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The Great Debate: Recording in F&I


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

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

The Benefits of Recording

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

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

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

Recorders Beware

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

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

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

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

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

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

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

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

Steps for Effective Recording

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

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

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

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

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

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

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

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

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

Storage

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

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

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

What to Record?

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

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

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

In Conclusion

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

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

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

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Meet the Trainer: Ron Reahard


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

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

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

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

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

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

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

Issues Facing the Future

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

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

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

Down Time

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

F&I Changing Lives

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

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

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