receiver network, and they came to me with the idea. If we had been acquired by GE or NationsBank, we would have been consumed and dismantled.

It was a similar situation with the second company. We were literally a year and a half or two years in and it wasn’t time to sell yet. But I saw the opportunity with NetSpend and decided to sell. When I joined, they were doing about $200 million in revenue with 200 employees, and they were owned by private equity. It was still very entrepreneurial, and it represented the opportunity to go into an industry that was relatively nascent.

So I joined up and eventually ran a division we called “commercial prepaid business.” My division worked with companies and individuals who wanted to rid their ecosystems of paper and cash by switching to online statements and electronic W-2s, for example. We took that company public in 2010. We then sold it to Total Systems Services, also known as TSYS, in 2012.

I could have stayed there for the next 30 years. It’s that kind of company. Folks who join don’t usually leave. It’s a well-run company with high integrity and a great reputation. But by the beginning of 2016, I was doing some soul-searching. We had been acquired three years earlier. If I was going to do something, what would I do? Lo and behold, through contacts and headhunters, the opportunity with IAS came up, and it happened to be in my backyard.

AE: You were in Austin?

Brown: When we were taking the company public, prior to selling to TSYS, I was spending a lot of time in Austin. My wife and I thought, instead of spending two weeks here and two weeks there and weekends at home, let’s go check out Austin. We decided to move the family in 2011. It’s a great city. Charlotte’s a phenomenal city as well. We went from one great city to another.

AE: So you didn’t have to move, but you did have to switch industries. How did your previous experience prepare you for work in F&I?

Brown: My history has been mainly in regulated industries. The money transfer and bill pay world is heavily regulated. We sold that company and started another one, which we sold to NetSpend, which is also very regulated at the state and federal level.

AE: Based on your prior experience, do you believe there is anything the automotive industry or the F&I segment needs to do better?

Brown: Specific to the regulatory environment, I think the industry has done a phenomenal job. We’ve got strong associations. But I know that, as the federal regulators get closer to the automotive industry, there will be more interest in our business line. We’re here to partner with our dealers and agents to make them successful. But the industry needs to be focused on who’s buying our products, and that’s the consumer.

The CFPB and the FTC want to be sure the consumer knows what they’re buying and whether there’s value in the product. Being able to get out ahead of that and telling the story rather than letting them tell the story for us will be important in the next five to 10 years.

AE: And that story will be told online.

Brown: Absolutely. Look, I think the power consumers have today is second to none at any point in history. You can go online and find information about any product you can think of. You can comparison shop for any product you can think of. The power is in the consumers’ hands, and it’s about how to design products and deliver them in the way they choose.

AE: Does that reduce or eliminate the role of the dealer and the agent?

Brown: Dealers and the agents who serve them will always have a role. But the opportunity to educate consumers on the value of service contracts and ancillary products online is powerful and should be embraced by the industry.

AE: What have your first few weeks on the job been like? How do you learn a new industry and meet expectations as an executive at the same time?

Brown: I make sure everyone understands I’m not the smartest guy in the room. It’s very humbling to step into an industry and know less about it than anyone else. That’s the first order of business, making sure you have the very best people in the industry onboard. You want people smarter than you and even more driven to succeed than you are, as well as people who are humble. Combine those three things and you’ve got a winner.

AE: You must have been pleased to learn you have a trainer like Frenchy Mélon on the team.

Brown: He’s phenomenal. And it starts with him, but it doesn’t stop with him. We’ve got people throughout the organization who are passionate about the products we sell, passionate about our agents. Somebody who wants to punch in at nine and punch out at four? This is not the place for them. Frenchy, Frank Klaus, Bob Corbin — a fabulous group of folks. And that’s part of what attracted me to IAS. This organization is full of passionate and talented people.

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Industry Trends for 2017

Industry Trends for 2017

With a tumultuous 2016 in the books and a new year underway, it’s time for our annual look ahead at what industry experts believe 2017 has in store for your agency and the dealers you serve. Despite the lingering tensions generated by a divisive presidential campaign and widespread concern of a downturn in new-vehicle sales, the 19 industry executives and experts we spoke with put forth a generally positive outlook for the nation, the economy and the automotive industry.

The Economy

Alan Miller, senior vice president of sales for CNA National, noted that, while the economy has grown slowly over the past few years, it has grown nonetheless, and he believes that trend will continue. He expects new-vehicle sales to match or slightly exceed 2016 levels and for year-over-year sales numbers to remain steady.

“The industry should enjoy slight gains in sales from 2016, buoyed by interest rates that will remain invitingly low, in addition to probable tax cuts that will allow consumers to have more discretionary spending,” agreed Bob Pruitt, president of Cal-Tex Protective Coatings Inc.

That said, our experts, across the board, all agreed that 2017 is difficult to predict at this point, since no one is entirely sure what President-elect Donald Trump will do once he takes office in late January.

“It’s going to be interesting to see what impact the new administration will have on the economy in 2017,” said Kelly Price, president of National Automotive Experts (NAE)/NWAN. “I believe we will see new-vehicle sales volume continue to slow down as the industry reaches a plateau. In the fourth quarter of 2016, we saw several manufacturers reforecast their late-2016 sales projections and slow manufacturing to reduce dealer inventory as a result of a decrease in consumer demand.”

“We just came off a contentious election, and we were all led to believe the election of Donald Trump would send the stock markets spiraling downward,” noted Dave Duncan, president of Safe-Guard Products International. “In fact, markets are up significantly since Election Day and looking like they may go even higher. Financial service stocks have been among the big winners, so those in the F&I space could benefit quite nicely from the election results. At least, that is what the markets are telling us.”

Jeremy Lindsey, COO of Alpha Warranty Services, agreed, noting that, if the gross domestic product remains steady, unemployment rates continue to fall and gas prices stay low, 2017 could be a solid year for agents and dealers.

“It feels like there are more variables this year than years past, in part because of the political climate,” Lindsey said. “As long as the economic outlook for 2017 remains positive, and President-elect Trump follows through with some of his policy objectives, I believe the economy as a whole and the auto industry will benefit.”

One executive who is incredibly bullish on the industry’s stock in a Trump administration is Larry Dorfman, chairman and CEO of Automobile Protection Corp., home of the EasyCare brand.

“I believe the initial impact of a fully Republican government will be a positive one and that the economy, overall, will do fine in 2017. Frankly, probably better than had Clinton won,” Dorfman said.

While the short-term gains for 2017 will be high, Dorfman added, they could come at the expense of long-term prosperity. That will depend in large part on the severity and reach of promised tax cuts. Depending on their impact on the national deficit, there could be long-lasting effects that won’t be felt for several years. It all hinges, Dorfman noted, on whether the money actually does “trickle down” like the incoming administration is claiming, or whether it “sticks to the top” like it has in the past.

Randy Crisorio, president and CEO of United Development Systems Inc. (UDS), agreed with Dorfman’s positive outlook, noting, “In my view, the economy next year will project growth amid renewed optimism for jobs and the psyche of millions of Americans. There have been so many positives laid out by the incoming administration that it’s difficult to recall them all.

“Tax relief, both individual and corporate, will deliver more spendable income for families to buy goods and services and will drive business expansion through job growth. Repatriation of corporate monies from other countries has the ability to infuse trillions of dollars into the American economy. When Americans have cash and confidence in our future, the lure of shiny new models of cars and light trucks will prevail.”

On the flip side of the coin, Robert Steenbergh, founder and CEO of U.S. Equity Advantage/AutoPayPlus, is a bit more hesitant about what impact the Trump Era will have on the economy in general, and the automotive market specifically. “I think the automotive industry will have a much more hesitant outlook based on fear of the change that Trump might bring,” he said.

Steenbergh pointed out that, in past elections, donations to Republican candidates outpaced those to Democratic candidates across the entire automotive market by a fairly wide margin. Yet, he noted, “Donald Trump reportedly collected the smallest amount of auto industry contributions of any GOP presidential candidate in two decades.” That leads him to believe there are a lot of people who are leery of what 2017 will have in store for the industry, with a “wait-and-see” attitude prevailing.

Thomas Elliott, president of StoneEagle, agreed — with a caveat. He noted that he believes we will enjoy a short-term boost to the economy in 2017, with the automotive market, in particular, benefiting. However, he noted, “Economic forecasts that I have read seem to lean strongly toward a slight decrease of around 2% for new cars, with a total target of around 17.1 million units.”

Speaking before the Federal Reserve Board announced a 0.25% short-term interest-rate hike on Dec. 14, Tony Wanderon, CEO of National Auto Care, said an increase was overdue. But he believes the fate of the auto retail market in 2017 would depend on several additional factors.

“With the new administration, I can see some pretty substantial tariffs being put in place on imports but to what extent, only time will tell,” Wanderon said, noting that the Fed is not the only influencer. “Lending has been crazy with advances reaching over 150% of MSRP and terms rising to up to 96 months, thus all of those customers are out of the market for years. In addition, all the pent-up demand is gone, so now we will be in our normal cyclical downturn.”


Presidential elections notwithstanding, there are a few trends our experts are paying close attention to as we move into 2017. Each has the potential to impact the automotive market as a whole — and the F&I segment in particular — in a variety of ways.

Brent Griggs, president and CEO of Portfolio, noted that one trend he is anticipating in the coming year is a cooling of the historically high leasing levels the market has been experiencing. This, in turn, will benefit the F&I market, opening up more opportunities for sales than many dealerships are achieving in today’s lease-heavy atmosphere.

On the flip side, however, Griggs also expects fleet sales to remain strong, which has the effect of reducing F&I opportunities. Finally, he noted, “We expect continued high profitability for auto dealers in general and a continuation of the consolidation that has begun, though at a lower pace due to high valuation expectations of sellers.”

Another executive who is carefully monitoring the leasing situation is Michael Feely, executive vice president of sales for ECP Inc. He noted, “The biggest trend we will be watching in 2017 is the effect of 3.5 million off-lease vehicles flooding the automotive market. This will significantly increase pre-driven inventories, thus creating a greater price-competitive market. This increase in pre-driven inventories may result in decreased profitability.”

“We will be watching regulatory activity, interest rates, availability of credit, and lease penetrations. All of these factors will play a part in the strength and profitability of F&I,” agreed John Luckett, senior vice president of sales and marketing for Resource Automotive/The Warranty Group.

John Pappanastos, president and CEO of EFG Companies, listed four trends that he believes will have a major impact on the market in the coming year: a tightening of consumer credit, manufacturer bonuses, regulatory reform and dealership consolidation.

Regarding consumer credit, “according to J.D. Power, the percentage of car loans with negative equity rolled in has reached a 10-year high, exceeding 31%, and the average amount of negative equity is over $4,800 per loan,” Pappanastos said. He believes this tightening of credit will be a positive thing for the industry in the long-term, especially in F&I. He noted that skyrocketing loss ratios are the stuff of nightmares for administrators.

Using GAP as an example, Pappanastos added, “The increasing severity of GAP claims is attributable to the fact that the higher levels of negative equity is being absorbed in consumer auto debt by extending loan terms. We’ve noticed that GAP claim frequency curves are matching the curves that we saw in 2008–’09, before the Great Recession. I’m not suggesting at all that we’ll see another recession. The credit crisis that led us into the Great Recession was related to mortgages, not auto lending. I’m just saying that GAP loss ratios is a trend that we are watching very closely.”

Matt Croak, president of Wise F&I, agreed that GAP is a good indicator of the market as a whole.

“GAP loss experience is being impacted by a changing external environment including lower gas prices leading to more miles driven, an increase in collision frequency, rapid advancements in technology driving up repair costs, and loosening of credit guidelines,” Croak said. “Unfortunately, these external conditions, among others, are contributing negatively to the loss performance of GAP.” To offset those losses, he noted, companies are being forced to build additional financial reserves, which then impacts every other product down the line.

The second trend Pappanastos is carefully monitoring is manufacturer bonuses. They have gotten so rich, he says, that in some cases, dealers are starting to forgo front-end margins in pursuit of the bonus check. Dealers across the board need to be careful, however, since he noted that it will be difficult to instill operating discipline once those incentives dry up.

Pappanastos said he expects that, for the incoming administration, regulatory reform is absolutely top-of-mind, and he expects some shakeups around the auto finance space. As for dealership consolidation, he expects the trend to continue, if not accelerate, in 2017.

“We expect to begin seeing an acceleration in public company consolidation. And we expect them to be targeting eight- to 12-store groups,” Pappanastos said.

Consolidation is among the big trends that Jim Smith, CEO of SouthwestRe, will be monitoring in 2017 as well.

“Factors I believe influencing this are economies of scale, the availability of money and the potential for capital gains tax decreases,” Smith said. “These factors will not only influence the consolidation of the automotive industry, but also F&I providers.”

Another trend executives such as Garret Lacour, CEO of RoadVantage, are paying close attention to is the price of oil. He believes any pain at the gas pump could have a significant impact on not only what models car buyers pursue but whether they choose to purchase at all.

“If fuel prices continue to stay in check, we will continue to see growth in the truck and SUV side of the business. However, OPEC’s December agreement cutting oil production could impact that,” Lacour said.

Lacour also believes F&I will play a larger role in profitability in 2017. “The public companies will continue to report an increase in F&I income, which will raise the bar further for finance departments to generate a larger percentage of front-end profit for dealers. This income will not come from finance reserve margins or even higher VSC penetration, but from vehicle protection products that offer the consumer a clear value proposition.”

Technology, as always, also has a part to play in the year ahead. Some executives, like Jimmy Atkinson, COO of AUL Corp., believes the proliferation of new technology aimed at the sales and F&I departments could be coming to a head.

“It seems we may be reaching a point where technology innovates the F&I office in a disruptive way,” Atkinson said. “We have seen automation of our processes like the menu, but there seems to be a drive to full transparency and web-driven process that includes F&I.”

That, in turn, could force F&I managers to start developing a different skillset and drastically alter the process they use today. Ultimately, however, Atkinson sees this as a good thing. He believes consumers will be more interested in purchasing more F&I products once they feel the process is more transparent and the value of those products is made more clear.

And the push toward technology extends beyond the F&I office, according to Patrick Brown, president and CEO of IAS. He noted that the increasingly complex technologies in the cars themselves will lead to more F&I offerings either coming to market to address those specific needs, or current products evolving to better cover those systems.

“VSC programs that integrate the addition of in-vehicle technology, powertrain, and safety systems will become staples in F&I,” Brown said.

F&I Products

Trying to predict which F&I products will get hot and stay hot — and which will cool off — has become an annual tradition for agents and providers. Our executives have a few in mind that they believe will be crucial to success in 2017.

At the heart of F&I is the desire to protect consumers from unexpected problems, as well as build their loyalty and give them a reason to come back to the dealership, Pappanastos explained.

“Another overarching objective of dealers is to build relationships with customers over the life of their vehicle ownership,” he said. “So I think you’ll see more emphasis on F&I products that drive customers back to the store’s service drive. These would include loyalty programs and discounted prepaid maintenance programs.”

Pappanastos went on to point out that F&I product sales generate around 40% of the average dealership’s gross margin, so the value of these products and their ability to bring people back in the door can’t be overstated. Luckett said vehicle service contracts will continue to be the “bell cow” for agents and F&I producers, and Atkinson agreed.

“I see the staples getting stronger with VSC in the lead,” Atkinson said. “We’ve seen high penetration rates, and dealers recognize it touches all the key profit centers in the dealership — service, parts and rental, as well as profits in F&I for sales and customer retention. Bringing that retail customer back to the selling dealership is paramount, and VSCs do that.”

Crisorio agreed, adding, “Mechanical service contracts will remain the core F&I product next year. We will continue to see modified plans being developed that are more targeted to high-tech electronics and more retail merchandising plans will be offered such as limited warranty powertrain coverage.”

On the heels of VSCs — and perhaps exceeding them in importance, depending on whom you ask — is GAP coverage.

Noting that “All the products are important, depending on the situation,” Duncan said, “On retail deals, GAP and VSC are a must for all kinds of good reasons. When a navigation head unit can cost $4,000, leaving the store without a VSC makes little sense. As for GAP, why would anyone take the chance of having a $5,000 or $10,000 claim when an extra $10 per month eliminates that risk?”

“GAP should continue to be a high-penetration product,” said Wanderon. “With terms, interest rates and negative equity going up and payments and resale values going down, there is not a better product in the market today.” He went on to offer a caveat, however, noting, “The only thing that every dealer should know is that the pricing will be going up. Over my 25 years in the GAP business, I have never seen claims this high.”

Another category that could see continued penetration in the coming year are bundles that make it easy for consumers to opt for a package deal offering a wide range of protections.

“We see the 2016 trend continuing into 2017 for robust, bundled products that include tire-and-wheel, dent-and-ding, windshield repair, interior/exterior coverage and key replacement,” said Lacour. The reasons for the popularity of the bundle, he explained, are that it is a much easier sell for F&I managers. And for consumers, they have a much higher value proposition, covering a much broader range of parts and functions their factory warranty isn’t likely to address.

Smith agreed with the dominance of the bundle, noting, “Bundled products gained in popularity at the F&I desk in 2016, and I think that will continue in 2017. I also believe that the utilization of loyalty programs (and products) designed to differentiate dealers from each other will continue to increase.”

Finally, products that provide protection against the elements will remain a top seller, said Pruitt. “The average age of vehicle ownership remains above 10 years. Products and services that help maintain the vehicle and its appearance — environmental protection products, paintless dent repair, prepaid maintenance programs and tire-and-wheel programs will increasingly continue to be popular aftermarket additions.”

Rules & Regulations

What will Donald Trump, who promised sweeping regulatory reforms throughout the campaign, do once he takes office? We asked our executives to hone in on this topic and give us their take on what changes to the regulatory landscape they see coming in the next 12 months.

“Among other things, President-elect Trump has been straightforward about his desire to reduce regulations to help spur growth,” Brown said. “In fact, he campaigned on the promise to remove two regulations for each new one that is passed. This should help businesses in multiple industries including the automotive and finance industries, and the economy as a whole.”

“Regulations that currently affect the industry — from the Consumer Financial Protection Bureau to Obamacare to overtime pay rules — are likely to lessen their grip and financial drain on the dealers and providers in the industry,” said Pruitt. He went on to point out that the stock markets, across the board, have seen gains since Donald Trump’s election, but, he added, “It will be interesting to see that when his economic policies are ultimately announced and begin to be implemented whether Wall Street is as bullish as it has already shown to be.”

However, cautioned Steenbergh, don’t expect massive changes overnight. “I do not believe that President-elect Trump can simply repeal the Dodd-Frank Act and abolish the CFPB in one fell swoop. Nor do I believe it’s necessary. The recent Wells Fargo scandal illustrates that some level of consumer protection is needed.”

For Lacour, it comes down to, again, taking a wait-and-see approach. “We can only speculate at this point, but if Trump’s team follows through on their pledge to eliminate or at least curtail Dodd-Frank, we expect to see some major changes with the CFPB. At the very least, the new administration will change the CFPB’s executive structure, thereby limiting its power and reach in regard to automotive finance regulations.”

That being said, Lacour added, he doesn’t believe all regulations will disappear — and he agreed that some are needed to protect the public from unscrupulous lenders — but on the whole, he noted, there is good reason for dealers to be upbeat about where things are headed on the regulatory front.

Among others, Lindsey, in particular, stressed that the industry needs to stay vigilant, since no one really knows what Donald Trump will actually do once he takes office, and it seems likely that he will ignore or recant on some — or even all — of the promises he made.

“With every unexpected cabinet appointment, this question seems very difficult to answer, because unexpected appointments may translate into unexpected policies,” Lindsey said. “As much as I’d like to see changes to the Dodd-Frank Act, I believe a repeal is unlikely because it would require new federal laws that would be difficult to pass. [The North American Free Trade Agreement] will be an interesting topic, as Mr. Trump made his disdain for that trade agreement quite apparent on the campaign trail. If the president-elect creates significant reform on trade deals, that could affect the automakers’ ability to make profitable vehicles abroad.”

Duncan made clear that, at the end of the day, it shouldn’t make much difference what regulations are — or aren’t — passed or repealed.

“The future of the CFPB remains to be seen. In truth, it should not make any difference,” he said. “We all know right from wrong anyway. We don’t need 4,500 lawyers in Washington to explain this to us. Be transparent, offer comprehensive products with a clear consumer value, and allow the customer to make their own choices. It really is as simple as that.”

Part of the issue with the CFPB is that in November, as Smith noted, there was a court ruling that will likely have more impact than Donald Trump will, at least in the short term.

“The CFPB just lost a landmark court case (PHH v. CFPB) that will significantly impact their previously increasing involvement in all lending areas,” Smith said. “Let’s hope this bodes well for the F&I industry, but as I said last year, the people in this industry still need to be diligent in their manner of operations.”

Pappanastos agreed, noting that it is more likely that the issues surrounding the CFPB will be felt in 2018 and beyond, rather than in the next 12 months. He doesn’t believe it is as high a priority as some in the industry might hope, but there are other factors at play as well. “The CFPB is appealing the ruling, which could elongate the final decision into 2018. The bigger, more likely possibility for 2017 is the ratification of the Reforming CFPB Indirect Auto Financing Guidance Act. This act passed in the House with a bipartisan vote of 332-92. Considering the widespread approval of this act, it is highly likely to be ratified in the coming year, especially with a Republican-held Senate.”

“Ultimately, only time will tell as it relates to the regulatory and compliance landscape,” Croak said. “At the federal level, a Republican administration working with a Republican majority in both houses of Congress could achieve some success as it relates to mitigating the effects of Dodd-Frank and the CFPB on our industry.” In particular, he pointed to Senate Bill 2663 (and the related House version, H.R. 1737), as well as H.R. 1486, another bill in the House of Representatives, which now have a significantly better chance of being passed. Both could have a positive impact on the automotive industry.

“We continue to be bullish on the U.S. economy, especially with a Republican majority in Congress to support Mr. Trump’s efforts to shore up America’s infrastructure,” Griggs concluded.

A Closer Look at Technology

A slew of new websites, mobile apps and platforms designed to inject Silicon Valley into the sale and finance of new and used vehicles is a sure sign that technology will play a major role in how dealers move units — and F&I products — in 2017. Our executives took a moment to dive deeper into how they see technology impacting the industry in the coming months.

It is important to note that not all the executives saw technology as taking any huge steps forward in 2017. Griggs, for instance, sees the march forward as continuing, but at the same pace it has been for the last few years. He noted that he has seen “Nothing dramatic, just the continued move to electronic processing that is now becoming the industry standard and adoption of tablets to support and sometimes replace the numerous F&I menus that exist.”

“I don’t anticipate any drastic changes overnight as many developments and changes are proofs of concept that take time to validate. I believe that we will see more dealerships testing the idea of reshaping the F&I process,” Lindsey said, noting that, in general, predictions around technology, for good or ill, tend to be the least consistent, and the least reliable.

Many of the executives, however, do see major changes on the horizon.

“Technology will continue to evolve, and I think we will see more providers offering online platforms for vehicle sales from start to finish, including F&I,” predicted Miller. He believes the usage of tablets will grow as dealers attempt to make the purchasing process more consumer-friendly, and he expects the push toward making more F&I product information available online to accelerate in 2017.

Price agreed, noting that research proves consumers across the board are unhappy with the retail automotive buying experience today, and the industry needs to do a better job of finding ways to make that process easier and more enjoyable.

“We have already seen the buying trends of the millennial generation impact retail consumer transactions,” Price said. “I believe we will see their behaviors and buying trends begin to impact transactions in the finance office. Millennials have an unbelievable amount of information at their fingertips. The industry will need to adapt to effectively engage these buyers. Integrating finance products into consumers’ mobile technology will be critical.”

Croak sees it as being a combination of the two views, with technology continuing to evolve — whether the industry likes it or not — but he doesn’t anticipate a seismic shift.

“Enhanced technology integration is leading to greater adoption of electronic contracting, rating, remittance and cancelations of contracts. Deeper integration between providers and lenders may lead to more efficient cancelation processing and quicker refunds for the consumer,” Croak said. “These processes will continue to refine, becoming more seamless to the dealer and the consumer.”

Elliot was also quick to point out that the push for better technologies — and better integration of the technology we have — isn’t coming from car buyers alone. “We are seeing a major push from OEMs, major automotive groups, product providers and new sales channels in trying to determine how to best connect with the internet consumer,” he said.

Elliot went on to predict, “I fully expect to see a massive shift in the use of analytics along with educational and informational tools by all of these parties in an effort to connect with the direct consumer. Information and the education and awareness of the protection products is critical in the evolution of the processes and technology.”

Putting It in Perspective

Ultimately, what the executives agreed on was that the automotive market is changing on all fronts, new technologies, new (or repealed) regulations, and changing product lines all contribute to a vibrant and dynamic market that never stops or stands still.

And those changes should inspire more enthusiasm than fear among agents, said Pappanastos. “This may sound a bit cliché, but I believe the changes transforming the auto industry create as many opportunities as they do risks, and we’re excited about the future.”

“Dealers and consumers will continue to push for value in the products and services they are offered,” said Miller. “Dealers want to deliver an enhanced buying experience along with a superior product experience. Because of this, any company associated with the dealer market will need to operate in an environment of continuous improvement in their products, services and representation to keep pace.”

For Smith, while the surprising election of Donald Trump increases the odds of major change — both good and bad — it just means businesses in all segments of the automotive market will need to stay nimble. “From a strict business standpoint, there will probably be opportunities, but we all need to be as flexible as possible in adapting to, taking advantage of, and even surviving these changes.”

“The more things change, the more they stay the same,” said Atkinson. He pointed out that good companies with good business plans and excellent customer service will continue to thrive, no matter what changes the country, the economy, or the automotive industry might face.

To that end, said Dorfman, even agents and product providers need to look beyond the F&I space. “The entire market is changing, and it is evident that focusing only on F&I will limit the ability of any agent or company to deliver an overall positive impact and experience to a dealer,” he said. As F&I becomes an earlier part of the car buying process, and as more information moves online, he added, intensive training will need to happen to ensure the entire dealership is on the same page.

“Focusing solely on the F&I office will be a thing of the past. Helping dealers hold front-end gross in a margin-crushed environment, improving the customer experience, and retaining customers through to the next purchase will be keys to the success of agents and administrators going forward,” Dorfman said.

“What’s the old saying? ‘There’s price, quality and service — pick any two you like, but you can’t have all three,’” said Steenbergh. “Bigger always leads when it comes to price because of buying power. But I believe the majority of customers will always be willing to pay for quality and service, especially if they like and trust the dealer they’re buying from.” He agreed that everyone — from F&I to service — in a dealership will need to learn to engage with consumers through the entire lifecycle of the vehicle, not just at the initial point of sale.

One thing is certain: The next 12 months won’t be “business as usual,” but will likely have a variety of twists and turns that no one — not even our expert panel — can predict. It is an exciting time to be in the automotive space, with many challenges to be overcome, but many more opportunities to be found.

As Price put it, “Buckle up, because 2017 is almost here, and it’s going to be a fun ride!”

Posted in Industry1 Comment

An Interview with Jeff Jacobs

An Interview with Jeff Jacobs

Jeff Jacobs is the CEO of Chicago-based Universal Lenders, home of the Zero Plan for F&I product financing. On the eve of the 2016 P&A Leadership Summit, AE caught up with Jacobs to learn what it’s like to grow up in the business, where agents and dealers can find new revenue, and why competition is always a good thing.

AE: Jeff, I know you’re based in Chicago. Are you from there as well?

Jacobs: Born and bred here in Chicago, in an Italian, blue-collar neighborhood. I grew up in a car family. I was a car dealer for 40 years or so, alongside my dad and uncle and brothers. My dad started out as a Studebaker dealer, and by the time we sold out in 2006, we had Buick, Pontiac, Honda, Mazda, Hyundai and Ford. We were a high-volume group.

AE: Were you an early import adopter?

Jacobs: We added Honda in 1987. It was popular but nowhere near the juggernaut it became. We bought it from a motorcycle dealer. People said we were nuts. But the American factories allowed the imports to come in by not building great product. Anyone who thinks world competition is not a good thing should have been in our service department in the ’70s. We had long lines of GM cars every Monday morning, all overheating. Today, there’s not much difference in the cars. The American manufacturers stepped up.

AE: F&I has come a long way since then as well.

Jacobs: My experience as a dealer taught me about financial products, service contracts and tire and wheel, and now I finance those products for dealers through agents. Considering what I put those agents through as a dealer, I have a real appreciation for all my agents.

AE: Any advice for the agents reading this article?

Jacobs: Don’t give up. You might have to go to the store 20 times. Keep leaving your card. You might get there on a day the dealer is frustrated with their current provider. That’s what happened in my store. I had an agent who wouldn’t stop bugging me, and he happened to come in on a day when a claim wasn’t bought and I felt underappreciated. And he got in and never left.

The other advice I would offer is that there are a lot of ways to increase revenue and incremental sales in the F&I department. You can’t let cash customers go by the wayside. Traditionally, dealers only used payment plans for credit-challenged customers who couldn’t get F&I products on a retail installment plan. And when times were good, they didn’t use payment plans at all.

AE: Did you use them when you were a dealer?

Jacobs: We liked the concept but not the program. We didn’t like waiting 90 days for money and we didn’t like that it could only be used for service contracts. So when we sold our dealerships and I needed something to do, I decided to get into this niche financing business. But I approached it like a dealer. I thought of every objection.

AE: Like not wanting to wait three months for the money.

Jacobs: Right. Instead of waiting 90 to 100 days to get funded, we pay our dealers within seven business days. Instead of offering financing for service contracts only, we’ve made other products eligible, including maintenance programs. Most importantly, our collection efforts reduce chargebacks by half. And the ZERO Plan is not just for credit-challenged buyers but cash buyers, which can be 30% to 50% of your customers.

AE: All the compliance experts say you should treat every customer the same exact way, and that includes offering everyone the same protection.

Jacobs: How can you say how important these products are for finance customers and then not even bring it up to your cash customers? Dealers look at average revenue per retail deal. The true gauge should include separate averages for finance and cash customers. You need to maximize revenue for each subset. And, yes, I would venture to say any governing body that is looking for a lawsuit and sees you’re only beating up on subprime buyers has a pretty good case. And it’s just not payment packing. You need to offer everything to everybody or somebody’s going to sue you.

AE: Why are we seeing all these payment packing headlines 10 years after that practice was supposed to have stopped?

Jacobs: I think it’s greed. Payment packing is easy to do. It’s not easy to sell the benefits. One way is illegal and the other isn’t. If the owner cares about compliance, their employees won’t take advantage of people.

AE: Michael Tuno, the agent and compliance expert, would say that if the dealer’s license were at risk, that would make a big difference.

Jacobs: He’s right about that. But if you have ever read a franchise agreement, you know it allows the manufacturer to take away your franchise. But they won’t do it. When it’s a successful dealer who sells a lot of cars, the manufacturer doesn’t want to get involved. When I was a dealer, I never saw any dealer lose their license or a franchise or even came close.

AE: Did you have any bad actors in the F&I department?

Jacobs: We did, and we tried to clean it up. Bear in mind, there was a time before Regulation Z when we had customers sign blank installment agreements and then mailed them their copy at the maximum allowable rate. But we became less and less tolerant of practices that alienated our customers. The F&I manager is the last person the customer sees. If they leave with a bad taste in their mouth, they don’t come back.

AE: What do you think about putting information and pricing for F&I products online?

Jacobs: Well, like I said, if auto retailers don’t make a push to sell products to everybody, the direct marketers will. Whether it’s a service contract or tires, somebody will. I believe in making it easy for customers to buy these things. The other place I would like to see more emphasis is in the service drive. We’re not going to be able to make any more money on finance customers. You have to look to cash buyers and service customers. That’s how you drive revenue going forward.

The way cars are being built today, with fewer and fewer breakdowns, I’m wondering how the industry is going to keep service contract sales levels up and keep from dropping the price? I don’t know how they do that. It’s a good industry right now, but outside competition is going to drag it down.

AE: Tesla will tell you they can fix your car remotely, if it’s a software issue.

Jacobs: It’s all about competition. When Chrysler, Ford and Chevy owned the market, they sold everything they could build. As much as I’m conservative in my thinking about business and politics, I don’t believe big banks, for example, should gobble up the small ones. I believe there has to be competition. I hope that never happens to our industry. No one company should buy everyone up.

AE: What do you do for fun?

Jacobs: I like to fish. I like to golf. I like to spend time with my grandkids. I have two kids and two grandkids. My son lives in Brooklyn and my daughter is here in Chicago. We go back and forth a lot. I used to play hockey and I get to a Blackhawks game two or three times a year.

AE: It’s a good time to be a Blackhawks fan. When will the Cubs win a pennant?

Jacobs: Well, I have always been a Cubs fan, and I would say that, within the next three years, they’ve got the best chance in my lifetime. I would love to see it.

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