Podcasts about kelly they

Introduction: Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards.   And now your host, Kelly Coughlin.   Kelly: Good morning. This is Kelly Coughlin. I've got David Shoemaker on the line. We’re going to do a podcast with David. He's the President of Equias Alliance.   David: Good morning.   Kelly: Good morning David. How you doing?   David: I am well.   Kelly: Just to kind of lay the foundation here I thought we’d talk very briefly about my relationship with David and Equias. As David knows, I'm a CPA. I've been in the investment and banking ecosystem for many years and as part of a consulting gig about a year and a half ago I came across the BOLI industry, the bank owned life insurance industry, and then Equias Alliance. I decided at that time, after looking at this asset class, that this is a space I wanted to get into. And I looked at the competitors, once I decided I liked the product, and decided who are the competitors, Equias, in my mind, rose above everybody else out there.     It wasn’t just me that thought that. I believe American Bankers Association selected Equias as their endorsed vendor. I think another dozen or state banking associations also selected them. Is that a fair statement?   David: Ten of them.   Kelly: Ten, clearly they emerged in my mind and in other’s mind as the key player out there. I met with David and I found him to be a key player in the industry, so I thought I'd do a podcast disclosing that I have an independent consultant relationship with David’s company, Equias. I thought we’d do a podcast and talk about first of all just give us a brief background on who you are, how you got into this space, some background and then we’ll talk about the product generally and how you got into this space and what your take is on that. You want to kick it off with some brief bio on who you are?   David: I graduated from the University of Tennessee, Knoxville with a Bachelor of Science in Business Administration, with a major in accounting, then worked for Deloitte Touche for nine years and an investment banking firm for three years. Then, while I was in investment banking, one of my clients was looking at an insurance product and asked me to help evaluate it knowing that I was a CPA technical type.     I liked what I saw, but what I didn’t like was that, it had a four percent front-end load charge. I thought it was a good asset class, but if we could get rid of the load charge we could make it very viable for banks to want to use as an asset class. I've been in bank owned life insurance and nonqualified differed comp for the last twenty-seven years now. I've worked with hundreds of banks over that period of time. I live in Memphis. I have a wife and six children. There’s a lot to do on a daily basis just keeping up with the family.   Kelly: All right, taking from your statement that you saw what was going in the market, the four percent front-end load. Let's elaborate on that because my understanding based on discussion with others including yourself is that you were one of the early pioneers of crafting the product offering as it is right now. What was the need in the market at that time? Give us a general year when that was. Then, where was the gap in products available and the products needed by the bank? What did you see at that time?   David: The year was 1989. There were several products available in the market, but they all had loads of between two and four percent. That means if you purchased a million dollars of BOLI asset and you had even a two percent load that was a $20,000 initial reduction of your cash value. You’d have to reduce your earnings and capital by $20,000 per million. I saw that as a hindrance to banks wanting to buy that asset.     So my partner at the time, who was an attorney, and I decided we could go to insurance carriers and see if they could provide a product that had no-loads which would be more viable for a bank. During that process we found that there's more to it than we’d initially understood. The carriers have to pay a premium tax to the state which generally averages about two percent. Then the federal government has a tax called the DAC or Deferred Acquisition Cost tax that effectively costs around a point and a quarter.     Carriers at time were not comfortable with essentially front ending that asset to give a hundred percent credit after they paid the taxes because they would potentially lose the money if the policy didn’t remain on the books. It took a fair amount of discussion and a fair amount of time, but my partner and I were able to convince four carriers to do no-load contracts.     At that time, I guess there were two other firms that we knew of in the business. They were Bank Compensation Strategies who pioneered the business and then there was Benmark. They were the primary players in, it wasn’t called BOLI then, the bank owned life insurance market. The need for it was to find a product that was viable to banks that didn’t have these loads charges and the idea behind it, back in that day, was primarily to fund nonqualified, deferred compensation plans for management and Boards of banks.   Kelly: That was the primary need for the product, not as an investment per se, but to help fund the nonqualified benefit portion.   David: Yes, to maybe take it a step further. There were not really any regs back until 1991 that were clear as to what a bank could purchase and couldn’t purchase. They could not buy life insurance as an investment asset. They could buy it to fund specific needs. A nonqualified, deferred comp plan was widely considered to be one of those specific items that could be funded with life insurance. It was not clear at the time that you could buy life insurance to informally fund health care and 401K and other retirement benefits and group life benefits and so forth.     Even in the first regs that were issued in 1991, bank reg; I think it’s called BC249, essentially said that you can’t buy life insurance as an investment. You can buy it to offset the cost of certain benefit plans. Even then it wasn’t clear whether that covered health care and 401Ks and things like that, so the initial design of bank owned life insurance was primarily for the purpose of nonqualified deferred compensation plans.   Kelly: The regs specifically prohibited it as an alternative investment asset class. Is that mainly because of that front-end charge and regulators didn’t want to see the hit to capital?   David: That was not the reason. They just viewed life insurance as not a normal asset for a bank from an investment standpoint. It was for specific purposes, but not considered to be an investment in the same terms as Treasury’s and agencies and municipal bonds.   Kelly: Now, that has changed since those early years correct that regulatory perspective?   David: Technically no, in 1996 there was a guidance issued under OCC96-51 which specifically gave authority for a bank to buy life insurance to informally fund retirement benefits and health care. So even today you can't buy life insurance purely as an investment. You have to purchase it from a regulatory standpoint to offset and/or recover the cost of employee benefit plans.     For instance, if a bank had no employee benefit plans; if they weren’t providing health care or 401K’s or retirement plans or nonqualified plans, they really could not buy life insurance and hold onto it until the death of the insured because they would not have a valid reason under the regs to buy that life insurance.   Kelly: They could only buy like Key Man life insurance.   David: They could buy the Key Man, but when that Key Man would leave the bank they’d have to surrender the policy because there was no need for it once that key man left.   Kelly: A bank does not have to have a nonqualified benefit plan. It could just have any sort of benefit plan. It could be health insurance. It could be 401K, any sort of benefit, correct?   David: That's correct, as long as they're providing employee benefits. From experience, if a bank provides health care coverage typically the cost of health care in today’s market is so high that health care alone is enough to justify buying bank owned life insurance generally up to twenty-five percent of capital.   Kelly: Right, so do you see BOLI as primarily an alternative asset class or an insurance product with investment benefits or does it kind of depend on what the needs of the bank are?   David: I would say it depends on the needs of the bank. I'd say it probably leans more toward the alternative asset class in that you look at the features of bank owned life insurance as a tool to produce earnings that would help the bottom line and help recover employee benefit expenses. BOLI has features that are attractive from that standpoint.   Kelly: As an alternative asset class, and I know you and I've had this discussion offline a couple times, if you consider the investment features as an alternative asset class what asset class does BOLI compete against best or worst I suppose? Where do you think, if you were a bank and they liked the features and benefits of BOLI and they need as a replacement. What asset do you think it replaces best MUNI’s, agencies, loans? As I see it, it could be a loan to an insurance company. Where do you see it?   David: It's hard to say that BOLI replaces any particular investment because the features are different than all the other asset classes that are traditional for a bank. If you go down that path and talk about, for instance, BOLI versus MUNI’s there is some common characteristics in that they both have income that's not taxable that helps produce generally higher returns than most taxable asset classes.     There are a lot of differences in those two asset classes, for instance, MUNI’s generally have a fixed rate interest rate, whereas BOLI is an adjustable interest rate. The credit quality of both are high. The BOLI carriers tend to be large, very well-known, highly rated carriers, so very strong credit quality. BOLI has no mark to market in the asset, that in reporting periods whereas municipal bonds generally have to do a mark to market of capital through the OTTI adjustment. BOLI essentially doesn’t have a diminution of value when rates rise whereas municipal bonds could.     Now, from the value of municipal bonds relative to BOLI is that it's always tax-free rather than tax deferred. BOLI’s tax deferred technically, but if held until death its tax free. If you surrender a BOLI contract before maturity, before the person dies, you have a tax liability for the gain plus an extra ten percent for the it’s called a modified endowment contract penalty. BOLI effectively has minimal liquidity from the standpoint of once you buy it you intend to hold it until death, because you don’t want to incur the tax liability.     Whereas a municipal bond if you decided to sell that you would still retain all the income that you've earned to that point tax free. Sometimes banks put municipal bonds in the hold to maturity buckets so they can't really sell the bond; it becomes an illiquid asset for them as well. There's some pros and cons to each, but BOLI does hold up well generally considering the pros and cons of it to any of the asset classes.   Kelly: But, especially MUNI’s.   David: Yes, I think from that standpoint rather than one versus the other it might be some combination of the two for diversification.   Kelly: From my perspective, I see MUNI yields to get higher yield you have to extend duration, so you look at the risk of extending duration versus investing some assets in bank owned life insurance. I've only been doing this for a year now. It’s seems that like half the banks have BOLI on the balance sheet and half don’t.     From my perspective, it's kind of a CPA, risk manager, investment person I don’t really see why a bank wouldn’t max out their twenty-five percent of net capital. Now, that sounds pretty self-serving I know, but in your experience what's the single biggest reason for a bank to not include BOLI in its assets class, because there certainly is a reasonable amount of bias and hesitancy for Boards and CFO’s to get BOLI. What's the single biggest reason that you see for a bank to not include it in their asset class?   David: The stats on BOLI are that sixty percent of the banks across the country have BOLI and forty percent don’t. For banks over a hundred million it's about two-thirds that have BOLI and one-third that don’t. It’s fairly common for banks above one hundred million to have an investment in bank owned life insurance. For those that don’t, it generally falls into one of two to three reasons.     Probably the most prevalent is a bank that has high loan demand. The bank wants to make loans to its local market because that helps build franchise value. If they have high loan demands, say their loan to deposit ratio is over a hundred percent, they may not have the liquidity to hold BOLI at the current time. All their attention and all their liquidity is going into making loans. While BOLI competes with loans well on the yield side, the tax equivalent yield side, banks tend to want to have loans for building the franchise value versus owning bank owned life insurance. If they have the option, they're going it put it into loans rather than BOLI assuming they feel comfortable with the credit quality of those loans. That's probably the biggest reason.     Number two is that some banks don’t fully understand the asset, haven’t taken the time to fully understand it. The pros and cons and features of BOLI is not traditional with a lot of banks. There's this uncertainty about something that's not traditional. They may think “We haven’t done that before and I don’t want to take the time to learn pros and cons.” Maybe they’ve had a presentation and it wasn’t presented in a way that made it clear what the pros and cons are. They maybe saw it as too much of a sales push instead of laying out all the pros and all the cons kind of thing.     Keep in mind that for BOLI to be approved by a bank it generally requires a hundred percent agreement, meaning you must have the CFO of the bank, the CEO of the bank and usually everybody on the Board to be in unison that they want to buy BOLI. You can have one person dissent out of ten, for instance, and that could keep it from happening.   Kelly: Why is unanimity required?   David: It’s not required. It's just generally the way it is. First off, if you don’t have the CEO and CFO on board it probably won't go to the Board. You need both of them. The Board, they normally just don’t want BOLI to be something that causes dissention among the Board members. That's not always the case, but typically they need all Board members or at least eighty to ninety percent approval before they would invest in the asset. I haven’t really run into it, but I don’t think you’ll see BOLI being approved on a five to four vote.   Kelly: Yeah, but that would be true with just about any asset class. Let's say the bank wanted to, the CFO proposed extending duration. Don’t you think that unanimity would be expected or the same standard would be expected for that decision to extend municipal bond duration versus like in a BOLI decision?   David: Yes, I would think so. On investments they have their investment policy that's been approved by the Board and that decision would have to be made within the investment policy about extending duration. Yes, I would think you would need a very high approval rate of the Board members before you would change the investment the policy to do something that effectively increases the risk.   Kelly: Do you see BOLI as being subject to…say within the scope of the banks investment policy in your experience?   David: No, BOLI has its own policy. One of the requirements under the regs is that you have to have a BOLI policy before you can purchase it. You would establish a bank owned life insurance policy; in a sense it's an investment policy for BOLI all to its own. It explains within the policy the bank’s view of BOLI; the percentage of capital that the bank would be willing to purchase; the percent to any one carrier; the due diligence that would be done before purchase; carrier selection; vendor selection. How would they go about deciding which carriers, which vendors and so forth? That all has to be documented in a policy before the bank can even go about purchasing a BOLI product.   Kelly: The bank either includes that as a chapter within the investment policy or they have it as its own separate investment policy.   David: I have pretty much only seen it as its own separate policy. If they include it within the investment policy it would be its own chapter. It's fairly lengthy. It's usually ten - fifteen pages of policy all to itself.   Kelly: How has the industry changed since the early years?   David: In the early years, I guess from a salesperson’s standpoint the hard part was to get a bank to talk to you about BOLI because it just wasn’t common and owning life insurance as an asset was not normal. It was outside the box and a lot of bankers didn’t want to discuss doing something that was outside the box. The biggest hurdle was getting the audience.     Today, most banks know about BOLI so they've heard about it and they have had many, many sales calls about it. Other banks they know have purchased it, so they understand at least the term and what it is. Now, there are just a whole lot of sales calls from insurance sales folks asking about BOLI. They're aware of it. It's just very, very competitive and maybe difficult for the bankers to understand the difference in firm A versus firm B.     The other way that's changed, when I started doing this the only products available were what's called general account products where the carrier provides a universal life insurance product or some whole life products that have an interest rate or dividend rate. Then the main risk to the bank was a carrier’s credit whether the carrier would be able to pay the claim later. Today, you have not only general account which are still very popular, but since then there's been a lot of purchases of what is called hybrid separate account products and also variable separate account products.     Variable separate account products are where the assets are segregated from creditors somewhat like a mutual fund. The bank can choose to invest the money within a particular investment bucket; although, for a bank it as to be eligible investments unless it's used as a hedge against a deferred comp plan. Those have some higher risk features, a little bit more moving parts. They have a stable value wrap sold by a registered product or private placement memorandum and so they're more complicated. Most community banks shy away from those because of the complications and the mark to market within the portfolio.     Then, there's a hybrid separate account product that has features very much like a general account. It has an added credit enhancement that if the carrier were to ever become insolvent the assets within the separate account by legal definitions are segregated from creditors of the insurance carrier so that those assets would only be available to the policy holders. These new asset classes have been pretty popular and have essentially enhanced the options for banks to buy bank owned life insurance.   Kelly: The first generation of BOLI was the general account, no-load product and then the second generation would be some of these the hybrid accounts and some of these more sophisticated product structures. But the core concept was the same, right?   David: That's correct, basically similar structure from a standpoint of no loads, no surrender charges, single premium, just a difference in the chassis if you will.   Kelly: Right, the risk sharing to a certain extent, right, because was the separate account available back then in the early years?   David: You could buy a separate account that was called variable universal life. It was a shelf product, but banks really didn’t buy it then because you had mark to market. Say it was all in a bond fund but the interest rates went up and the value of the bond fund went down five percent you’d have to take an immediate mark to market on your balance sheet and income statement. That was not very attractive to a buyer. If you're a bank you don’t want that kind of volatility on your income statement.   Kelly: Even though that's the nature of a municipal bond portfolio, they have to mark those.   David: A municipal bond portfolio they mark to market, but not through the income statement. They mark to market through the capital account.   Kelly: Right.   David: It doesn’t flow through income.   Kelly: Right.   David: Whereas if you were to do the same thing in a variable universal life insurance contract and have that mark to market risk you’d have to mark that through your income statement because the cash value is changing.   Kelly: One of the things that I noticed about Equias, again this sounds somewhat self-serving, but I’ll say it anyway. This relates to the industry changes. When I see Equias, it just seems to be a highly professional organization. I think eighteen consultants and thirty some support personnel and I believe seven CPAs and a bunch of attorneys, MBA’s that kind of thing. It just seems that one of the things that appears to have happened with Equias having emerged as the key player is the element of professional consulting capabilities versus I would suspect in the early years, and currently, many of potentially our competitors, it's mainly a bunch of insurance guys, right, trying to sell product?  I would think in the early years that's what it was all about, insurance guys trying to sell insurance to a new market…banks.   David: Yes, there was a lot of that. The business model that Equias developed was this is not an area that banks have a lot of expertise in and that they need support services so that they can spend a minimal amount of their time dealing with the technical stuff and don’t have to pay a lot to CPA firms and law firms to help them through the process.     We set up the firm with the idea that we could provide those services at costs that are competitive with anybody in the marketplace. Through volume we could provide more services and all the technical services that a bank would need, but do it in a very cost effective way. That’s where we actually have eight CPAs and two attorneys and a former OCC regulator, former bankers, bank directors, and a former head of the BOLI area for one of the major insurance carriers.     We've staffed our firm with very, very experienced, competent, technical people including the consultants are all very experienced, so that we could be a real asset to the banks. It'd be hard for our competitors to match our knowledge and experience and to duplicate what we can do.   Kelly: One of the things that got my attention was I think you're one of the few that has a SOC 1, Type 2 audit. Not many insurance “agencies” have that kind of thing going on. That was a good plus in my mind with you guys.   David: Yeah, it covers our implementation process, as well as our administration process, and covers not only the BOLI side of it, but covers the nonqualified benefits side. We’ve set up internal controls when we established the company and we followed those controls. We've been able to go through the audit process very efficiently and effectively.   Kelly: I’ll probably be criticized for this being an infomercial for Equias, but what the heck. That's what we can do. All right let's finish with one final thing. I’ll give you the choice. This is a question I ask every guest either your favorite quote or, what I like the best, is tell us what one of the stupidest things you’ve said or done in your business career.   David: One of the early days in my career I remember having gone to this bank to explain BOLI and the nonqualified plans probably for the seventh or eighth time. Some of the Board members were wearing out with me coming back almost it seemed like every month. One of the Board members, who was an attorney, when I came back this time she just looked and “Oh no, not you again.” I said, “Yeah.” She said, “Look, if I vote for this, does that mean you won't come back and you'll leave us alone?” I said, ‘You’ve got my word on that.” I guess in that case persistence paid off.   Kelly: It's good, yeah.   David: It wasn’t one of those real positive “I'm glad to see you” kind of moments.   Kelly: That's right; you got the deal done though.   David: Yeah, I was able to get it done through persistence, not through the sales process really.   Kelly: Yeah, that's good. All right, David, thanks for your time. I appreciate it.   We want to thank you for listening to the syndicated audio program, BankBosun.com The audio content is produced by Kelly Coughlin, Chief Executive Officer of BankBosun, LLC;  and syndicated by Seth Greene, Market Domination LLC, with the help of Kevin Boyle. Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin. If you like this program, please tell us. If you don’t, please tell us how we can improve it. Now, some disclaimers. Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant.   Kelly provides bank owned life insurance portfolio and nonqualified benefit services to banks across the United States.  The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier of Kelly Coughlin.  

Kelly Coughlin is interviwed by Chris Carlson. Chris is a lawyer and actor in Minneapolis and applies his Socratic method to extract from Kelly what the heck he is doing with BankBosun. Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards. And now your host, Kelly Coughlin. Kelly: Hi, this is Kelly Coughlin. I’ve got my long-time friend Chris Carlson on the line. He’s CEO of Narrative Pros. Chris, are you there? Chris: I am. Kelly: Great. How are you doing? Chris: I’m pretty good. How about you? Kelly: I’m terrific. Chris and I were catching up. We haven’t talked with each other in a while, and we were catching up on what’s going on. Chris had a bunch of questions about what we’re doing at the Bank Bosun, and we thought, “Well, let’s turn this into a podcast.” Rather than me talking to Chris about what I’m doing, he’s going to ask me some questions so it will help him and the audience better understand what we’ve got going on. Chris I’m going to turn it over to you. Chris: All right. Well, I think first up on the order of business is letting everyone else know a little bit more about who you are. I’ve known you for a while, but why don’t you let people know a little bit more about yourself. Kelly: I’m 58, 4 daughters, 4 granddaughters, and I don’t know if you knew this, I have one grandson. Finally a male in the family. Chris: Oh, congratulations! Finally! Kelly: CPA. Went to Gonzaga University. My uncle is Father Bernard J. Coughlin who is President. Go Barney! He’s 92 now, and I always give him a shout-out when given the opportunity. I also got my MBA from Babson. Let’s see, I worked for PWC when it was Coopers and Lybrand, and then Lloyd’s Bank, CEO of an investment and financial technology company that I founded, managed, and sold. I don’t if I’ve touched base with you since I’ve started working with Equias Alliance as a risk consultant. They do bank-owned life insurance (BOLI) and non-qualified plan programs for banks. I don’t think we’ve really touched base since I started with them. Chris: No. It’s interesting. Kelly: Yes, it is. Chris: Speaking of which, explain to me this BankBosun. Am I saying that right? I take it it’s a nautical term. Kelly: Yeah. Technically, it’s spelled B-O-S-U-N on the website, BankBosun, but Bosun is actually spelled B-O-A-T-S-W-A-I-N, like boat swain, but it’s pronounced Bosun. Chris: Okay. Kelly: BankBosun, it’s a syndicated audio program, really, that’s designed to bring together executives all throughout the U.S. who are participating in what I call the bank ecosystem. Chris: Wait. I’m not going to let off the hook here. What does a boatswain do? Kelly: The captain of a ship needs help and guidance and support, so the boatswain helps the skipper, the captain of the ship, achieve its mission and purpose. Chris: All right. Yeah, that’s a segue because I’m connecting the dots as we speak as I listen to you. BankBosun helps C-level execs in the way. Is that right? Kelly: Yeah. That’s correct. We’re not dealing with ship captains. We’re dealing with bank officers, chief officers. It’s a clever play on the words C-officers, sea-level officers. Chris: It is clever. It’s very punny. A lot of puns. That’s good though. It keeps the interest. I’m not going to let off the hook with the other fancy term which is banking ecosystem. An ecosystem, if I remember it, that’s like the jungle. Right? What do you mean by banking ecosystem? Kelly: The jungle is one ecosystem, so technically it’s a biological community interacting within a set relationship among resources, habitats, and residents of the area. By this, I mean the residents of the banking community, so it’s all the residents of the banking community interacting among each other. The area is not defined as a physical definition like a pond or an ocean or a jungle. It’s defined as a business industry, and in this case, it’s the banking industry. Chris: Sure. All right. What do they need? I mean, why them? I mean, given your background it makes sense. Kelly: Why the banking ecosystem? Chris: Yeah, why do they need particular help and why are you the one to help direct that assistance? Kelly: Well, bankers are just fascinating, interesting people, aren’t they? Chris: Yes, yes they are. They evidently need a lot of help. Kelly: Well, I’ve been in the banking ecosystem, if we can keep using and then abusing and overusing that term, since I was 22. I started my career at Merrill in Seattle in the early 80’s selling mortgage-backed securities to the banks and credit unions. That was a good introduction to navigating this ecosystem. I would say that I learned a lot from that. Then I was consultant at PWC, and CEO of Lloyd’s at two asset management subsidiaries of Lloyd’s Bank, and then as a CEO of our financial technology company Global Bridge. Our primary market was banks, so I’ve been in this ecosystem, if you will, for many, many years, and I do find it interesting and fascinating. The 2008 crash, or melt down I should say, and several others that we’ve had in history, emphasize that banks are a foundation or bedrock of the economy. Frankly, they need all the help they can get. It’s good for the economy. Chris: These bankers you’re trying to reach, I’m assuming you’re doing it through these podcasts and other high-tech, and you’re pretty comfortable that they’ll be able to get the help they need through that and not be put off by it? It’s a good way to reach them? Kelly: Well, it’s certainly is not something that historically they’re used to and comfortable with. Historically it’s been print media, download reports, print them, stick them in your briefcase, read them when you can. Half the time you don’t read them, or if you do, you read them on the airplane and then chuck them. It’s not something that they’re used to right now, but I know as a CEO of a couple of companies in my past, that we pulled in so many different directions from different constituents whether it be board members or key customers or regulators, employees, suppliers, consultants, accountants, everybody is pulling at us and yanking at our time. CEO’s, generally, and CFO’s, but C-level execs, they need to extract value from all these different sources of information efficiently and effectively. I really am a proponent of the multitasking concept, so the idea was, “Let’s give them some good information, bring together this ecosystem, give them some good information but in a way that they can do other things.” Kelly: Frankly, we’re right in the middle of sporting season, football season and the World Series. I was actually down in Kansas City for the World Series. That was fun. The commercials are ridiculous in these sporting events especially football, so I figured out a way to multitask during these games. Certainly during football games you can read if you want, but also you can listen and learn too. CEO’s, you run your own company. You got a million things going on. Right? You’ve got to figure out a way to maximize the return off of that. Chris: Absolutely. Yeah. You said earlier that you think that it’s a time when banks have a greater challenge than they’ve had in the past, and with your nautical-themed assistance, give me a sense of why now is a particularly challenging time for banks and how you’re going to be able to help us. Kelly: Well, I like the nautical theme for the Bank Bosun. I’ve sailed for many years. I’ve lived in Seattle in the 80’s. To me skippering a boat was, where you have a lot of moving parts and people and weather and tides and currents and rocks and other boats to deal with and coast guard, the regulator, and it really served as a great metaphor for running a business, but especially a bank. I think any executive that’s been in charge of a boat knows exactly what I mean about that. When you’re out sailing in the Puget Sound or the ocean, you use whatever tools and information you can muster up to get you and your crew and your boat to the next point. There are no guide posts. There are no signs. You have to watch weather, currents, tides, all that kind of stuff. All of those principles apply to skippering a company, but especially a bank. Chris: That makes sense. You sold me on the metaphor. Kelly: Good. Chris: Tell me more about where you’re at right now and what the connection is with your Bank Bosun. Are they okay with this new gig? How do they relate? Kelly: Well, Equias is in the bank-owned life insurance space. BOLI is the acronym for that. I came across Equias and the BOLI industry when I was working on a management consulting project. I didn’t know anything about the industry or the product at that time, but after I finished the engagement I thought, “Man, I need to get into this space,” because I love the asset class, if you will. Frankly, it’s an alternative investment for banks’ portfolios. Now, it has to be surrounded by insurance and you have to make sure that insurance is a key part of it, but at the end of the day, it’s a phenomenal asset class. It transfers balance sheet risk. You get a higher return than treasuries, than municipal bonds, and that sort of thing, but I really do like the asset class. Then it has some benefits for funding non-qualified plans. The thing that I liked about it is it reminded me of my early Merrill Lynch days selling mortgage backed securities. At the time, mortgage backed securities were a new, innovative product. They had a few more moving parts involved, and it required me to simplify the value proposition. You really need to focus on the benefits, which everybody needs to do in any business. With any product, you’ve got to focus on the benefits. I always think of the line, “People don’t want a quarter-inch drill. They want a quarter-inch hole.” Now this is, at the end of the day, a life insurance product. I also love the line by Woody Allen, “I tried to commit suicide one day by inhaling next to an insurance salesman.” There’s always some inherent bias against that. My father sold insurance, and I told that to him when I was about 22 or something. He didn’t find it that funny actually. I find it funny. Chris: It is funny. It’s a funny line. Kelly: Yeah, it is. Chris: It’s funny because the word inhaling is funny. Kelly: You’re going to probably offend somebody. Chris: Probably, but that’s not your target market. Kelly: They’re my colleagues. Chris: Your friends, as it were. Speaking of friends, I haven’t wished you, my friend, a Happy New Year. We’re about a year into it here, and you see all these lists coming out, top movies, top TV shows. Why don’t you give me the top three initiatives for, BOLI, or for the banking ecosystem? Kelly: Okay. Chris: Pick your field. Kelly: Well, I certainly have three, but I’m not going to tell you two of them because I wouldn’t want to tip off our competitors onto what I’ve got up my proverbial sleeve. Chris: Okay. Kelly: Stay tuned. News at 5. Chris: That’s right. Kelly: Let me hear your sales voice say that. Chris: News at 5. Now it’s, News in 5 seconds. I asked you for the top three initiatives for 2016 and you said that you’ll give me one. Kelly: I’ll give you one. Chris: It’s called negotiating? Kelly: Yeah. Chris: Okay. Kelly: The one that I’m intrigued by is a confluence of two things. One is cyber security risk. Chris: All right. Kelly: The other is risk transference of that risk. I want to explore whether it makes sense to pursue a captive insurance program for banks to underwrite cyber security risk. Setup a collective or a community to do that. I think it’s being mispriced now by insurance companies because they haven’t really identified the risk. They haven’t really identified how big the risk is, how to mitigate the risk, and then how to price it. Anytime you have unknowns like that, especially in insurance, you get over, mispricing, I should say. That’s something that intrigues me. Chris: Yeah, it makes sense. Kelly: Yeah. The other two I’m not going to tell you about. Chris: Perfect! In the acting business, we call this dramatic tension, which you’ve done a good job of creating. Kelly: Thanks! Chris: Well it sounds interesting. It’s good stuff. We want to thank you for listening to the syndicated audio program, BankBosun.com The audio content is produced by Kelly Coughlin, Chief Executive Officer of BankBosun, LLC; and syndicated by Seth Greene, Market Domination LLC, with the help of Kevin Boyle. Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin. If you like this program, please tell us. If you don’t, please tell us how we can improve it. Now, some disclaimers Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant. Kelly provides bank owned life insurance portfolio and nonqualified benefit services to banks across the United States. The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier of Kelly Coughlin.