Podcasts about market domination llc

❓ How do unsaid words and uncommunicated desires impact marriage? In this Wednesday episode of Whinypaluza, Rebecca Greene and her husband, Seth Greene, founder and CEO of Market Domination LLC, discuss the importance of communication in marriage, particularly the things often left unsaid. Inspired by Taylor Jenkins Reid's book After I Do, Rebecca explores how failing to express feelings can lead to resentment, frustrations, and miscommunication in relationships. The couple reflects on their experiences and shares insights on how being specific in communication can strengthen a marriage. Key Takeaways:

How do you savor the final year of high school while preparing for the next chapter in your child's life? In this episode, Rebecca Greene and her husband, Seth Greene, CEO and Founder of Market Domination LLC, discuss the challenges and joys of having a child in their senior year of high school. They share personal anecdotes about navigating "senioritis," balancing excitement and anxiety, and preparing for college applications and financial aid. Rebecca emphasizes the importance of cherishing every moment while providing practical advice for maintaining open communication and supporting your child's dreams. Key Takeaways: Cherish the Moments: Rebecca talks about the importance of savoring the last year of high school, highlighting that it's crucial not to rush through the senior year but to enjoy every milestone, from football games to Homecoming. Prepare for the Transition: Seth and Rebecca discuss the steps they are taking to prepare their son for college, including working with an admissions counselor and managing financial aid applications. They emphasize the importance of planning and staying organized. Support Your Child's Independence: Rebecca reflects on the need to gradually let go and encourage her son to be more self-sufficient, such as cooking his meals and doing his laundry. This shift prepares both parents and children for the upcoming changes. Stay Connected and Communicate Openly: The couple stresses the value of maintaining open communication with their children during this transitional period. They encourage parents to listen to their kids' concerns and be flexible as plans may change. Embrace Help and Reduce Stress: Rebecca highlights the benefits of seeking professional help to navigate the complex college admission and financial aid processes. Utilizing experts can alleviate stress and provide valuable guidance. Outstanding Quotes: "Advocate for your child and be nice to the school; we can get what we want while being nice." - Rebecca Greene "Our job as parents is to get ourselves out of a job. Our kids should be self-sufficient when we launch them into the world." - Rebecca Greene "Be where your feet are. Don't be sad ahead of time; enjoy the moments with your child now." - Seth Greene "Why are you being sad ahead of time? You have a year. Don't be sad now; be present." - Seth Greene Follow-Up Information: For more parenting and marriage tips, visit Rebecca Greene's blog at Whinypaluza.com and sign up for her free email newsletter. Join the Whinypaluza Mom Facebook Group to participate in challenges, win prizes, and connect with a supportive community of moms. Check out Seth Greene's company, HowToFindMoneyForCollege.com, for help with college financial aid and admissions planning. Tune in next week for another episode of Whinypaluza Wednesday, where Rebecca will share more insights and tips for navigating the challenges of parenting and marriage. New boost Learn more about your ad choices. Visit megaphone.fm/adchoices

Have you ever wondered what it takes to pivot from an aspiring FBI agent to a successful tax coach and business consultant? In this milestone 200th episode, the tables turn as Bruce Corris, President of Market Domination LLC, interviews Gary Heldt, the man behind the mic. In this special 200th episode of "Grow Your Business & Grow Your Wealth," host Gary Heldt becomes the interviewee as Bruce Corris takes the reins. Gary shares his unique career journey, beginning with his dreams of joining the FBI, which led him to pursue an accounting degree. When an FBI hiring freeze derailed his plans, Gary transitioned into the accounting world, becoming a Certified Public Accountant and later a certified tax coach. Throughout the episode, Gary reflects on the evolution of his podcast, the importance of proactive tax planning, and the critical role of having a diverse team of professionals. This conversation celebrates Gary's career and provides valuable insights for business owners and aspiring professionals. Key Takeaways:

❓ Have you ever wondered how clear communication and empathy can transform your marriage conflicts into opportunities for growth? Rebecca Greene and her husband, Seth Greene, Founder and CEO of Market Domination LLC, dive into their recent marital conflicts and the lessons they've learned. They share their experiences and lessons from recent marital conflicts, emphasizing the importance of clear communication, empathy, and responsibility in maintaining a healthy relationship. Through candid discussions and practical tips, they aim to help others navigate their relationship challenges and foster stronger connections. Key Takeaways

Building self-confidence in children is a pivotal aspect of their development, and there are numerous strategies to foster this essential trait. Join Rebecca, Whinypaluza's Blog podcast host, and her husband, Seth Greene, CEO of Market Domination LLC, as they share their perspective, underscore the importance of encouraging children to explore new things, discover their passions, and focus on their personal goals. They caution against the detrimental effects of comparison, particularly with siblings or friends, and instead advocate for teaching children resilience and a growth mindset. The Greenes also emphasize the role of supportive adults in a child's life, such as teachers and coaches, in building their confidence. They believe in open communication, celebrating achievements, and recognizing a child's uniqueness, while also warning against setting unrealistic expectations. Join Rebecca and Seth Greene on this episode of the Whinypaluza podcast as they delve deeper into these strategies for building self-confidence in children's development . Key Takeaways:

How do you navigate the challenging yet rewarding journey of parenting a teenager? Join Rebecca, Whinypaluza's Blog podcast host, and her husband, Seth Greene, CEO of Market Domination LLC, as they delve into the joys and challenges of parenting their 17-year-old son, Max. This episode covers the delicate balance of independence and guidance, preparing for college, and fostering strong family bonds. Listen for insights on adapting parenting styles, open communication, and celebrating your child's milestones. Key Takeaways:

Welcome to another insightful episode of Direct Response Secrets with your host, Zachary J. Radford! This week, we're thrilled to feature Seth Greene, a titan in direct response marketing and the founder of Market Domination LLC. Dive into an engaging conversation that bridges the realms of podcasting and direct marketing strategies.

Tune in to the latest Catherine B. Roy Show episode featuring Seth Greene, the nation's leading expert on leveraging podcasts to skyrocket your business. As the co-host of the acclaimed Sharkpreneur podcast with Kevin Harrington from Shark Tank, Seth shares invaluable insights. Nasdaq named Sharkpreneur one of the "Top 10 Podcasts to Listen to in 2019." Learn from Seth's wealth of experience as the founder of Market Domination LLC, a direct response marketing firm. With nine best-selling books and features on NBC, CBS, Forbes, Inc, and CBS Moneywatch, Seth Greene is the authority on business growth strategies. Don't miss this episode packed with actionable tips and success stories!Connect with Seth HEREWORK WITH MECOACHES, CONSULTANTS, ENTREPRENEURS & BUSINESS OWNERS if you are ready to step into your power, do what you love, and make your dream business flourish◉ Book a free call with me:☎ http://bit.ly/StrategySessionWithCatherineDownload LinkedIn Decoded eBook: https://www.lhmacademia.com/Visit https://linktr.ee/catherinebroy for more

Seth joins us on the show to discuss different marketing strategies and following a passion.

Seth Greene has created the Million Dollar Digital Marketing Agency Podcast Program, a customized program to help Digital Marketing Agency Owners add one million dollars in new sales to their business in a scalable, profitable way that doesn't involve them working more. Seth is the founder and CEO of Market Domination LLC. Listen to this insightful RIA episode with Seth Greene about client communication and expectations. Here is what to expect on this week's show: Why most advisors don't communicate with their clients enough How client expectations differ from the typical direction RIAs are prone to move in Defining a “warm and fuzzy month” How to make client communication statements more personable, seasonal, and less about money   Connect with Seth: Links: LinkedIn- linkedin.com/in/sethgreene Website- marketdominationllc.com      Learn more about your ad choices. Visit megaphone.fm/adchoices

On today's episode of The Thoughtful Entrepreneur, we are so excited to speak with CEO of Market Domination LLC and co-host of the Sharkpreneur podcast, Seth Greene! Seth discusses Market Domination LLC and the two different divisions within the company. In the first division, they recruit a cult of 50 evangelists that will promote their clients' business every single day for a year. The other is the trafficking conversion division that builds online marketing funnels which generate leads, strategy sessions, webinar attendants, and direct sales and drive both online and offline traffic to make sales and grow their clients' businesses.  Seth discusses what works well in marketing today. He shares that marketing really boils down to two things: behavioral psychology (why we do the things we do) and math. He discusses the two strategies that work really well. One is human relationships and the other is where you show up in a market. He emphasizes the importance of direct mail and how that outreach is becoming more effective as it is also becoming less common.  Seth discusses his relationship with Shark Tank's Kevin Harrington, and how their years of collaboration originated. Don't forget to listen to our next episode, where we recap all the great insights Seth Greene offered!  Key Points from the Episode: The importance of quality content  How personalization can positively impact marketing  The positive impact of focusing on others professionally and personally  About Seth Greene: Seth is the nation's foremost authority on growing your business with a direct response marketing podcast. Seth is the co-host of The Sharkpreneur Podcast with Shark Tank's Kevin Harrington, which was named the number 6 podcast to listen in 2019. He is also the founder for direct response marketing firm https://marketdominationllc.com (marketdominationllc.com) and he is an 8 time best-selling author who has been interviewed on NBC News, CBS News, Forbes, Inc, CBS Moneywatch and many more.  Links Mentioned in this Episode:  Want to learn more? Check out Seth Greene's website at https://marketdominationllc.com/ (https://marketdominationllc.com/)  Check out Seth Greene on LinkedIn at https://www.linkedin.com/in/sethgreene/ (https://www.linkedin.com/in/sethgreene/)  Don't forget to subscribe to The Thoughtful Entrepreneur and thank you for listening. Tune in next time! More from UpMyInfluence: ️  We are actively booking guests for our The Thoughtful Entrepreneur.https://upmyinfluence.com/guest ( Schedule HERE). Are you a 6-figure consultant? I've got high-level intros for you.https://upmyinfluence.com/b2b ( Learn more here). What is your #1 Lead Generation BLOCKER? http://upmyinfluence.com/quiz (Take my free quiz here).

Seth Greene has created the Million Dollar Digital Marketing Agency Podcast Program, a customized program to help Digital Marketing Agency Owners add one million dollars in new sales to their business in a scalable, profitable way that doesn't involve them working more. Seth is the founder and CEO of Market Domination LLC.    Listen to this insightful RIA episode with Seth Greene about time lapse retargeting! Here is what to expect on this week's show: - How you can show your ads to the most qualified people, wherever they may go! - Targeting your competitors' customers - How and why financial advisors would want to use this ad strategy.   Connect with Seth: Links: LinkedIn- linkedin.com/in/sethgreene Website- https://marketdominationllc.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth Greene Episode 114 Everlasting marketing principles that just work. Featuring Seth Greene, Founder and CEO, Marketing Domination LLC -The Lockbox Podcast with Jeffrey Brogger  Seth Greene is the founder and CEO of Market Domination LLC, one of the fastest growing direct response marketing firms in the country. Seth gets results for his clients. He does it by “Crafting the magical marketing proposition that makes your competition disappear and the right prospect appears like magic!” Seth's multi-talented team is also responsible for the creation of this podcast, doing all the behind-the scenes work that makes Jeffrey's life easier. During this conversation, Seth explains the relationship with his client, the famed Harmon brothers, how relationship marketing works for Market Domination LLC and all their Dream 100 clients. This episode is filled with practical takeaways for commercial and residential realtors. Jeffery even puts Seth on the hot seat to solve marketing challenges specific to the real estate industry. Highlights from this marketing masterclass include: How realtors, commercial and residential, make the mistake of not telling their power stories. Differentiate yourself and narrow down your niche so you can customize your marketing. Tactics for niching, including who you serve and how to reach that market. Understand your market demographics, including where they get their news, spend leisure time, what they watch and when. Use the right ethical marketing proposition. When and how to use print effectively. A discussion on Facebook and YouTube ads. Enjoy the show! Connect with Seth: Website: https://marketdominationllc.com/ Connect with Jeff: https://steezy.digital/ Facebook: https://www.facebook.com/jeffrey.brogger  LinkedIn: https://www.linkedin.com/in/jeffrey-brogger/ Twitter: https://twitter.com/jeffbrogger FREE DOWNLOAD: The Ultimate Real Estate Goal Setting Framework This SMART spreadsheet will automatically breakdown the number of phone calls, appointments, or open houses you need to achieve your income goal!!! Click below to download this SMART spreadsheet today! https://steezy.digital/ultimate-real-estate-goal-setting-framework Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth and Rebecca Greene Better Relationships, Better Life with Judy Herman Episode 012: The Whinypaluza Traditional Marriage Seth Greene is a nationally recognized direct response financial services marketing expert, the CEO of Market Domination LLC, and co-host of the Sharkpreneur podcast. Rebecca Greene LCSW-R is a Top 100 Mommy blogger and host of the Whinypaulza podcast. With their combined experience in marketing, podcasting, and married life, these two make a perfect entrepreneurial couple!   Listen to this insightful interview with Seth and Rebecca on Better Relationships, Better Life, where :   Here is what our conversation touched on in this week's show: How faith and learning from past relationships give clarity about common goals in marriage.  Great partnerships are possible with traditional marriages (vs. egalitarian marriages). Growth mindsets and clearly defined roles give stability to the entrepreneurial couple & family. Adjustments and challenges with becoming new parents. Seth shares his first-time experiences as a new dad. Rebecca shares how the family contributes to her blog and podcast.  How to balance career and family time.  Connect with Seth: Website: https://marketdominationllc.com/ Facebook: https://www.facebook.com/MarketDominationLLC YouTube: https://www.youtube.com/user/APMFunnel LinkedIn: https://www.linkedin.com/company/market-domination-llc/ Instagram: https://www.instagram.com/market_domination_llc/ Twitter: https://twitter.com/mktdominationus Connect with Rebecca: Website: https://www.whinypaluza.com/ Facebook: https://www.facebook.com/whinypaluzaparenting/ Relationship Stress Quiz - https://www.judycounselor.com Complimentary Clarity Call - https://JudyKHerman.as.me/Complimenta... Linked In - https://www.linkedin.com/in/judykherman/  Learn more about your ad choices. Visit megaphone.fm/adchoices

The Insurance Marketing Organization Podcast with Seth Greene Episode 039: What Is Different? Seth Greene is a nationally recognized direct response financial services marketing expert, the CEO of Market Domination LLC, and the host of this show! This week is the fourth part of a five-part series of principles that will help you differentiate your IMO and edge out your competition.   Listen to this insightful episode, where Seth breaks down the two types of differentiation, and how you can use them to make your IMO or financial service firm stand out. Here is what to expect on this week's show: Why breaking out of the mold of other financial advisors isn't only about having the lowest prices The difference between “physical differentiation” and “perceived differentiation” How Seth and his team differentiate the financial services products they offer from their competition, and ways that the differences manifest themselves in both physical and perceived ways   Connect with Seth: Website: https://marketdominationllc.com/ Facebook: https://www.facebook.com/MarketDominationLLC YouTube: https://www.youtube.com/user/APMFunnel LinkedIn: https://www.linkedin.com/company/market-domination-llc/ Instagram: https://www.instagram.com/market_domination_llc/ Twitter: https://twitter.com/mktdominationus Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth Greene   The Insurance Marketing Organization Podcast with Seth Greene Episode 038: What Are You Going to Offer That is Different? Seth Greene is a nationally recognized direct response financial services marketing expert, the CEO of Market Domination LLC, and the host of this show! This week is the third part of a five-part series of principles that will help you differentiate your IMO and edge out your competition.   Listen to this insightful episode, where Seth breaks down methods of differentiating your IMO from your competition. Here is what to expect on this week's show: How to think outside the box, and offer services or products that your buyers' advisors haven't told them about Going bigger, better, and beyond Ways of convincing buyers who are already satisfied with their IMO or FMO   Connect with Seth: Website: https://marketdominationllc.com/ Facebook: https://www.facebook.com/MarketDominationLLC YouTube: https://www.youtube.com/user/APMFunnel LinkedIn: https://www.linkedin.com/company/market-domination-llc/ Instagram: https://www.instagram.com/market_domination_llc/ Twitter: https://twitter.com/mktdominationus Learn more about your ad choices. Visit megaphone.fm/adchoices

DTRH Episode 48 High Volume Marketing is DEAD Ft. Seth Greene Hate to break it to everyone, but high volume is DEAD. The amount of "noise" generated by businesses in the marketplace created a toxic environment for demand generation, delivering valuable content, and selling. We're all playing the "numbers game." Turns out this "game" dug the mile-wide hole most businesses are stuck in.    Key Takeaways:  High-volume outreach damages your brand. It annoys the sh*t out of people, you become viewed as irrelevant, and it makes your company, marketing team, and sales reps look bad in the marketplace.    Too many people try to grow their business themselves. They dump money into high-volume spray-and-pray marketing, high-volume spaghetti selling, and mass-distributed generalized advertising. Don't "generalize" your messaging. Be relevant and be sure to connect the dots for them. It's only obvious to you because you created it or sell it so you must meet them where they are, then start building relationships by communicating with them at a human level. Segment your prospects into core groups. Segmentation of your prospects or target buyers into small niche audiences is of the utmost importance. Ensure you are speaking the language of the customer before engaging. Stop the bullsh*t product peddling ASAP.   "People's most valuable commodity isn't their money; it's their attention. If you're boring, if you sound like everybody else, if you're plain vanilla, no one will pay attention to you..."  - Seth Greene   About Seth Seth Greene, Founder of Market Domination LLC, is the nation's foremost authority on how to grow your business with a cult of 50 evangelists promoting your business every week for a year.  Seth is the co-host of the Sharkpreneur Podcast with Shark Tank's Kevin Harrington which was named the number 6 podcast to listen to by Nasdaq.  Seth is a 9-time best-selling author who has been interviewed on NBC News, CBS News, Forbes, Inc, CBS Moneywatch, and many more.    Feel free to connect with Seth Greene or Rob Turley on LinkedIn or follow @RobTurley2 on Twitter!  #DTRHpodcast #MarketDomination #HighVolumeIsDead #DigitalMarketing #Advertising #Growth #Sharkpreneur #Marketing 

Seth Greene   The Insurance Marketing Organization Podcast with Seth Greene Episode 028: Where Do Your Advisors Spend Their Time? Seth Greene is a nationally recognized direct response financial services marketing expert, the CEO of Market Domination LLC, and the host of this show! This week is the second part of a five-part series of principles that will help you differentiate your IMO and edge out your competition.   Listen to this insightful episode where Seth breaks down what to look for in the ideal advisor- and where you might find them: Here is what to expect on this week's show: Why specificity is best when writing ad copy The #1 reason why agents switch Why, sometimes, the conversation approach is more important than the amount of people you get in seats Why knowing your leads' hobbies and engaging them in those hobbies can generate higher conversion rates Why a lead's time to make the first contract is a very telling KPI   Connect with Seth: Guest Contact Info: Website: https://marketdominationllc.com/ Facebook: https://www.facebook.com/MarketDominationLLC YouTube: https://www.youtube.com/user/APMFunnel LinkedIn: https://www.linkedin.com/company/market-domination-llc/ Instagram: https://www.instagram.com/market_domination_llc/ Twitter: https://twitter.com/mktdominationus   Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth Greene   The Insurance Marketing Organization Podcast with Seth Greene Episode 026: Who is Your Ideal Advisor? Seth Greene is a nationally recognized direct response financial services marketing expert, the CEO of Market Domination LLC, and the host of this show! This week is the first part of a five-part series of principles that will help you differentiate your IMO and edge out your competition.   Listen to this insightful episode where Seth breaks down what your IMO ought to look for in an advisor: Here is what to expect on this week's show: How to find the top 20% of advisors that will drive in 80% of your business, rather than an advisor from the bottom 20% that will cause 80% of your headaches Why clarity in messaging is just as important to an IMO as having the newest, coolest technology What Seth thinks his previous guests on this show have done right Why a good advisor ought to know where the puck is headed, and stay ahead of trends in the market Why target market ought to drive your choice in advisor   Connect with Seth: Guest Contact Info: Website: https://marketdominationllc.com/ Facebook: https://www.facebook.com/MarketDominationLLC YouTube: https://www.youtube.com/user/APMFunnel LinkedIn: https://www.linkedin.com/company/market-domination-llc/ Instagram: https://www.instagram.com/market_domination_llc/ Twitter: https://twitter.com/mktdominationus Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth Greene is the world's #1 trusted authority on cutting edge direct response marketing, a best-selling author, the only 3x Marketer of The Year Nominee, and the founder of Market Domination LLC.   https://marketdominationllc.com/

The wait is over! Are you interested in direct response marketing or building a cult of evangelists for your brand? In today's episode, I have invited Seth Greene: CEO of Market Domination LLC, and Podcast Co-Host of SharkPreneur Podcast with Kevin Harrington. Seth shared some massive and fantastic insights on direct response marketing, podcasting. Some of the Biggest Takeaways of the episode with Seth were: ✅ Direct Response Marketing = one specific market, trackable response- quantity ✅ Build Relationships = Podcasting ✅ Add value to guests = goodwill and reciprocity, and promote your brand and much more What is your take on direct response marketing? Thoughts on podcasting? Any insight on how to build a cult of evangelists for your brand? Connect with Seth on the below platforms, etc: Listen to SharkPreneur Podcast: Apple Podcast: https://podcasts.apple.com/us/podcast/sharkpreneur/id993002971 Resources: You can buy Market Domination for Podcasting book here: https://www.amazon.com/Market-Domination-Podcasting-Secrets-Podcasters-ebook/dp/B01N58RT0C Google Play: https://play.google.com/store/books/details?id=m3eYDQAAQBAJ&rdid=book-m3eYDQAAQBAJ&rdot=1&source=gbs_vpt_read&pcampaignid=books_booksearch_viewport https://growyourowncult.com/ebook-checkout https://marketdominationllc.com/Podcast/ More of Seth's advice for podcasters: https://smartbusinessrevolution.com/seth-greene-how-to-leverage-podcasts-partnering-with-shark-tanks-kevin-harrington/ https://www.linkedin.com/pulse/how-grow-your-business-podcast-seth-greene- Connect with the host Roohi Kazi on the below platforms, etc: Instagram-roohik2 LinkedIn: Roohi Kazi Visit this link for more listening options/platforms for the Business Podcast by Roohi, and next step groups: https://bop.me/roohikaz Business Podcast by Roohi website: https://6thimbles.wixsite.com/bizpodroohi

Seth Greene joined the Learning from Smart People Podcast to talk about how to find your niche and dominate it. Seth Greene is the founder of Market Domination LLC and is a leader in direct response marketing. He has great insights, actionable ideas and fantastic examples of what he is doing for his clients. In this episode of the Learning from Smart People Podcast, Rob Oliver and Seth Greene talk about: · The definition of direct response marketing · Your marketing depends on your target and where they hang out · Properly selecting your target market · More than finding a niche, find a micro niche · Your target market needs to know they have a problem and be able to pay you · Why you need to know your target audience · A Magical Marketing Proposition · Testing out your message on your target market · Scaling your marketing · Finding partners – co-opetition · Working with those partners · Finding one per week, for an entire year · Identifying your ambassadors · Developing a partnership plan You can connect with Seth Greene through his websites. Additionally, you can get his book at a 50% discount and take advantage of the free 15 minute phone call. Website: http://www.growyourowncult.com Website: http://www.marketdominationllc.com Thanks for listening to the Learning from Smart People Podcast! Please Subscribe, leave a comment and follow us on social media: · Twitter: http://twitter.com/LFSPPodcast · Instagram: http://instagram.com/LFSPPodcast · Facebook: http://facebook.com/LFSPPodcast · LinkedIn: https://www.linkedin.com/company/lfsppodcast/ · YouTube: https://www.youtube.com/channel/UCbWV_LuUad7ZWuE9j5D9v-w You can also use the “Contact” page on the “Learning from Smart People” website: https://www.learningfromsmartpeople.com/

The Private Equity Profit Podcast is hosted by Cliff Locks, founder and president of Investment Capital Growth, a strategy, and operations management consulting firm, and Seth Greene, CEO at Market Domination LLC, Best Selling author and serial entrepreneur. Cliff and Seth interview experts in the financial sector, focusing on private equity and real estate funds, discussing developments and trends shaping the industry. Learn more about your ad choices. Visit megaphone.fm/adchoices

Rebecca and Seth Greene – The Whinypaluza Podcast with Rebecca Greene Episode 013 Marriage and Parenting with Rebecca and Seth Seth Greene is the nation's foremost authority on growing your business with a podcast. Seth is the co-host of the Sharkpreneur podcast with Shark Tank's Kevin Harrington that was just named “One of the Top 10 Podcasts to Listen to in 2019” by Nasdaq. He is the founder of the direct response marketing firm Market Domination LLC, and he is a 7-time best-selling author who has been interviewed on NBC, CBS, Forbes, Inc, CBS Moneywatch and many more. Listen to this insightful Whinypaluza episode with Seth Greene about marriage and parenting. Here is what to expect on this week's show: ●    Why it's importance to take time for your family and time for yourself. ●    How it's critical to tell your spouse when they do something you appreciate. ●    Why there will always be challenges in parenting and marriage. ●    How sometimes one parent has it slightly easier than the other. ●    Why it's important for parents to give themselves credit for their hard work. Connect with Seth: Links Mentioned: marketdominationllc.com Guest Contact Info: Twitter @MktDominationUS Instagram @market_domination_llc Facebook facebook.com/MarketDominationLLC LinkedIn linkedin.com/company/market-domination-llc Follow Rebecca Greene Blog whinypaluza.com Book bit.ly/WhinypaluzaBook Facebook facebook.com/whinypaluzaparenting Instagram @becgreene5 Learn more about your ad choices. Visit megaphone.fm/adchoices

The Origin of Whinypaluza Episode 009 with Rebecca Greene Seth Greene is the nation's foremost authority on growing your business with a podcast. Seth is the co-host of the Sharkpreneur podcast with Shark Tank's Kevin Harrington that was just named “One of the Top 10 Podcasts to Listen to in 2019” by . He is the founder of the direct response firm Market Domination LLC, and he is a 7-time best-selling author who has been interviewed on NBC, CBS, Forbes, Inc, CBS Moneywatch and many more. Listen to this insightful Whinypaluza episode where the tables are turned and Seth Greene interviews Rebecca Greene about becoming a top mommy blogger. Here is what to expect on this week's show: ●    How there are so many different types of social work people can go into. ●    Why MST is evidence-based therapy for children with severe behavioral issues. ●    How parental exhaustion is absolutely real and affects all parents. ●    Why people don't always do the right thing when they know they should. ●    How no one knows what they are doing when they are brand new parents. Follow Seth Greene marketdominationllc.com Twitter @MktDominationUS Instagram @market_domination_llc Facebook facebook.com/MarketDominationLLC LinkedIn linkedin.com/company/market-domination-llc Follow Rebecca Greene Blog whinypaluza.com Book bit.ly/WhinypaluzaBook Facebook facebook.com/whinypaluzaparenting Instagram @becgreene5 Learn more about your ad choices. Visit megaphone.fm/adchoices

Seth Greene – The Whinypaluza Podcast with Rebecca Greene Episode 004 Seth Greene Seth Greene is the nation's foremost authority on growing your business with a podcast. Seth is the co-host of the Sharkpreneur podcast with Shark Tank's Kevin Harrington that was just named “One of the Top 10 Podcasts to Listen to in 2019” by Nasdaq. He is the founder of the direct response marketing firm Market Domination LLC, and he is a 7-time best-selling author who has been interviewed on NBC, CBS, Forbes, Inc, CBS Moneywatch and many more. Listen to this insightful Whinypaluza episode with Seth Greene, her husband, about raising their children while being a successful entrepreneur. Here is what to expect on this week's show: How Seth started a financial firm with help from Rebecca. How Seth has started many successful businesses over the years. Why Seth helps people save on college instead of save for college. How Seth hires people for culture and then trains them to succeed. How Market Domination changed during the COVID-19 pandemic. Connect with Seth: Links Mentioned: howtofindmoneyforcollege.com marketdominationllc.com Guest Contact Info: Twitter @MktDominationUS Instagram @market_domination_llc Facebook facebook.com/MarketDominationLLC LinkedIn Follow Rebecca Greene Blog whinypaluza.com Book bit.ly/WhinypaluzaBook Facebook facebook.com/whinypaluzaparenting Instagram @becgreene5 Learn more about your ad choices. Visit megaphone.fm/adchoices

Books are the ultimate business card. But do you actually want to write a book? In this episode, Matt is joined by Seth Greene, founder of Market Domination LLC, to explain how advisors can become an author of their own book, all while skipping the demanding and time-consuming writing process. Seth unpacks Market Domination’s five-step COI method and how his team helps advisors write their own book that generates referrals. He also shares what marketing techniques are making advisors stand out and find prospects during COVID-19 and three marketing missteps to stop doing immediately. In this episode, you will learn:   How the upcoming U.S. election is impacting cost-per-lead ad spending on Facebook Why LinkedIn campaigns are working better than ever before for Seth’s clients How Seth’s COI system works and who it’s designed for Stories about professionals who’ve successfully used their book to generate referrals Three marketing missteps that advisors should avoid And more! Tune in now to learn about marketing in the virtual space! Resources: Top Advisor Marketing | Market Domination LLC | Seth Greene on Linkedin Brought to you by: iris.xyz 

Chas is joined by Seth Greene, who is the co-host of the #6 Rated (NASDAQ) SharkPrenuer podcast with Shark Tank's Kevin Harrington. Seth is the founder of Market Domination LLC, and is a 7 Time Best-Selling Author. On this episode, Seth talks about how he met his podcast co-host, Kevin Harrington, and how making that one relationship changed everything for him. You can learn more about Seth by going to yourdream50.com

Seth Greene is an 8x best-selling author and entrepreneur. He’s also the Co-Host of The SharkPrenur Podcast, along with Kevin Harrington, one of the original sharks from Shark Tank. Seth is the founder of Market Domination LLC, and is the only 3x Marketer of the Year nominee.  In this episode of Specified Growth Podcast, Seth talks about some of the “shock and awe” boxes he’s sent out over the years and the amazing success rate that comes with them. He also discusses the major marketing trend that not enough people are talking about, and what being a magician has taught him about marketing. Don’t miss this episode of Specified! Please reach out if you have any feedback or questions. Enjoy!  Text me: +1 (720)-704-4855 Email: tatsuya.n@castagra.com Twitter: @TatsuyaNakagawa Instagram: @tats_talks LinkedIn: Tatsuya Nakagawa YouTube: Tats Talks

Seth Greene is the nation's foremost authority on growing your business with a podcast. Seth is the co-host of the SharkPreneur podcast with Shark Tank's Kevin Harrington that was just named “One of the Top 10 Podcasts to Listen to in 2019” by NASDAQ. He is the founder of the direct response marketing firm Market Domination LLC, and he is a seven-time best selling author who has been interviewed on NBC, CBS, Forbes, Inc, CBS Moneywatch, and many more. What you'll learn about in this episode: How Seth first connected with Kevin Harrington of TV's Shark Tank and then developed a consulting relationship and partnership with him How the Market Domination Dream 50 program works to build networking relationships with key centers of influence within the entrepreneurial community How Seth and his team are working through the coronavirus crisis and identifying new opportunities in spite of difficult conditions Seth shares an example of a real estate agent adding value and building a relationship and getting a large number of referrals in return How Seth and his team have 72 affiliate partners generating new business, and how the pandemic has actually caused business to increase significantly Why enjoying talking to people and having a fairly large, established client base are the keys to Seth's methods Why Seth recommends you read Pendulum: How Past Generations Shape Our Present and Predict Our Future by Roy H. Williams and Michael R. Drew What steps Seth and his team are taking to navigate the global pandemic by staying in front of prospects and adding value for clients Why the dramatic increase in social media use during the pandemic has created an incredible marketing opportunity for entrepreneurs Why virtual events in place of in-person events can be sustainable and worthwhile, even after the pandemic passes Resources: Seth's previous appearance on the show in Episode 75: https://smartrealestatecoachpodcast.com/podcasts/seth-greene/ Website: www.SmartRealEstateCoachPodcast.com/marketdomination Get a FREE copy of Seth Greene's book, Market Domination for Podcasting: www.Marketdominationllc.com/podcast Pendulum by Roy H. Williams and Michael R. Drew: https://amzn.to/3anbE09 LinkedIn: www.linkedin.com/in/sethgreene/ Additional resources: Website: www.SmartRealEstateCoachPodcast.com/webinar Website: www.SmartRealEstateCoachPodcast.com/termsbook Website: www.SmartRealEstateCoachPodcast.com/ebook Website: www.SmartRealEstateCoach.com/QLS/ Smart Real Estate Coach Podcast Sponsor: Paul G. Dion CPA, CTC

Hear what the biggest frustration for a capital gains tax deferral strategy was for Seth Greene. Seth is the world’s #1 trusted authority on cutting edge direct response marketing, a best-selling author, the only 3x Marketer of The Year Nominee, and the founder of Market Domination LLC and co-host of SharkPreneur Podcast with Kevin Harrington of Shark Tank.

Our very own Brandy Seats was featured on The SharkPreneur podcast with Seth Greene, a best-selling author and founder of Market Domination LLC, and Kevin Harrington, the inventor of the infomercial and one of the original sharks on Shark Tank. Brandy Seats is the Senior Vice President of Active Wealth Management. She provides a wide range of [...]

Johnathan Krueger is interviewed on the SharkPreneur Podcast  by host, Seth Greene. In this informative Sharkpreneur episode, learn how to make a business stand out in a crowded market. Seth and Jonathan discuss taking pride in guiding clients to make informed decisions, avoiding costly mistakes, lowering their taxes, and increasing estate size. Jonathan attributes his success to the high priority he places on being a good steward of the assets entrusted to his care. During this episode you’ll hear:  How you should work using your strengths and not your weaknesses. There is Energy Management for you and your body as well as energy management for your finances as an entrepreneur. Why it’s important to be intentional in how you guard your personal energy. As a fiduciary, Jonathan maintains his Series 65 Uniform Investment Advisor license and uses his intricate knowledge of insurance and investment solutions to provide LionsGate Advisors’ clients with advanced wealth preservation and legacy continuance strategies. Jonathan Krueger is an Investment Advisor Representative with Lion Street Advisors, LLC, a Registered Investment Representative and a Registered Representative with Lion Street Advisors, LLC member SIPC. Opinions expressed on this program do not necessarily reflect those of Lion Street Advisors, LLC or LionsGate Advisors. The topics discussed, and opinions given are not intended to address the specific needs of any listener. Neither Lion Street Advisors, LLC nor LionsGate Advisors offer legal or tax advice; listeners are encouraged to discuss their financial needs with the appropriate professional regarding your individual circumstance. Resources:  Kevin Harrington is the inventor of the infomercial, one of the original sharks from the hit tv show shark tank, and has generated over 5 billion dollars in TV and digital direct response sales. LinkedIn  Seth Greene is the world’s #1 trusted authority on cutting edge direct response marketing, a best-selling author, the only 3x Marketer of The Year Nominee, and the founder of Market Domination LLC. LinkedIn  The SharkPreneur Podcast

Seth Greene of Market Domination, LLC talks about Marketing, Pitch Tank, and Compelling Calls to Action. BizSoup Talk Radio Podcast Episode 001 with John DeBevoise Seth Greene is the Founder & CEO of Market Domination LLC and co-host of the Sharkprenuer Podcast, which was named #6 on NASDAQ’s ‘List of Top Podcasts You Must Listen To In 2019’. Listen to this information-packed BizSoup Talk Radio Podcast episode with Seth Greene about Marketing, Pitch Tank, and Compelling Calls To Action. ●       3 things to do in your business monthly to get new business ●       4 examples of powerful subject lines that really work ●       How telling a compelling and emotional story about a product or service is a great way to get someone’s attention Links Mentioned Turn your podcast into a book at www.marketdominationllc.com/PodcastOffer If you have a question about your product go to BizSoup.com Connect with Seth Greene Website www.marketdominationllc.com LinkedIn https://www.linkedin.com/in/sethgreene/ Facebook https://www.facebook.com/MarketDominationLLC/

The growth of podcasting has been taking place for years now and shows no signs of slowing down anytime soon. Knowing how to leverage a podcast in your business can increase your reach and your bottom line. Seth Greene has paved the way. Seth is CEO of the direct response marketing firm Market Domination LLC, […] The post Seth Greene | How to Leverage Podcasts & Partnering with Shark Tank’s Kevin Harrington appeared first on Smart Business Revolution.

Seth Greene is a top-rated podcaster with his show “SharkPreneur”, a 7-time marketing author, and the only person in history who has been nominated 3 years in a row for Marketer of the Year. Seth has been featured on CBS MoneyWatch, CBS news, The LA Times, The Boston Globe, The Miami Herald, and the #1 morning radio show in New York City.  In this episode Seth and Michael discuss: 2:32 How Seth got started on Wall Street – at 12 years old! 6:09 Explains how he magically went from cold calling Hell to working with Dan Kennedy and founding Market Domination LLC 12:50 Seth talks about his personal traits that led to his success 19:02 How he became a better business owner and manager 25:19 Seth has chosen great people to work with – he tells us how he made those decisions 27:49 The origins of his spectacularly successful podcast were humble 31:53 Meeting Shark Tank alumni and his current podcast co-host Kevin Harrington was anything but accidental 40:31 Seth explains the “Shock and Awe” package and how that has contributed to an amazing close rate 47:37 Seth talks about how he achieves amazing results for his clients….sales and lots of them 51:32 Once a magician, always a magician 53:50 For more information about Seth and to get a free copy of his book do this… FREE "7.5 Steps to Achieving Extraordinary Goals" eBook: http://michaelaltshuler.com/download-e-book/ Facebook:http://facebook.com/MichaelAltshulerBiz Twitter: http://twitter.com/maltshulerbiz Please SUBSCRIBE and leave a review!

Podcasting is the easiest, fastest, and cheapest way to get in front of an audience, build a targeted audience, build a following, and make yourself an authority in the niche. Seth Greene, founder of one of the fastest growing direct response marketing firms in the country called Market Domination LLC, says he has not yet […]

Podcasting is the easiest, fastest, and cheapest way to get in front of an audience, build a targeted audience, build a following, and make yourself an authority in the niche. Seth Greene, founder of one of the fastest growing direct response marketing firms in the country called Market Domination LLC, says he has not yet found a business that podcasting couldn’t work in. Most business owners, coaches, authors, consultants, and entrepreneurs are passionate about helping people. They want to do what they do and do a great job, but marketing isn’t their passion. Their business is their passion. Seth says folks hire them to grow the business so business owners can do what they do best and they do what we do best, which is getting them new customers, clients and patients. Seth talks about the biggest challenges most entrepreneurs encounter when trying to run their businesses and shares some resources they could take advantage of to help them with it. Love the show? Subscribe, rate, review, and share! Here’s How » Join Heartrepreneur® Radio community today: heartrepreneur.com Heartrepreneur® Radio Facebook Terri Levine Twitter Terri Levine Instagram Heartrepreneur® Radio Pinterest Terri Levine YouTube Terri Levin LinkedIn

Matt Foley: I am 35 years old. I am divorced and I live in a van down by the river. Intro: Kelly Coughlin is a CPA and 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. Greetings, this is Kelly Coughlin, CPA and CEO of BankBosun, helping bank C suite execs navigate risk and discover reward a sea of risk, regulation and revenue opportunities. One of the benefits, perhaps the only benefit, of getting older, is having a huge portfolio of …mistakes. Some wise person said, “Many times what we perceive as an error or failure is actually a gift. And eventually we find that lessons learned from that experience prove to be of great worth.” I say baloney to that. The mistakes I have made cost me and my company money. So, I reject that idea. And another wise man, Alexander Pope, an 18th century British poet, said “A man should never be ashamed to admit he has been wrong, because he is wiser today than he was yesterday” I say, forget that idea too. Wrong is wrong. And yes, I might be wiser, but I certainly am irritated and embarrassed at a few of my own mistakes. And one of the BIGGEST mistakes I have made over my 25 illustrious years in the business world is with presentations. And my weapon of choice was Powerpoint presentations. And for all you prospects, clients, and conference attendees who have had to endure one or more of my busy, complex, unclear, and lengthy PowerPoint presentations, I now herewith formally apologize for the harm that was done to you through boredom, confusion, and frankly lousy theater. As many of you know, I am a huge fan of using audio…the human voice as a great tool to communicate your mission, message, and mechanics (that’s my term for product features and benefits) of your company and your products and services. Your spoken word is so much more powerful than the written word. With your voice you can communicate with energy, emotion, empathy, excitement… coincidentally they all begin with the letter E. I don’t know about your writing skills, but if I try to communicate my value proposition using words that communicate energy, emotion, excitement…they just don’t work in business writing. This is why live presentations are great. They allow you to communicate your mission, message and mechancs of your company and value proposition with emotion and energy…those E words…That said, if that message is not clear, concise and credible then you should just keep your mouth shut…take the advice of Matt Foley, Motivational Speaker, “I wish you could just shut your big yapper.” God, I love Matt Foley. Many of the mistakes we make with presentations are easily controllable…and I certainly have made my fair share of these, even before we talk about non-verbal mistakes we make…by the way, I encourage you to listen to my two-part interview with Robin Kermode, where he talked about a couple non-verbal tips like squeezing your butt together to lower your center of gravity, and what to do with your hands and how to stand. In my mind, after having made dozens of miserable presentations, there are five things that can dramatically improve our Powerpoint presentations. Number One: Direct the audience to yourself…not the screen or the handout. My actor friend Chris Carlson, CEO of NarrativePros in an interview said only we stupid business people, communicate this way: Hey audience, listen to what I am going to say, because I am so brilliant, but, by the way, don’t look at me, look at the screen over there. Cause I am not worth looking at. Don’t do that. And it starts with don’t give them content on the slide that encourages them to study and read it and not watch and listen to you. You want them focusing on YOU! Number two…Get comfortable with white space on the slide. We tend to have too much content on our slides and too many ideas or concepts on each slide. Get comfortable with clean and open white space. You fill that white space with your brilliant words that you speak and not the words that you write. And be aware of the Rule of Thirds on your slides. Your slide can be divided up into nine boxes…resembling a tic tac toe grid. Generally speaking, you want your key messages on a slide where two lines intersect, that is just outside the four corners of the center box. Number three: Get Your presentation down to less than 18 minutes. Frequently, presentations are too long and Q&A is too short. By capping it at 18 minutes, it forces you to distill your message into its critical and core elements. Audience cognitive learning…that is thinking and listening, is draining. There is this concept of cognitive backlog where your audience can handle up to a max of about 15 - 18 minutes of cognitive learning. If you exceed that they go into a backlog mode, where learning and listening starts to shut down. Research shows that you have about two minutes to get your audiences’ attention; five more minutes to keep it; and if they like it you get another seven to ten more minutes. So that is a total of no more than 18 minutes. The rest should be about them…no more about you. So to accomplish the mission to hold their attention, we need to carefully prepare and rehears our presentation. It takes more time to prepare a 15-minute presentation than a 50-minute presentation. Why? With both of them, you can only hold their attention for 18 minutes. With the longer presentation you are simply throwing more words at the wall and hoping something will stick. With the shorter one, you are carefully crafting your words to ensure that each message on each slide sticks with the audience. Number Four: We use text too much and images not enough images. Use images either alone or to guide the viewer to the important message…again no more than two, ideally one, message per slide. I want to expand on this a bit. I had a client of mine say, but if I don’t put more detail and content on the slide, it won’t mean anything when I leave it behind. Very, very true. But that is resolved in my fifth and final point.And I really can’t emphasize this enough. Because if you do this, many of the flaws and weaknesses in the previous four points will magically be uncovered and discovered. Number Five Write your complete and total speech out verbatim. Read it out loud. And record it. Write, Read, Record…the three Rs…oh wait, write is a W word…you get the idea. To Write it, you can use an outline or a mind map or whatever works for you. I personally like the mind map approach, whatever works for you…write it out literally. Tell your story in an interesting way. If you haven’t listened to Paul Smith’s audio interview Sell with a Story or Joanne Black’s interview Pick Up the Damn Phone, you should. I interviewed both of them over the past six months. Their ideas can help you in writing your speech. So you write and rewrite your speech and then you need to connect it to your Powerpoint images. Copy and paste your script into your Powerpoint slide notes at the bottom of the slide page….What I like to do is copy the entire speech into the first slide…and then start cutting and pasting into the subsequent slides from this first one. If you haven’t created the slides, then this text will help you with the theme and message and image you want in that particular slide. Keep editing and reading aloud and rewriting and reading aloud again. This process is terrific for creating your talk and also, by the way, recalling the talk. And then once you have it and the slides are pretty good, record your voice making the presentation. You can either record this in Powerpoint or in another audio recording application. If you have someone else helping you with the Powerpoint slides, having this audio content will be incredibly helpful for them in creating the slideshow. So, back to the client that complained about lack of detail and content, when you provide your slide deck to interested clients or prospects, you also provide them the slide deck with the transcript AND you provide them the recorded presentation with the slides advancing with your audio overlay. It’s a great repurposing of the presentation and it offers you a way to repeat it and deliver it again and again with other prospects or clients throughout the company for those who couldn’t attend, liked it so much they wanted to hear it again or perhaps they had a martini at lunch and fell asleep…   So to summarize, it goes like this: Direct the audience to you, the speaker, not the screen or the handout. Get comfortable with white space on your slide. Divide the slide into a tic tac toe grid and place your key message…remember only one or two…in close proximity to the corners of the center box. Get your presentation down to less than 18 minutes. There are some tips and tricks on getting Q&A going, because frequently nobody wants to be the first one to ask a question. Use more images and pictures and less text. And no more than two points per slide. And finally, the most important one, write, read, record, and rehearse…darn that pesky W in write…About six years ago, a couple of my sales people were making a big presentation…they came to me with a 50 slide Powerpoint deck they intended to present…I just about puked. I told them to get it down to 15 slides including opening slide. I also told them I wanted to see their script in the notes on each slide so I knew what they intended to say. They pushed back saying, they didn’t want to memorize a script rather would just use notes…I said fine. But I want a script for each slide as if you WERE going to read it verbatim…this process forced them to fine tune their presentation. Cut out the noise. And forced them to create a very good, well rehearsed, repeatable presentation that they could use again, fine tune again and allow others to make a similar presentation. So record it while you are still in production mode, and then re-record a finished version. The recording process will really help you get it right….that’s right with an R… To get some help and guidance the non-verbal stuff listen to my interviews with Robin Kermode and Chris Carlson, both actors. To get some help on how to write it listen to Joanne Black and Paul Smith…you can find all of them on our website or just google bankbosun.com and their name: Robin Kermode, Chris Carlson, Joanne Black and Paul Smith. Most bank executives have to make presentation all the time..to their board, shareholders, employees, regulators, cucstomers, prospects…I personally lover working on these presentations. To me it’s like writing poetry for business. You have a limited number of lines, words and time to communicate a powerful impactful and memorable message. So if you want help, give me a call. Thanks for listening. Outro: 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. 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.

Todays guest is Seth Greene, CEO of Market Domination LLC. He will be talking with us about the magic of direct response marketing for your business! www.marketdominationllc.com

Title: Pick Up the Damn Phone Means No Cold Calling! Listen to Joanne-of-the-Nice-Voice Explain. Date: August 25, 2017 Attendee and Guest:  Kelly Coughlin, CEO, BankBosun; Joanne Black, Author and Consultant, [Boatswain’s whistle] That’s the Bosun’s whistle calling you bankers to attention.  Listen, compete, win. Intro: Kelly Coughlin is a CPA and 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. Greetings, this is Kelly Coughlin, CEO of BankBosun, helping bank C- suite execs navigate risks and discover reward in a sea of threats and opportunities. It wasn’t so long ago, that there were really only three ways to communicate with people: the mail, in-person, and on the phone. That was it. That’s the way it was only 40 years ago. Imagine that…no texting, no social media, no cell phones, no internet, no email…just 40 years ago. Today, we have all these new different ways to communicate…and frequently, when something “new” is introduced in the market, it gets overused and misused. Why? Because we lose sight of the purpose of the new concept and focus simply on using the new concept. In communications today, I will say the reliance upon binary digits…technology…is overused and misused today. As most of you know, we at BankBosun are huge fans of using the human voice as a way to more effectively communicate your message…whether it be your company mission and vision, your product features and benefits, or your assessment of the market landscape and environment, the power of the human voice to communicate empathy, energy and emotion is one of the strongest powers as human beings we have. And if we don’t use that power, we miss a huge opportunity to connect and communicate with our tribe. We like to say, while the pen is mightier than the sword, the voice is stronger than both. Use it. The new communication tactics today are terrific and I use them constantly and consistently. But in terms of effectiveness, nothing compares with the sound of the human voice…I fully recognize that it is not efficient, and that is why many companies founded in the digital era have adopted a business model that minimizes or sometimes completely eliminates the human voice…Facebook, Google, Uber…have you ever tried to get an Uber customer service agent on the phone…forget it…it just won’t happen. This audio interview is an example of the power of the human voice. I posit that if you only read the transcript of this interview, you will miss a huge portion of the underlying message. See how I said huge there? You would miss that if you just read it…it would sound huge…If you only read, you will miss the guest’s energy, empathy and emotion. You just don’t get that with the written word. Oh, and did I mention people don’t read anymore…they don’t. If you send a written piece longer than three quarters of a page it most likely won’t ever get read. Over 65% of written documents over one page in length get put down for later reading…and over 50% of those docs never get read…period. But if you listen, you get to hear a whole new dimension of communication. And you technical people that think your products and services are way too complex and need to be communicated with a written doc or flow chart or a Powerpoint. Wrong. You especially need to tell your story with your voice. I am not suggesting you abandon your written material. But frankly the more complex your offering the more you need to be able to tell your story with your voice…if you can’t, you need to learn your story better. My guest today is also a strong advocate of using the human voice. She is a thought leader, author, and consultant.  And frankly, she is the genuine article.  She has written a number of books, one is called No More Cold Calling: The Breakthrough System That Will Leave Your Competition in the Dust.  And then another one, Pick Up the Damn Phone!: How People, Not Technology, Seal the Deal.  She is America’s leading authority on referral selling.  She is not bragging though, her publisher gave her that moniker and she runs with it, and runs with it hard.  And now she is going to run with it at BankBosun to help our community and regional banks compete and win, not through cold calling or the traditional tactics like getting referrals from centers of influence, rather, she is quite the contrary and thinker who believes no sales person should ever have to cold call or send cold emails.  Let’s hear about that.  But what I like most about our guest, Joanne Black, she has a nice soothing voice, especially, compared to my rough and gruff voice.  And so, I am going to welcome Joanne and hope she is on the line so we can all hear her great wisdom and insight and hear her especially nice voice.  Kelly: Joanne, are you on the line? Joanne: Oh, I wouldn’t miss this for the world, Kelly. This is fabulous. Kelly: Thank you Joanne for taking the time.  I know you are on the west coast of California, is that correct? Joanne: I am in the San Francisco Bay area so it’s a beautiful sunny day here and we haven’t had any earthquakes in a while and I hope that continues. Kelly: Excellent!  Well, Joanne, are you ready to get right into it? Joanne: I am always ready.  Kelly: Alright. Well, Joanne, I am going to start out with a challenging question here.  I am going to start out by asking you to reconcile two seemingly contrary and opposing messages that are the titles of two of your books.  One book says, Pick Up the Damn Phone and the other says, No More Cold Calling.  Well, what do you want us to do, call or not call? Joanne: Oh, I want you to call but only if you have gotten a referral. The reason I wrote that second book is, I truly was alarmed by how so many people depend on technology and not only depend on it, I think they hide behind it.  And instead of actually having conversations they are depending on emails, on e-books, on social media to get people’s attention.  But the titles may seem like they are not aligned but they actually are. To only wants you to pick up the damn phone, when you have done your research online, when you have talked to people and then when you have been introduced to the person you want to meet or you are going to pick up the damn phone to talk to some of your colleagues, to talk to your clients and ask them for other people you should be meeting.  That’s what the phone is for, not to cold call.  Kelly: Well, are people afraid of the phone these days or are people afraid to contact people? Joanne: It depends on who your clients are.   So, we need to communicate as our clients communicate, and if they communicate by text then text them and set up a time to talk to them.  But you have to have the conversation when you are asking for a referral.  You know, you can’t ask for a referral in any digital format.  That’s my point of view and I am sticking to it.  And the reason is that a referral is very personal and before I can introduce you or I can introduce any banker I need to have a conversation.  I need to know the business reason why I am going to make the introduction. Because when I refer someone my reputation is on the line.  I need to depend on you to take care of my client just as I would.  So, therefore, I need to have that conversation.  I also need to equip you with a language to introduce me.   And it’s not just because I am a nice person.  It’s not just because I have written two books.  It’s not just because I have had my company for 21 years.  It’s not just because you say I have a nice voice.  I mean, that’s not business reasons for the introduction.  There has to be something I do that’s going to resonate with the person you are introducing me to that’s going to help them solve a problem.  Kelly: Now, you are kind of picky about using the term referral, why don’t you define what you think a referral is and then what a referral is not. Joanne: Well, it is what I know, not what I think.  But a referral means that you receive an introduction.  Let me contrast that to my definition of a cold call, any cold outreach, whether you are sending an email, whether you are on social media, whether you are just popping in to a client.  I mean, I don’t know if anybody does that anymore, but some do.   A cold call versus a referral, a cold outreach means that you are contacting someone who doesn’t know you and doesn’t expect to hear from you.  That is ice cold, you are definitely interrupting them. They don’t know you. And in many times there are actually circumspect whether that person really said that you should talk or not, a lot that goes on there.  So when a referral gets you the introduction you always get the meetings, because you have been introduced by someone your prospect knows and respects.  Make sense? Kelly: Yes it does.  I’m interested in the term outreach.  I’ve been in the sales business one way or another many many years and it’s only been in the last eight years maximum that the term outreach has become popular.  It is just selling, correct?    Is it just making a contact, whether it be outreach on the phone, outreach on email, outreach in person, it’s selling, correct? Joanne: I don’t agree.  So here is the thing, I’m want to go back a whole bunch of years when I did work in the banking industry.  I worked for a makeup performance and my clients were all banks, mainly community banks, and at that time if you wanted to get information on a bank you would call their corporate communications department and they mailed you an annual report.  That’s how we learnt about a company.  We did not have the internet and when the internet first became frequently used, I’m going to say mid 90s, maybe, when people were contacted all over the world and then it went from there. We now have many different ways of reaching people so it’s not just calling someone to get information.  It’s not just making a phone call.   And, by the way, I think those times were probably a lot simpler, but there are so many ways of contacting people now.  And that’s what I mean by outreach, because it could be by phone, in person, social media, email, I can’t think of anything else, but there probably is, but there are just so many avenues we have now to reach people. So that’s why I call it outreach, and I don’t think it’s selling. Kelly:  I think probably selling implies doing more talking than listening. But if an outreach is listening and talking then that probably makes more sense to use the term outreach. Joanne: I think it is very much about building relationships and expanding connections, and those lead to sales.  Here is what happens. I have been exposed to several people recently who have said to me, I don’t know if I should go to that event because I have been to things like this in the past and I don’t get any leads.  Don’t say that to me, I say that’s always a wrong approach.  We need to be out there meeting people all the time, whether it’s for breakfast, for lunch, for a beer, whether it’s part of a golf tournament, a tennis tournament, whether we are going to our kid’s...to their baseball or soccer games, we need to be out there all the time meeting people, getting to know people, sharing ideas.  That to me is what selling is about, because the number one reason that people do business with us, because they trust us.  That doesn’t happen overnight.  It does happen when you get a referral introduction.  For me, sales is about having a conversation and being clear about what their issues are before ever talking about what we do.   Kelly: Let’s talk about account based sales. You seem to spend a lot of time, a lot of energy on account based sales activity. What’s your definition? Why is that important and what’s the alternative to that? Joanne: It’s the old saying that there is nothing really new again.  So account based sales is a newer term used for those of us who have named accounts.  We have a certain book of business, a certain book of accounts that we are responsible for meeting with and ultimately selling to.  It’s a book of business, period, named accounts.  And as bankers then we know we need to meet these companies and talk to them and build relationships with them. That’s what it’s about. That’s account based selling.  It’s just a new term but there is nothing new about it.  The opposite is, so many companies now have people on the phone all the time, inside sales reps, people calling and wanting to open up a conversation.  They don’t build relationships.  They are the ones making a hundred dollars a week, a day or whatever it is, and maybe talking to a few people.  That is not what I’m talking about and that’s not where bankers are playing either.  It’s not where I play.  Account based sellers build relationships.  That’s the differentiation in the term.  Kelly:  Do you distinguish between retention of business or for cross selling, up-selling purposes? Joanne: One of the downfalls that I see is that in so many organizations, that we do business with a client, we close that business and then we move on.  To me, when you talk about cross selling and up-selling, it’s always listening.  So, we get in there with one product or service because most of these companies have more than one bank they are doing business with and through developing the relationship and getting to know them better, yes, our goal is to find other opportunities within that client.   We may or may not, or it could be that a bank that they were doing business with, maybe they changed bankers and their client doesn’t like this new banker and suddenly reaches out to you because they like you. It’s critical to stay in touch with people.  And yes, if the door opens and you see an opportunity to talk about another product or service, you do that, but more importantly, we need to be asking those clients for referrals to other people they know. And that is not happening.  It’s happening yes, ad hoc, but it’s not a discipline.  It’s not systematic.  And it happens but we can’t depend on that.   Kelly: Okay, you make a pretty bold statement in some of your work.  One of these statements says this, Why closing is never a problem in account based selling. Why is that? Joanne: First thing, it’s never the problem, it doesn’t matter what you do.  So, when people say to me, I’ve had a sales leader say to me, Joanne, my team can’t close, can you help me?  Well, that’s my time to step back because it is never about closing.  It’s always about something earlier in the sales process that was forgotten. That was over looked.  If we have done our true discovery and we built relationships with all the people who are going to be involved in the decision, that we found out their timeline, we found out what they need, we’ve made a lot of check ins. I don’t even like to call it that, but we are in touch, then closing should be like one foot in front of the other.  Closing is never the problem.  I am going to give you an example.  I realized that I missed a step, very recently, and I knew the deadline was short so I wasn’t even sure about that. But a client was having a meeting and they were bringing in their account executive and suddenly they wanted to expand it to a bigger group so now we are looking at like 25 people instead of 10.  The mistake I made was, I did not have the conversation with the right person about what that would cost them when they expanded that number and I would have made a recommendation to start with a smaller group.  The group that really would get the most benefit from referrals, start with them first.  Let’s get proof, let’s get results and then we can expand it.  So, I missed that step. Now, as a result, first of all, the date didn’t work and second, it was too big. And it will happen because they do these quarterly business reviews and bring the whole team together then.  And now I have to do a lot more work on my end which I am willing to do and we have already outlined some next steps to bring a referral program into a quarterly business review with a smaller team. So, I made that mistake.  It’s called, sometimes...I have an author friend who calls it "happy ears”.  You know, when a prospect or a client just says, oh, this is fabulous, yes we need to do it.  This absolutely meets what our challenges are.  I never thought about it that way, you have given me so many insights   and good advice, on and on and on.  We have “happy ears”, and they go sure, they are going to do business with us.    That’s not business, that’s “happy ears”, and that was my downfall. Kelly. Yeah.  You make another statement here, How digital dependence derails account based selling teams.  I want to give some background in this question.  At BankBosun, we believe that audiocasting is a very effective way to communicate your message, whether it be a company message, a product message, service message, a human voice communicates with energy, empathy and emotion and you just can’t get that out of the written word unless you are writing like Yeats or Shakespeare, most people really don’t read anymore anyway.  So, we like to use digital audio to capture this, like we are doing today.  In my interview with you, we get the emotion, we hear your wonderful voice, we hear your energy and then we envision banks would share that message with their referrals or current customers or prospective customers.  I am not at all suggesting that banks rely upon this and be dependent upon it, but do you think that tactic challenges your statement, digital dependence derails account based selling teams? Joanne: No, if digital is the only outreach then I would say yes.  The point in that post and really the message in my second book, Pick up the Damn Phone, is that if we sit behind technology and we rely only on technology, whether it’s audios, videos, emails, e-books, whatever it is, webinars, podcasts that we are not developing the relationships we need to develop when we have a conversation, and that’s what I mean by digital dependence.  Now, audio is one tool, video is another.  I just wrote a post, in fact, about why video doesn’t work for me.  You see, everybody has a different way of accessing and understanding information.  For me, I can read way faster than I can listen, of course then, I have to put in my blue tooth or my earbuds.  You know, whatever I’m doing, it’s one other block for me.  Now, I agree that there is nothing that replaces hearing a human voice, that’s why we need to talk to people and have conversations but we need to communicate in different modalities.  Some people love videos, some love audio, and many people love audio because they put it on their phones and can listen in the car.  If it’s the written word, there is Infographics.  Some people love those.  Infographics gives me hives. I just don’t know where to look first.  I get, you know, where is this?  It’s like charts and graphs. I want someone to explain it to me.  That’s my learning style.  We need to use various modalities in digital but then we need to have an actual conversation.  And when I talked about digital dependence is there are so many people who are not having conversation. They are relying on digital for everything. Kelly: Got it. I would like to reserve part two, if we could, to talking about strategy and tactics on getting referrals, could we to that in part two, do you think? Joanne: Well, of course we can and I look forward to it. Kelly: Okay, I want to end part one with, I find it interesting, the contrary, and you are, that you use the term, circles of influence and many of us use the term centers of influence, is there a difference between how we use the terms?  I actually kind of like your term better. It implies, large, diameter, circumference, wider in scope whereas a center implies something that’s closed.  It’s got a door and only few people are allowed in it, closed, narrow. What are your thoughts on that? Joanne: I think they are interchangeable.  I mean, truthfully, with everything I say is maybe I meant center and I said circle. You know, it’s really the same thing. We understand these are the people who would most likely to give us referrals over time.  And that’s centers of influence, circles of influence, it’s exactly the same. Kelly: Okay.  Well, with your permission, unless you have some kind of trade name, ownership and you are going to charge me every quarter every time I use it, I am going to start using it. Joanne: Oh, fantastic Kelly, please do.   Kelly: Joanne, I would like to know how bankers can get in touch with you.  You could put a plug in for your books again and any other thing.  I think we are doing a giveaway on the book, No More Cold Calling: The Break Through System That Will Leave Your Competition in the Dust.  Is that correct? Joanne: That’s correct.  The way to reach me is, Joanne, J o a n n e, @nomorecoldcalling.com and the first 10 people who send me an email and put in the subject line “listened to your podcast with Kelly” will receive a book.  If you would like to chat and hear a human voice, it is area code 415-461-8763, 4154618763, and that’s Pacific Time. I invite you to visit my website, nomorecoldcalling.com.  And yes, both of my books are available on Amazon, on Kindle as well as in hardcover for No More Cold Calling and paperback for Pick Up the Damn Phone Kelly: Very nice, sweet.  Joanne, thank you so much and we will be in touch about scheduling part two which is “the circles of influence and how to get them to work for you.”                                                   Joanne: Terrific, thanks Kelly. Kelly: Okay Joanne, thank you, good bye. Outro: 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. 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.

Date: August 16, 2017 Attendee and Guest:  Kelly Coughlin, CEO, BankBosun; Mike Lindell, CEO, MyPillow.com That’s the bosun’s whistle calling you bankers to attention. Listen. Compete. Win! Kelly Coughlin is a CPA and 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. Greetings, this is Kelly Coughlin, CEO of BankBosun, helping bank C- suite execs navigate risks and discover reward in a sea of threats and opportunities.  I used to sing an Irish song to my four girls when they were young called John O’Dreams.  It’s one of my favorites…and the song song went like this, “The prince and the ploughman, the slave and the freeman, all find their comfort in old John O’Dreams.”  So, John O’Dreams is like the sand man representing sleep. What’s that have to do with BankBosun and bankers?  Well all of us need our sleep, even brilliant successful bankers, and who better to help you sleep than, For the best night’s sleep in the whole wide world visit MyPillow.com, Mike Lindell, CEO of MyPillow.com. Kelly: Mike, are you there? Mike: Yes, I am.  It’s great to be here. Kelly: Great!  Mike, many thanks for taking the time to do this interview.  I am not sure if you know this but you have become somewhat of a cult celebrity figure from your MyPillow ads on TV, I suppose.   Very impressive, so congratulations on being a rock star. Mike: Okay, thank you. Kelly: I want to focus kind of on the business part of things, but I do have one question for you on your recent ad change.  There you are, you are waking up in this couple’s bathroom/bedroom with your pillow.  I mean, Mike, don’t some of the iron rangers in Minnesota raise their eyebrows a bit at that?  Mike: I don’t know what clip you’re seeing, but I am actually in their mirror they open up their cabinet in the morning when they get up and say, hear that guy, the MyPillow guy, and then we go from there and then I go to their bedroom and see what they are sleeping on with their pillows and correct them in that, and we go through all the problems they have with their current pillows.  But it has been amazing, that ad and the other ads that we have made right now. Kelly: Yeah, well I am really intrigued about your ad spend and your budget and your ROI on that, but before we get into that, as much as I would like to give you the opportunity to promote the pillows, I think we’ll focus on the business part of MyPillow.com company, some of the background on you personally and then, in business, how did you get started, the history of MyPillow, especially the early foundation years.  Mike: Well, I have always been an entrepreneur and my last job was in 1980s where I worked for someone, but I had a carpet cleaning business and then I had a lunch wagon business, and I had some bar and restaurants that I bought, but everything I did I sold to a bank.  I had a lot of problems with the banks, so when I started MyPillow I actually spent two years inventing it and I had sold the bar that I had at the time and I ran the money completely down to nothing.   So, when I finally had the MyPillow invented I mortgaged our house to the hilt.  I had four little kids and we were all in and that’s all we had left in the world, just a few pillows and a dream. Kelly:                              You’ve started this up in northern Minnesota, is that where you are from? Mike:                              I am from far west of Minneapolis, it’s my home town.  I grew up in Chaska, Minnesota, and when I invented the pillow it took a couple years.  I actually had, like I said, I didn’t have any money left and I walked into box stores and they said, how many would you like, and they laughed at me, and I had people laughed that you are never going to get a partner on a pillow and all these different things.  And then a friend of mine finally said,  and he said, why don’t you do a kiosk?   And I said, how do you spell that?  I didn’t know what a kiosk was.  And I ended up doing the kiosk and we only sell like 80 pillows.   And one of the guys that had bought one there actually called me in January of that year and said, are you the guy that have been in this pillow from Minnesota?  And he said, this pillow changed my life.   And he said, I run a Minneapolis home and garden show, would you like a spot in there?  And that started where I did shows for seven years, home shows and fairs and any place there was people. Kelly:                              Did you man the booth yourself in the early years? Mike:                              Yeah, I did everything, made the pillows, faced a lot of it, virtually, people tried to take the company.  I had my own demons,  I was a crack cocaine addict, so I had a lot of problems, but yeah, I did the booth, I did all my own manufacturing, learnt how to sew, I worked out of a little garage, I took any phone calls.  Myself and my family, we did everything ourselves, everything, even the design on the packaging. We still do to this day.  We do everything ourselves.  Kelly: How did you get your funding…your start-up funding? Mike: Yeah, that’s when I mortgaged my house and I had money from a business I had sold a couple of years earlier but with four kids and not working at the time and just advancing the store I ended up at nothing.  So, basically I took every money I made in the show and I would roll it back in to buy product the next time or to buy raw materials and so I didn’t have any funding.  I never had. Kelly: Ownership, has that always stayed the same, since inception? Mike: Yeah, I’m the majority owner of the company.  I have had stock with my friends and employees and stock that I have given away and a couple of people that buy into it back in the day and so it is all like a big family.  Kelly: Why pillows?  How did you find, or how did you select that industry of all the things to get into?  What was it about the pillow industry? Mike: Well, I have always had problems with pillows, even when you go back from when I was 16 years old and I worked in a grocery store in Chaska, Minnesota, and one of my first pay checks I went and bought a pillow.  It was 1977, and I said if I go and buy a nice pillow maybe it will work, and it didn’t.  It was a down pillow I got at home and it didn’t work.  I couldn’t return it and, I don’t know, maybe it was my calling, but I just had problems.  All my life my pillows would go flat.  I would use my arms, headaches, neck-aches, I had all these things that I knew the pillows were the problem and I tried every pillow through all my life and nothing ever worked.  Basically, out of my own necessity, at first I am going, I want something you can move and adjust and would make it fit me rather than me trying to fit the pillow, and kept thinking to myself, well they make all different size clothes for people, how can they give us a pillow and say it’s going to work for all of us and none of them ever do.  Kelly: Which pillows or which type of pillows were you really trying to compete with? Mike: No, there was nothing out there like MyPillow.  I had a dream of the logo and I wrote the logo all over the house, MyPillow, and my daughter came upstairs, one of my daughters, in the middle of the night, she was like nine or ten years old, she said, what are you doing dad, and I said, I am going to invent  this amazing pillow. And she grabbed her water and she said, that’s truly random, and she went back downstairs. And then I just had an idea, I wanted something that you could just adjust and move.  And it wasn’t necessarily what was going to be inside it, I wanted it to be soft like down, but I wanted it to be support.  I wanted it to have everything you would ever want in a pillow.   If you ask every single person, what would you like in a pillow?  Whatever came out of their mouth, my pillow would have.  You know, I was so particular, once, you know, I tried over 94 different kinds of foams and stuff to go inside a pillow and poured stuff on a deck.  One of my sons and I, every day we get home and he would try different things like, you know, some mad scientist.  And so, it was a lot of trial and error and I would get close and then once I had it invented, I wanted it so you could wash and dry it.  In pillows traditionally, you couldn’t do that before, and I wanted it to last so I put a 10 year warranty, and then the washing and drying, adding that to the mix,  that took another two months. I would first engineer what the product should be and all the problems I had and why they didn’t work and then you just solve each problem.  So, it was kind of reverse engineering of what I wanted and say, okay, this pillow goes flat, well, let’s make it so it won’t go flat at night.  Well, this one here I want to build it wash and dry, let’s make it so you can wash and dry it.  Well, this pillow it feels soft but you can adjust it, everybody‘s shoulders are different.  So there was a lot of that went into the inventing of it. Kelly: Oh, kind of traditional things that many people do, kind of the business school activities, you look at your market; look at your competitors; look at the price points; look at demand; how are you going to fill that, you kind of said, to hell with all that, I’m not going to do that.  Did you do any analytics, before you got neck deep into this on pricing and market demand or anything like that? Mike: I did absolutely no analytics.  I just drop my life, I thought, wow, am I the only one out there that has problems with pillows and sleep?  I started asking around and it wasn’t just me.  Every single person had the same problem.  So many people at that time thought, oh that’s your bed, or I’ll just go and cotch some place and just sit, oh, I just sleep, I guess when we get older we just, you know, our sleep is worse.  And we have insomnia and all these problems associated with sleep.  I didn’t buy that from many and I didn’t believe this.  So, my philosophy was, you solve these problems, and if I can do that for myself and then these other casting out I gave some to other people to try and it solved everybody’s sleep problems.   So, I’m going, if you do that and then the price points and stuff came later.   And I actually got myself in a lot of trouble, selling at a lower price at one time and then with my marketing, if you want to talk about that in a minute, I just wanted to help people get great sleep and then I didn’t know anything about indirect cost, direct costs and all these other things at the time. Kelly: Interesting.  So, you claim that they are made in Minnesota, where do you get all your materials?  Mike: My patent form is made in Wisconsin.  I have never changed off of that, that is the formula that they tried to duplicate in other places but they can’t.  So, like for my neighboring state of Wisconsin, the foam gets poured there, I get the stuff, I run it through my machine then I patent the runs, makes the different sizes.  There are three different sizes that all go into the pillow.  One is the size of a quarter, one is the size of a dime and one is the size of down and then they are all mixed together proportionally.   And these other machines, the fabric got cotton grown here and California and the Carolinas.  We do all our own cutting, sewing. We have machines that fill.  I have over 1500 employees now.  So, we do everything in Minnesota.   I have two factories in Chaska, my neighboring town.  I guess we have about 350,000 square feet now of factory and then I have, right outside as I am sitting here, my own call center because I...when I did shows for seven years I knew at those shows what kept me going is people kept coming up and telling other people that already had the pillow then, this is the most amazing product I have ever used, not pillow, product.  And I am getting all this amazing feedback and it just kept me going that was so powerful.  I like helping people.   Then I said, you know what, if nobody will take my pillow I am going to bring it to the people.  So, I did my own infomercial in the summer of 2011 and it aired...it was a real audience, just me and a friend of mine.  I had never been on TV before, and it launched October 7, 2011 and I had five employees and 40 days later I had 500 employees.  Kelly: Alright, how much did that infomercial cost you, do you recall? Mike: To produce it was $150,000 or $200,000, something like that, but I was told I needed movie stars and all this and I said, why, I think people are tired, they just want honesty and they are tired of seeing infomercials that claim this and do this, and like I said, it was a real audience and then I just told my friends and family.  I didn’t have any money.   I said, guys if we all put in money on this we are going to be the biggest infomercial ever and they all believed me and I didn’t know that most infomercials fail in this country.   And by December 26 of 2011 we are the number one infomercial in the world.  Kelly: How many people did you get in on that? Mike: It was just, I don’t know, maybe 20 of us, just friends and family.  We all just threw in      everything we could into just get it going.  And over the next six months we took in tens of millions of dollars, because every ad that went out, you know, we are making the pillows, it was a miracle we all got out in time.  But the bigger companies didn’t believe me that I was going to get that big that quick.  So, we didn’t get good pricing on raw materials.  We were taken advantage of. I learned so much from the spring of 2012 because my advertising dollars were spent on audiences that weren’t my audience and I didn’t know they were bad at the time.  It’s like batting a 100 hitter instead of batting all your 300 hitters.  We took in all those tens of millions and we were in the hole by June.  And I’m going, what happened here?  And when you look at nowadays the stuff I learn, and every ad you now you ever see for My Pillow I view that as my only business, that particular ad at that moment in time.    So, if that doesn’t make its number in direct sales, I never re-up it again.   And I do that for every ad you ever see.  I don’t do branding, I get direct marketing or I am getting direct sales from that ad and then, obviously, you get the branding comes secondary.  I know where every ad dollar, I know my audience so well, I know my demographics, I know who is buying.   You think everybody needs a pillow but everybody doesn’t buy a pillow.  The millennials are one group that’s really hard to crack. I do the same thing for my customers.  I view every customer like it’s my only customer.  That has been the success of MyPillow because I could spend, at $1.5 million a week on advertising, easy.  And if I had an ad that went out and it didn’t make us money I will never do it again.  If every company in this country knew where to spend their advertising dollar and knew they were actually getting a good return and didn’t advertise the thing that didn’t work, product cost in this country would go way down because you wouldn’t have all that wasted advertising out there. Kelly: So, in 2016, the election year, you spent quite a bit of money on advertising at Fox and CNN and I’m sure many, many others during that period, how much did you spend in 2016? Mike: By the way, it’s not just CNN and Fox, we do 18,000 radio reads a week. Radio is one of our biggest venues too.  In TV, we do hundreds of stations across the country, but we probably spend 1.5 million a week times 52.  Kelly: In TV and radio or just TV? Mike: That’s probably just TV. Kelly: So that’s the biggest...well, that’s one of the biggest part of your budget, because you go direct, you are not doing anything wholesale, right? Mike: No.  While we do...You know, we have some box stores, we do a little bit of wholesaling but we are in some stores across the country too but that’s not our...Our biggest thing is direct to the consumer.  That’s our biggest part of our business and I love that part.  I love being on TV, and we do our own advertisement.   It’s really easy in radio because the radio hosts, you get them and their family believing in the product and nothing better to sell if you are a radio host, if you believe in the product you are selling, that it’s helping you, most likely it’s going to help someone else. Kelly: I heard that Dana Perino on Fox news one time singing your jingle and I thought, man, that’s got to be terrific for you.  Mike: [Laughs] I was just at the White House for the Made in America, I got to meet, last summer, Mr. Trump, the President he called me to meet him before he was elected and it was all about meeting and talking about, wow, Mike, your company is everything I want in this country, and he goes, you have all these employees, and we talked about the inner cities and stuff.  And here again and I get invited, a year later, to the White House for...and all these other manufacturers were there and what an amazing time.  We talked about how it’s so important that this stuff be made here, and it’s quite an honor to be there for that. Kelly: I know you attended the Trump rally and certainly you are a big supporter of Trump, that of course can be politically toxic these days. Has it helped or hurt your business? Mike: Right, well, like I said, for me, it has been an easy decision because of that meeting I had with him last summer.  I wasn’t political before that and then when I met him I was all in.  That he would be the best President ever, I still stand by that.  I know where his heart is.  I know what he is going to do.  It’s too bad he gets attacked all the time.  I actually went to the third debate. I was in the spin room. I went all in.  I spoke at the Minnesota rally about two days before the election when he flew in here to talk.  So, I just know this was what I was supposed to do and we let the chips fall where they fell and it hasn’t hurt us.  If someone doesn’t want to buy a pillow, because I met a guy that I know is going to help this country and I’m aligned with, I am going to do it with the stuff.  I am doing with the inner cities and my foundation, we align perfectly and I have access now to be able to do that, to help all these things.  I have been very blessed with this platform to help people, and that aligns with the President, so would I change anything, absolutely not.  Will I ever change what I do?  No! Kelly: Well, that’s just great, Mike.  It’s quite a success story and I think that is terrific.  Do you have any of your favorite quotes or sayings or any beliefs you want to share with us that kind of helped you get through your challenging years? Mike: I am going to say a couple things but one thing about manufacturing here in the U.S.  I want to tell people, this is when I was just at the White House, this got brought up, anyone that thinks they are saving a bunch of money by going over and getting it made overseas if you are a small entrepreneur, and you have got to realize, your money is tied up for three months. Those products are going to take two months, six to eight weeks to get here.  Now, if your market changes, let’s say you get too big, they are not here in time, you end up air shipping them in, or let’s say, by the time it gets here your markets changed and now you are sitting on all that inventory or if it’s not the quality you expected, you have that, it becomes quite costly.  So, there are so many things that I don’t think people realize.  And then if you get in trouble what happens then is big companies will come in and try and gobble you up and give you pennies on a dollar because they have the money to do it where you didn’t have that money to do that.  So that was one of the things with made in the U.S.A.  And I firmly believe that people nowadays, where we are at, that I would say by telling people, you are made here, I think that’s at least a 20 percent lift in sales, that’s just my opinion.  When you talk about perseverance, and as an entrepreneur, a business owner, I’ll say I faced a lot of adversity I am quite a story of hope, from a crack cocaine addict to where I am at now.  I quit everything by the grace of God, January 16, 2009, everything overnight, and I’m doing so much nationally with all these different places, like your Teen Challenges, Union Gospel, Salvation Army, all these places to help people in that area.  But as far as entrepreneurship, if you don’t believe in your own product, it has to start there and it has to start, you know, not giving up.  Still if something happens, like I see it happens all the time, because I get approached by entrepreneurs and inventors and everything, all the time, they’ll get one little obstacle, number one, out of fear they won’t get it out there, they are afraid to jump in, out of fear. What if I fail? What if I fail?  And that’s one thing that will block them from even starting.   But then when they do come across something that happens to them, that’s a little adversity they are facing, but might seem devastating at the time, you look back on that and you’re going, wow, that had to happen.  I mean, I can look back at My Pillow and so many different things happened and I look back and I go, wow, that had to happen at the time.  And you come through it and you learn from it and you look back later on and you go, wow, that had to happen. That wasn’t so bad.  That was meant to be. Kelly: Well, Mike, I hope I get a chance to meet you some time. It sounds like you are just one heck of a business executive, but more importantly a terrific human being.  I appreciate your time on this podcast and I encourage all our listeners to go out and order one or two pillows from MyPillow.com. And tell them BankBosun sent you…and they won’t know what the heck you are talking about. Mike, I wish you the best of luck and success going forward.  Thank you. Mike: Thanks a lot. Mike: Bye Outro: 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. 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.

Title:  Understanding Hidden Risks in Insurance Companies and Impact on BOLI Asset. Prepare yourself for your bank owned life insurance (BOLI) annual review with a better understanding of insurance company "General Account" portfolio hidden risks.  Attendee and Guest: Kelly Coughlin, CEO, BankBosun; David Merkel, CEO, Aleph Investments, CFA and Actuary                                        Date:         July 10, 2017 There are only two things as complicated as insurance accounting. And I have no idea what they are. Andrew Tobias, The Invisible Bankers Intro: Kelly Coughlin is a CPA and 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: Greetings, this is Kelly Coughlin, CPA, CEO and program host of BankBosun, helping C-Suite executives manage risk and discover reward in a sea of threats and opportunities.  One of the classic risk management strategies is to use insurance to manage the risk of loss in many assets, whether it be a home, a car, a health, life, a revenue stream, a cyber hack, offloading the risk through a third party who assumes that risk and pay a fee, a premium, to do that has been employed for hundreds of years.  The first case of life insurance actually began in Philadelphia, providing a death benefit to the surviving widows of poor Presbyterian ministers in the 18th century.  Today, life insurance is utilized by banks to manage the loss of key management, and as an alternative asset class to municipal bonds and mortgage backed securities.  It’s called Bank-Owned Life Insurance or BOLI and it’s used by over 3600 banks that hold over $160 billion in assets.   As part of their annual report to the Board, and frequently regulators, the consultant involved in placing the BOLI asset with the bank with all the financial update on the insurance company or companies that hold the asset.  And to get a famous plug but a fully disclosed plug I do independent   consulting work with Equias Alliance, one of the best in the business for placing and monitoring the BOLI market.  Most of the BOLI assets are placed in the general account portfolio of the bank which means the bank’s assets are held on the balance sheet of the insurance company, somewhat like a loan to the insurance company.  And like any loan to a company, you want to look at the ability of the borrower to pay it back along with the expected interests.  So one of the things we do is look at the value of the insurance company.  We frequently look to third party rating agencies to provide some sort of analyses on this, but I thought it would be interesting to have someone that has actually done this work as part of their career. David Merkel, CEO and CFA of Aleph Investments who has a BA and a MA in political economy from the prestigious Johns Hopkins University, was a senior analyst with Hovde Capital, a hedge fund, and he was chief economist and director of research for Finacorp.  And David is an inactive fellow in the society of Actuaries.  I have David on the phone, who is going to talk to us about valuation of life insurance companies. Kelly:                            David, are you on the line there? David:                           I am here, okay. Kelly:                            Thank you for joining us. David:                           Happy to join you. Kelly:                           Give us a little bit of personal background. David:                           Okay, I’m based in Ellicott City, Maryland, which is just outside Baltimore.  My wife and I decided to try for something big and we were able to have three children and we adopted five more.  The kids have a lot of fun, in my opinion.  It has had its challenges, it has had its successes and failures but in general I loved doing it. Kelly:                            Great, congratulations on that.  Life insurance companies, at their core, are basically investment companies.   Is that a fair statement? David:                           Yes, and that’s become more true as the years have gone along.  When I was a young actuary, the society of actuaries syllabus tended to work on a level saying, analyze the policies that you write. And they gave us all sorts of ways to do that, but they didn’t talk much about investments.  But the company I worked for, initially, Pacific Standard, which was the largest consultancy of the 1980s.  And since you have never heard of Pacific Standards, you know that the 1980s were pretty kind to life insurers that grew up a part of Junk bonds of Michael Milken. The game changed and since that time virtually every insurance company that has failed has failed because of their asset policy.  I think there has been a grand total of one that has failed for other reasons, and make that two, AIG and its derivative counter parties, that was another thing.  But a lot of the failures there was apt an investing policy too.   I actually wrote a paper that was picked up by the special inspector general, the TARP on AIG to point out the aspects of the failure that was due to the securities lending agreements inside the life insurance companies.   I spoke?? to Wall Street Journal and the New York Times and it had actually even got read by Warren Buffet who supposedly thought it was a good paper. But assets are the main factor of what makes insurance companies fail, that’s the long and short of it.  That is why we should analyze it more. Kelly:                            It seems to me, insurance companies are more like mutual funds so I would kind of like to start with that as kind of the baseline. Other than not being a completely separate legal entity, which a mutual fund is, how does a general asset portfolio resemble or differ from a mutual fund other than the fact that an insurance company has a mortality risk expense that’s kind of built into that?  If you take the mortality risk expense out of there, doesn’t it resemble a mutual fund in that sense? David:                           The main difference between a mutual fund and an insurance company in the way that you invest with them, because I have invested for both of them, is that with a mutual fund, you don’t have a balance sheet.  Your mutual fund holders can come and go as they please and everything is valued at par.  With a life insurance company, you have liabilities that are relatively sticky, at least many of them are sticky.   And one of the key aspects of trying to ascertain the riskiness of a life insurance company is in understanding how much of the portfolio of liabilities can run, i.e. there is no surrender charge, and there aren’t that many consequences for leaving and measure that against how much do you have in assets that can be rapidly liquidated.   Because, again, it is risk based liquidity that is really the thing that you try to look at, in terms of the asset portfolio, to understand what is the true risk of a run on the company, and it does vary from company to company. Kelly:                            And we’re talking about bank owned life insurance general asset portfolios, what are the types of liabilities that should cause concern, or at least tension, of a banker who is holding a GA portfolio. David:                           Yeah, there are some liabilities that life insurers write that are not under-writable.  In some cases, the insured knows more than the insurance company.  The best recent example of that is long term care, in the sense that long term care policies have consistently lost money for insurance companies.  And so you have to be weary of a company that writes too much long term care. I mean, generally if even as one of the bigger writers has gotten out of it that life is left writing business, that’s been one really ugly liability. Kelly:                            Where can they find that on the balance sheet? David:                           You would have to actually begin looking at the statutory statements to find out how much is long term care. Kelly:                            There has got to be an asset and a corresponding liability related to that, correct? David:                           It’s going to be, I guess, it’s another thing that’s written in the General Account.  I know that the rating agencies will write up and describe how much of the business that a company has would be in long term care, if it is a material amount.  Things that are a little more fuzzy these days though are the things where we don’t have either good ways of hedging or good ways of actuarially coming up with reserves.  And those things are things like Universal Life, Secondary Guarantees, Term Life policies that are ultra long, that might go over the whole of someone’s life, that end up being lapse supported, and the reserving for those just does not work.  We don’t have good models for that. Kelly:                            Now, you are listing out the liabilities that should get attention, right, long term care, universal life with secondary guarantees? David:                          I should mention that variable life and annuities that have secondary guarantees as well because there is no good way to hedge those and if there is no good way to hedge them there is no good way to price them either. There is no good actuarial basis that you can say, this is what it is worth and this is how we can invest to make sure that we are always going to have enough to pay our claims. That is probably the biggest single thing in the life insurance industry today.   If it stays small, I guess you don’t have to worry much but if it becomes a really big part of an insurance company, the secondary guarantees, then you have to begin to ask questions. And there are examples of companies that when they realize that they sold the secondary guarantee on an annuity, just as an example, a variable annuity, where it has some sort of income benefit, accumulation benefit, death benefit or withdrawal benefit.  When Cigna was originally writing the reinsurance for all the people who were doing the guaranteed minimum death benefits in the 90s, Cigna eventually ended up taking something like a $4 billion dollar hit because they did not understand what they were doing and how open ended the claims would be.  With the Hartford, they were one of the biggest writers of these guarantees and had to scale it back dramatically.  They were going to people to buy out the liabilities because as they began to try to estimate what they might be worth because there is no actual way to truly know what they are worth.  They were paying 110, 120, and in some cases 130 percent of the contract value to get out.  And what I told the people who approach me, I said, the odds are, they are only giving you about half the premium you deserve.  And so long term guarantees that involve investment risks mixed with other actuarial risks like debt or longevity are impossible to price.  There is no good mathematical way to do it and all the reserving methods that are done on a statutory or a GAAP basis are inadequate.  This is not a happy thing to think about but...so what I say to people, after I say this, is just make sure it’s not a large part of the General Account of the company. Kelly:                           What’s a large part, 10 percent? David:                           I would simply say, make sure that your company is below average with respect to it, versus the whole industry, because you don’t want to be in one of the companies, that is one of the early ones to blow up on something like those. Kelly:                            Do you have any bench mark numbers on those three categories combined or separately what a kind of average is? David:                           And one thing you have to realize, one of the secondary guarantees is that the actual contract value of the accumulated value of the variable life and variable annuities and variable universal life is in the Separate Account, however, all the secondary guarantees are in the General Account.  This is one case where you have to really consider that the Separate Account do have an impact on the General Account, the degree that they have written business that has secondary guarantees.  Those are the types of liabilities that make me suspicious of a company but until the stock market falls hard most of these aren’t going to have any punch but if it’s down 40 or 50 percent and it stays there for a while, like after the great depression, you will once again find that the life insurance companies will have harder times.  The ones that were launching variable business with the secondary guarantees.  That’s the biggest one, and maybe other secondary guarantees, the little interest rate guarantees, are relatively small.  The ones with the equity components are the big ones.  For the most part, if you get away from those, the ordinary life insurance and annuities that are written by insurance companies are easy liabilities to hedge and value.  That should be 80 to 90 percent of the total liabilities of the General Account.  But again, it’s a good question to ask and see who your consultants are.    Kelly:                            In your mind, how did we go about determining whether a life insurance management team is (a) competent and (b) conservative? David:                          Okay, well starting with competent, the main thing is that they try to manage risk on the front end.  And the example that I give is, some companies that write disability business will do significant underwriting on the front end before they write a policy but will not for every claim.  But then the others who will write every policy and then basically force people, sue them to get the payment. But the good companies that are competent do the risk management on the front end.  And that applies to every aspect of writing a policy, whether it’s their investment policy, all the things that go into that.  They are careful in choosing the lines of business that they go into.  They are disciplined when it comes to doing mergers and acquisitions.  The really good companies will do small acquisitions and they will do it to gain competencies, synergies, new markets of distribution methods rather than doing big scale acquisitions.  Large scale acquisitions have a large probability of failure and tend to be far more expensive than you might think when it comes to the total integration of it.  Competent managements tend to be good in using their excess capital whether it’s returning it to shareholders in a flow and disciplined way through dividends and buy-backs or to mutual policy holders through the dividend scale.  Because, again, these places don’t just exist for themselves, they do have clients that they have to satisfy who are owners, whether mutual or stock.  They will be careful in the way that they do send money back and how they use free cash for growth.  Now, as for conservatives, here are a couple things that I think about.  They put profits ahead of growth and they are willing to grow more slowly when conditions are bad.  They will try to grow free surplus so that they have more options in front of them rather than all those who consume their free surplus and be running as tightly as they can against the risk based capital levels.  Conservative management, when you hear that they have adjustments they tend to be positive non-recurring adjustments.  They tend to be disciplined in reserving and in their credit analyses.  The Companies that are taking a lot of risk in their assets are the ones that are always constraining that liquidity during their phase of the cycle.  One other thing about the conservative management team is that even during the bull phase of the cycle they tend to grow a little slower than other companies.  They pick their response and they are looking for profitable growth ahead of just growing to gain market share.  They are not controlled by their marketers, they are controlled by businessmen Kelly:                            What types of investments do these insurance portfolio managers invest in that are different from, say, a fixed income mutual fund?  Do they tend to buy a lot of private securities, is that it? Is that accurate? David:                           They do have more private securities.  And private securities are not necessarily worst and often they’ll have better covenant of protection.  It depends what they want to do. So, for example, some will have their own mortgage origination arms.  Some will engage in doing credit tenant leases.  Those aren’t bad asset classes and those can be done quite conservatively.  It’s a question of what your stress on credit quality is. One of the questions that I pose is, where do they look for returns greater than triple B corporate bonds?  You take a look at a life insurance company’s portfolio, most of its public corporate and public mortgage backed and things like that, and that’s enough to get you to a certain level then maybe the last 10 percent of the portfolio has to be invest in somewhere.  And there might be common stocks, and a lot of it will be in junk bonds, depending upon the company, and some will originate their own assets.  The most traditional one is commercial mortgages; do you have a good credit discipline or not?   And that, at least, you can track overtime because your mortgage losses are disclosed in the statutory statements of the life insurance company.  Those are tracked pretty carefully, ever since the mortgage defaults of the 1990s.  The question I would pose is, every company tries to earn above average returns at some point, where are they doing it and why do they think they have expertise there?  Since the insurance industry actually came through the crises better than the banks you might want to ask how did they do   1999 -2003.  That was a much worst period. Kelly:                            Do insurance companies tend to lump all of their general asset portfolios into one consolidated portfolio or do they segregate it by the underlying product type that brought in the assets? David:                           Okay, we typically notionally do that.  It will be one big account, as far as the investment department will be doing to manage, however, the actuaries will come along and say, “These assets provide the income for this segment of liabilities.  These assets provide the assets for this segment of liabilities.” And then they will try to match and then they will go back to the investment department and say, Okay, here is what we need for each individual line of business and here is what we have.  Here are the tweaks we need in order to have something that’s good for the company as a whole in order to match up against our models for what assets are needed for each liability stream. Kelly:                            If one of those, let’s just call them products, sub accounts, over-performed, let’s say the BOLI over-performed and then the universal life secured guaranteed underperformed, will they transfer some returns from the BOLI over to the universal life to lend them, so consequently, BOLI gives up its extra juice it got, how would that work? David:                          As I said, the segments are notional, they are just one big general account and it’s the way that the actuaries then try to figure out, what is the true profitability of each line.  It is something that is an internal calculation but the credit results are going to be spread across that general account portfolio.  They will probably have the same credit quality across each of the segments but what vary is what the length of the assets purchased for each notional segment. Kelly:                            The other long-term risk that one needs to think about? David:                           These long-term risks that is not getting talked about enough is what happens if interest rates stay low.  Because what’s happening at many insurance companies is that they bought long bonds and they thought it would be good enough to hedge all that they were doing.  Many of the annuities that they wrote in the 1980s, ‘90s, maybe even into the early 2000s, they carried long term guarantees that were sometimes as high as 6 percent per year forever.  To have a stream like that for the remaining amount of annuities or life insurance is pretty considerable down at those guarantee rates and right now long bonds, long corporates, it’s pretty difficult on a conservative portfolio when you strip off the expenses for a life insurance company to have with things that can meet those long term guarantees.  And it gets a little worst every year as bonds mature on the life insurance portfolios.  That’s the biggest challenge that virtually every life insurance companies are going through right now.  Because if you look at the expected flow of liability cash flows versus the expectable on asset cash flows, even if you have the rough interest rate sensitivity of the match, you are going to have more liability flows then more asset flows and then more liability flows. As these portfolios age, the real risks come if interest rates stay low.  The optimal scenario for life insurers, that should it ever happen, is that interest rates rise slowly.    If interest rates rise slowly, life insurers do wonderfully.  That would be the ideal scenario for virtually every life insurer.  When they do their interest rate test for their asset level liability management, typically these days, the worst scenario is, interest rates drop and stay down.  And the best one is, interest rates slowly rise. Kelly:                            Any quick dirty simple mathematic measures one can look at to determine long term credit quality of a life insurance company? David:                           Yeah, one thing, not mathematical, just to start is that mutual companies tend to think longer term and tend not to make the best of what that company make.  They tend to be better off through really long-term obligations, but do they maintain a high ratio of surplus to risk based capital?  Now if you are looking for where you can find that, if you look in the blue book, that is the annual statement from the statutory statements of the life insurance companies.  Those are published on the five-year historical pages.   Aside from that there is no place publicly that they are published, unless you go to the rating agencies.  Now, rating agencies aren’t horrible, in fact, they are usually quite good.  They failed in the early 1990s regarding guaranteed investment contracts.  When the rating agencies tend to fail over time is when they deal with new things.  Once something has been through a failure cycle the rating agencies are pretty good at analyzing.  So, when you think of them on corporate credit they are usually pretty good but they were horrible though with structured corporate credit because they have never been through that. So when the financial crises they got floored.  Other things to look for, look for a slow rate of growth over time.  You don’t want them shrinking.  You don’t want them staying flat but you don’t want them running really quickly.  Conservative management teams grow slowly and they are happy enough with it and they try to get more profitability out of what they are doing.  Also, see if they lose money more rarely on a GAAP basis, they should make money in bad times.  That’s the sign of a conservative management team.   And if they have surprises they should be positive ones.  You want to see that they are better than their competitors. Over time, because conditions change I don’t give an absolute set of numbers for this, but you want them to be better than the average of their industry in these areas.  But the one thing that I learned as an actuary who had to be at both ends for credit analyst and a portfolio manager for equities where I was analyzing insurance companies, it was that the most important things though, aside from a few basic mathematical calculations, is to try to understand the management team.  And again, are they conservative, are they competent?  That would take you a lot further, particularly for long run judgments.   And since you are thinking long run and since we are talking life policies, you should ask whether they have a culture that will maintain itself after the existing management team.  Do they tend to reproduce managers that continue to be competent and conservative?  I think often that the mutual companies tend to be better at that because they have no one else to report to.  They don’t have to put out quarterly earnings, except to the state regulators.  And the companies that blew up, often life insurance companies often last 30-40 years, were the rapid growers.  They had aggressive management teams, I worked for such companies, AIG was one of those.  Always grow grow grow and take chances to do it, you know, you would never hear about the little dirty secrets inside most companies like AIG, just as an example, but in the early 90s my boss and I found five reserving errors that were greater than $100M each, and one was a billion, and these never came through the gap statements because AIG found a way to basically find sufficiency in their assets to cover it over.  In general, the companies that are better managed tend to be moderate growers.  They are trying to grow but they are not trying to grow faster than anyone else.     Kelly:                            You mentioned leverage, talk about that. David:                          This comes in two forms.  The more common form is if you are a stock company you are borrowing money at your holding company.  The more that a company borrows at its holding company level, in general, the more aggressive they are going to be as a management team.  The lesser way is if you are writing guaranteed investment contracts and other types of short term business.  To the degree that you are doing that, that’s a form of leverage because that means that you are...and especially if you are writing anything like a floating rate contract that can be terminated within, say, seven days, those are the sort of things that if they get written you have to be really good at managing your liquidity as a company because you have big payouts that are happening in the short run.  With most other life insurance or annuity portfolio that doesn’t happen. Kelly:                            Great.  The underwriting process, you distinguish between initial front end, heavy duty, due diligence and acceptance versus accept anybody but then be real tight with the payouts, how can one distinguish between those two? David:                           Basically, it’s by reputation or you can...if you are looking for something that’s actual data, in the annual statement of every life insurance company there is a schedule as per denied claims.   A good company has relatively few denied claims. It is the companies that have pages and pages of denied claims that you have to go, “what are these guys doing?” Kelly:                            Right.  Well, David that’s all I have.  I appreciate your time, and do you have one of your favorite quotes that you operate by, your business life or personal life? David:                           Here we go. Kelly:                            Say it slowly. David:                          It is appointed to men once to die and after that the judgment, so live your life in the sight of God and not because men are looking over your shoulder. Kelly:                            Oh, very good that’s a nice one.   David, that’s perfect, thank you very much for your time. Outro: 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. 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.

Topic: Can Banks Earn Revenues Helping Customers Reduce Property Taxes?? Date: May 24, 2017 Attendee and Guest: Kelly Coughlin, CEO, BankBosun; Jason Ziccarelli, CEO, StrydeSolutions, Intro: Kelly Coughlin is a CPA and 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 Coughlin: Greetings. This is Kelly Coughlin, CEO of Bank Bosun, helping community banks with risk, regulation, and revenue creation. Community banks face enormous threats today. And I put these threats into three primary categories. I call them the three R's. Risk, regulation, and revenue. I've spent much of my 25-year career participating in the first two R's, risk and regulation. I worked for PWC and their internal controls and risk consulting area in the ‘90s. I was director of risk management for a number of subsidiaries of Lloyd’s Bank out of London in Minneapolis, and this included a trust company, mutual funds, broker dealer, investment management, and dealing with regulators in the US in the UK. But today I'm focused on the third R - Revenue. While banks face enormous threats and challenges from a risk management and regulatory perspective, the biggest threat they face is on the revenue side of the balance sheet. Rather, the income statement. Banks generate revenues and profits from two primary categories. Net interest income and non-interest income. The net interest margin has dropped from nearly 5% in the mid-90s to less than 3% in 2015. I don't need to tell you bankers that these fees are being compressed. Add to this compression the unfair competitive advantage that some non-bank financial companies get - credit unions and Internet companies. Every day I see expensive ads from Lending Tree and Quicken. Well, this just adds to the revenue threat. I am committed to helping community bank executives manage this. We set up a management consulting firm, BankBosun, with this singular purpose. There really is a two-pronged approach. One, get more market share of the deposit and credit business. And all the related revenues you can get from that without getting in the jam that Wells Fargo did. Those of you that are familiar with my vision and mantra is using audio messaging, especially locally based syndicated podcast programs, is the most effective and efficient way to get your message out. The second prong is generating more non-interest other income, and you can do this two ways. Generate more revenues from existing business lines or generate more revenues from new business lines. Certainly, generating more fee income from depository banking is a help. Those of you that have wealth management and trust know this is a big bonus to your revenues and profits, and capturing greater market share certainly will help with those business lines. Today’s interview is with Jason Ziccarelli, CEO of Stryde Solutions. In full disclosure, I've not met Jason personally, but I've talked to a number of companies and individuals that are using his solutions to generate fee income. Some of what Stryde does might not fit into the banking business model, but some of it will. I don’t think much of what he does competes with banks. Rather, it complements what banks do, and more importantly it allows the banker to get a few more crumbs from the client’s cake. I like the Tom Wolfe description used in describing his job as a securities trader. “We simply take a few more crumbs on the plates of our customers.” Stryde has business lines that sound like this: Credit card merchant audit. Work comp audit. Waste and recycling audit. Cost segregation. Property tax mitigation. WOTC, welfare work tax credit. Now, I'm not sure bankers really want to get into reviewing whether a company recycles and how much waste they generate. I'm just speculating on that, but helping some of their merchant clients that accept credit cards reduce their expenses and earn a fee to help without taking on any overhead to do this. Well, I'm speculating again. This might be something to talk about. So rather than to speculate further, I've asked Jason Ziccarelli to get online to talk about some of this. Jason, are you there? Jason Ziccarelli: I am, yes sir. Kelly Coughlin: How are you today, Jason? Jason Ziccarelli: I am well, thank you. Kelly Coughlin: Great. Jason, where are you right now? Where do you live? Where do you work? Jason Ziccarelli: I'm in Buffalo, New York right now. We live in Buffalo, New York. I'm kind of back and forth between our Buffalo and Fenton offices in Fenton, Michigan. So, I'll spend about one in three weeks in Fenton and the remainder of the time in Buffalo. Then on occasion, we get up to our vacation home in Alaska. Kelly Coughlin: Boy, you like the northern latitudes, don't you? Jason Ziccarelli: Well, when you're as round as I am, you like it where it's cold here. You get hot fast. Kelly Coughlin: That's great. Well, let's get right into it. Jason, you've got a bunch of different business lines. What is your mission and vision for Stryde, and is there a common value proposition for all of these different, somewhat unrelated business lines that you have? Jason Ziccarelli: Well there is, and the underlying concept or idea is simply opportunity. We work with lots of different individuals in a lot of professional backgrounds. They could be financial professionals. You mentioned of course the focus of your show, the banking world, and commercial realtors, business brokers, business consultants, legal professionals, tax professionals. They all see value in what we do and the opportunity to differentiate both they themselves from their competition and the services then that they're bringing to the table. Opportunity is the underlying idea behind everything that we do. When you see how we combine everything, what you'll see is the most comprehensive, synchronous service that exists in the business consulting community today. Kelly Coughlin: So, they all seem to be somewhat underserved service lines I should say. Credit card merchant audit, waste and recycling audit, cost segregation. I've been in consulting for better part of 20-plus years. I don't think any of us ever looked at these business lines. Are these kind of underserved, hidden sources of revenue for consultants? Jason Ziccarelli: Well, they are, and beyond a shadow of a doubt. In fact, it's not just the consultants that are missing the boat, of course. Then, it's the consumers that the consultants represent or work with that are missing the opportunity. If we look at the various categories, you mentioned a few of them. Let's talk about the merchant audit. I think that sometimes at first blush, folks can get confused and think that what we're going to do is come in and identify savings opportunity and change vendors. We're not a vendor. We don't change vendors. We don't associate with vendors. We are true business consultants and auditors. What we're going to do is, we're going to go in and do an 11-point, proprietary audit on the merchant processor that's being used and the fees that are being applied. We are almost universally darn near 100% of the time going to find errors, inconsistencies and even abuses as identified by the federal government approximately six years ago when they kicked out their last study on this topic and suggested that somewhere between $60 and $80 billion a year are erroneously taken from business owners by their merchant processors. We go after that. We get them their money back, and when we're successful as we are 100% of the time to date after 16 years of doing this, when we're successful we keep a percentage of our success, and that is exactly how we're paid in each and every platform. When you look at applicability and you reference an underserved market, we can go topic by topic and point out that in a work comp audit, we find opportunities 72% of the time. If we look at cost seg studies, these for example, less than 8% of all businesses out there that can engage in a cost seg study have actually taken advantage of it. R&D is less than six percent. It is absolutely an under-served market, one that we developed and exploded as a business consulting firm and have been servicing with the highest level of success, again, for the last 16 years. Kelly Coughlin: Okay. I want to dig into that a little deeper. Or as the media likes to say, I want to unpack that somewhat here. Let's make sure we're clear with our terms here. I'm a CPA, so I'm always sensitive to the use of the term audit. You're not doing an external accounting type audit. You're doing more or less an internal audit on behalf of the company, correct? Jason Ziccarelli: Yes sir, that's correct. We're were nonintrusive, non-disruptive in nature. The audits that we do tie up very, very little of the business owners time, that or of their staff or other associated professionals such as their tax firm. We're not looking to supplant or replace or usurp any of their current representation. We're going to work in conjunction with the representation. We're just going to do what they don't do. When we talk about opportunity, what it comes down to is this. Every single business owner in America, and there's 28 million privately held businesses in this country before we talk about publicly traded and Fortune 500 and so on and so forth. Twenty-eight million privately held businesses in America, and all the folks out there competing with one another to sell product or to do this or that. The one thing that every one of those business owners are after and for which there is little to no competition, is Refined Profit. Refined operational cost, tax mitigation, which then result in refined or enhanced profits. That's exactly what we bring them, and we do it on our dollar at no risk to them through our contingency based model. Kelly Coughlin: You used the term refined profit. Explain that a little better. Jason Ziccarelli: When we look at the businesses that are out there today, there's only a couple of ways to make more money. One way, of course, is to try to grow, and there is risk associated with that. There's downtime, there's infrastructural cost, there's all sorts of things that get in the way of that. Again, there's a substantial degree of risk. The other way to make more money is to refine costs. Now, there can be risks associated with that because sometimes the way we refine costs are layoffs and things of that nature. With our program, we're able to refine costs, mitigate taxes, accomplish all of that in that non-risk based scenario as a result of our contingency-based fee structure. One, we're not disrupting anything. Two, we're not changing the business model or business practices. Three, what we do in being non-disruptive, non-changing of vendors affords us the opportunity to provide the benefit at no risk to them. Kelly Coughlin: Got it. You threw out the term 72% when you guys do an internal audit of a work comp deal. Seventy-two percent have some money coming back to that. Let's say we've got a bank with 1,000 clients. Lend them some money, they do some traditional depository traditional banking services. How would a bank work with Stryde? I think I've seen some video that shows the primary way one of your customers works with you is, you have an app where many of the business lines are on this app, and the banker kind of answers a handful of questions on the app and basically, this qualifies the client as a good candidate for one or more of these services. Then, your team takes it from there. So, the bank doesn't really have to staff up for this. Is that a fair statement? Jason Ziccarelli: Oh, absolutely. It's a very accurate statement. Our platform is app centric. When we look at that, it's all based and built around our app which is our proprietary software. We built that in-house. It's not a modification or a white label of another system. We built it based on our years of experience and doing what we do. There's hundreds of thousands of in-house studies that went into the algorithm tied into that, and also in real time ties in with federal state and regional tax databases. It is a real time responsive interactive tool. There's a lot of stuff that goes into it. I won't bore you to death with that. Fundamentally, what we'll do is, we'll work with the bank to educate them solely on the application and use of the app. The app is a very, very simple tool to use. In fact, it was it was built with the idea that it had to be so simple that a child could run it. It actually is built such that a child can run it. You do not need to be an expert or even have moderate experience in the various services that the app represents to be able to run the app and to do so professionally. That's the key to all of it, to be able to do so professionally. What the app does, it uncovers various opportunities relative to the dynamics of the business and the activities that they're engaged in. It walks through what the opportunities look like or what the benefits could be to that business by engaging us, then moves into a discovery call option where they have the opportunity to work with our staff. In doing that, they can schedule real time right on the app. What the app does is, it looks at based on the answers to the questions, it looks at everything that that client will qualify for. It then looks to all of our in-office experts that would be appropriate to put on that call to address any potential questions, overlays all their calendars in real time and issues times for which all of those individuals will be available. So, at the click of a button. There's no multi-calendar coordination or anything like that. It's instantaneous and real time. It then goes back and walks through each and every one of the services with regard to what they are, how they work, what our fee structure is, images of existing and past clients, and then the dollar figure that's associated as far as the potential savings. Then, it moves into the contracting and document collection pages again, all of it fully automated. So you see, once you become familiar with that structure you don't have to be an expert in what we do. You don't have to step up. We support everything. All components of the application and execution and maintenance of our program and the service for the client. Kelly Coughlin: Okay. We've got a community bank, regional bank. The bank has 1,000 business clients. From what I can tell, many of your services are focused on cost reductions, expense reduction, correct?  Jason Ziccarelli: That is correct. Kelly Coughlin: Okay. They have 1,000 clients. They meet these clients periodically throughout the year. Maybe they're doing deposit business, lending. They would just meet with them on their recurring cycle. In this scenario, the bank would find the relationship, do the qualifying through the app and through discussions. You do some training with them, obviously. They complete the questionnaire and then they identify a property expense category. We come up with a $25,000 property tax expense reduction. Would that be looking backwards that they were overcharged and they are now entitled to a payment from the county for those property taxes? Jason Ziccarelli: No. Property tax is one that's on a go forward basis, so that's non-retroactive. Work comp is look back as well as go forward. Things like WATC are go forward. Cost seg studies, cost segregation studies. We can look back a little bit as well as go forward. R&D, we can look back a little bit as well as go forward, so it all depends on which services we're looking at as far as applicability and associated timeframe. Kelly Coughlin: So let's say it's a going forward one. How do you get paid on that? How does the banker get paid? How do you get paid? Let's say it's a cost reduction to $15,000. You get paid on the savings that they would experience over the next five years? How long does that last? Jason Ziccarelli: It's based on service. Each service is a little different and we have a very clear and outlined compensation schedule. Of course, working with an organization like a bank, we custom design exactly what products we're going to offer as well as the associated compensation schedule within our existing schedule. It's based on the service that's being offered. For example, if we did a cost segregation study we're never going to charge greater than 10% of the benefit to the business owner. A merchant audit, for example. We're going to charge 50% and we're going to do it for three years. And the associated advisor's going to get 30% of that. It all depends on the service, the service it’s going to impact. Is it a one-time fee, like a property tax audit? That's one time? Is it several years of repetition or is it is it perpetual in nature will it go on as long as a client? Each service has its own set of rules, guidelines, regulations, and then associated fees. Kelly Coughlin: Obviously on a property tax expense, if you find a $15,000 annual reduction, they're not going to pay that for 10 years. They might do it one time, I'm thinking, right? Jason Ziccarelli: That's correct. And what you look at there is, it's a fantastic return on investment. If for example we have somebody’s property tax reduced by $50,000 and you look at the fee doesn't come out of their pocket. They're already realizing $50,000 in savings, so they give us back $25,000 of that. In that example, 50% first year. It is not a burden for them, but if you look at that over say a 10-year time period, $50,000 savings over 10 years is a $500,000 benefit for an upfront cost out of the savings that we created. It's truly not even an out of pocket cost. Kelly Coughlin: You mentioned cost segregation. Tell us what that is. Jason Ziccarelli: Sure. Cost segregation is something that the IRS says, anybody that invested in, built, renovated a commercial property, if I if I bought a commercial property, if I built a commercial property, if I leased a commercial property and have modified it, I've spent money on engaging in enhancements, the monies I spend will traditionally be depreciated in a straight line model over 39.5 years. What the IRS says and what a cost segregation study says is that everybody should engage in one, and that's itemized deductions. What we're going to do is say, instead of depreciating the entire building, the gross costs associated with same over a straight line 39.5 years, we're going to segregate the components of that building into their own itemized appreciation schedule. One of the examples I give very frequently is that I pace a lot when I'm talking. As I'm talking to you right now, there's actually a pattern in my floor that you can see as I'm pacing. It's just my style. I like to move around while I'm speaking, and I wear out carpet very quickly. Well, here's an example of the argument. Carpets in general are going to last three to five years. If it's me, it's going to last a year and a half. But the point is, let's say it last three years. Within 39 years you then mathematically have replaced that carpet 13 times. Yet, if you depreciate the building as a whole, you're still depreciating the dollars allocated to that first round of carpet even though you're now on the 13th round. What we're saying with a cost seg study is, carpet is not going last 39.5 years, so we're going to put it on say a five-year depreciation schedule. Then, I'm going to look at your partition but I'm going to look at your plumbing and your wall, and PVC will go on a shorter depreciation schedule than copper will. Different grade wiring will go on a different depreciation schedule than one another. So, every item, every aspect of that building goes on its own depreciation schedule, and by virtue of that, you drastically accelerate the depreciation and put a great deal of money back in the clients’ hands today. It's something that has proven very, very successful for us over the last 16 years and every one of our clients have participated in it as we've put hundreds upon hundreds of millions of dollars in their pockets through this and others of our tax strategies. Kelly Coughlin: Now, that cost seg project, that seems fairly labor intensive, isn't it? You've got to really look at the granular assets that they have and in essence, what you're trying to do is reclassify them as expenses, right? Or instead of a five-year depreciation, three-year, but doesn’t that require quite a bit of detailed analytics to do that? Jason Ziccarelli: Very detailed analytics, and it's done on our side, on the client side. We're looking at getting copies that depreciation schedule and having some dialogue with their tax planner. On their side again, we talk about being non-disruptive nature. You're talking about a handful of minutes of time of that business owner and their staff. Whereas it's a lot of time on our part. But again, we go back to being non-disruptive for all the work that needs to be done. It doesn't tie up the time or energies of that business owner and/or their resources, their staff. So, all of that work is done on our side. Again, when you look at our structure and contingency based model, that's where we see such a high-level of adoption of our services within the business owner community. Kelly Coughlin: Right, but you guys do all the heavy lifting there. That’s part of the model? Jason Ziccarelli: Absolutely. Kelly Coughlin: Okay. Let's talk about worker’s comp audit. How do you find value there? Jason Ziccarelli: Well, there's a lot of different things that we're going to look at, but a good example, a very, very easy to understand example for anybody that's listening just not familiar with that is that all too often, you'll get an insurance agent because of the commoditized nature of the industry that really just wants to get a contract signed and move on to the next. They don't want to overly analyze it and jeopardize losing the opportunity. I'm not suggesting for a moment that they're not doing their job. But again, they specialize in the product, and there's a lot more to this as there is to anything else than just the product at hand. What can happen all too often is, you can get, again, it's just one example of many that we'll look at. You can have employees carry one classification that may or may not be appropriate and/or an employee carrying a classification wherein they should carry several. One of the examples I very frequently give is, let's look at a construction site. Construction is generally considered higher risk of various professions, so tends to be more cost associated with workman's comp. With that, we could have Mr. John Smith who's out in the field today. The work comp, the agent comes in and says, he's a laborer. Well, he very well may be a laborer, but he may be a labor for hours a day out of a 10-hour day, and another two hours he may be in the office bidding on work, and another two hours he might be in training to become a supervisor. Whatever the case may be, where he or she should carry multiple classifications that by virtue of that reduces the overall costs on he is an individual. Then, you extrapolate that out across all of the employees and all of a sudden, you find that you've been overpaying for an extended period of time, and not just overpaying for a period of time but that you will continue to overpay until these reclassifications are established. Again, as I said, that's but one example of the of the types of stuff that we'll look at. Again, in that case, I mentioned merchant audit this is darn near 100% of cases that we find inconsistencies, errors, and even abuses. In this case, it's approximately 72% of the time that we see overcharges occurring. Kelly Coughlin: So, you uncover that, and then there's sharing for a period of time. Either one time or a period of quarters or years. The entity is on its own. They get to keep all the savings from that, correct? Jason Ziccarelli: Exactly. Correct. As with all of our services, everything again is contingency based and performance based. We can go to work for the client on any one of these topics, and if we don't find a benefit, there is no cost. Kelly Coughlin: Okay. Then, the final one that I'd like to talk about is credit card fees. I don't know how many of the community banks and regional banks that are out there are actually earning credit card fees themselves. So, they could be a target of your internal audit. Or if they're not earning fees from it and they use credit card processing companies to do that work for their customers, then they or their customers could benefit from that. What's your take on that? Jason Ziccarelli: Well, you'll see in the banking world as you just said, there's various realities for the different banks and institutions that may be listening to this call. Some of those realities are that they're providing these services, at which point our offering same would be a conflict of interest. Under those circumstances, it would simply be omitted from the audit so it wouldn't come up. You'll have other institutions that are not offering those services and then could look at it as one of two things. One is, it is a good service to the client to find opportunity, provide savings, and again, facilitate benefit for that client. If it's an institution that does provide the service but is not doing so for that client, it's also a great opportunity to uncover and demonstrate that the folks they are using are not treating them as fairly as they should. And it then creates an opportunity for that bank to win over that business. Kelly Coughlin: Got it, interesting. Let's say a banker listening to this says, yeah, I'd like to get onboard with this or I'd like to explore it. I think you charge them $99 a month upfront on a recurring basis. They need to more or less assign a point person at the bank to be responsible for this business line. It seems like that point person could be a new banker -  one or two years out of college or something like that. It doesn't have to be the executive senior guy there, but you could appoint someone that would learn the product, get proficient in it, and then work with more senior bankers to get it rolled out to their customer base. Does that seem like a logical way to approach this? Jason Ziccarelli: That's the logical way. It is an incredibly easy thing to run. If it's a junior, brand-new member of the bank, they will have absolutely no problem. You see all ends of the spectrum and everything in between. Whatever the dynamics, whoever the personnel, the system will accommodate incredible opportunities and will be something that anybody can successfully learn, do so very quickly, and then exercise on a regular basis. Kelly Coughlin: That's terrific. I think that covers pretty much what I would like to do on this podcast. I'm going to recommend that any banks interested in this get in touch with me, and I'll help them navigate through you and Heather to make sure we advance this thing. Jason Ziccarelli: That would be fantastic. Kelly Coughlin: Okay. Jason thank you very much for your time. I look forward to working with you guys in the future, and let's see if we can help these banks generate an additional source of revenue so they can more effectively compete against the big banks and the big brokers out there. Sound good? Jason Ziccarelli: It does sound good. I look forward to working with you and all those on this call, and appreciate the opportunity. Kelly Coughlin: Thank you. Bye. Outro: 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. 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.

A Banker’s Voice is Mightier than the Pen and the Sword. We have entered the era of total competition. No matter your industry, company, or nationality, there is a battle-ready competitor somewhere who is busy thinking how to beat you. There are no safe havens. Yet the hard truth, for all the talk of new paradigms, reengineering, and organizational learning, is that most executives in most companies are still equipped to fight the last war. Their strategic assumptions, management structures, information systems, and training programs are geared to a competitive battlefield that no longer exists. The rules of engagement have changed. Strategic mind-sets have not. In the life-or-death quest for strategic change, business has much to learn from war. Both are about the same thing: succeeding in competition. Even more basic, both can be distilled to four words: informed choice; timely action. The key objective in competition - whether business or war - is to improve your organization's performance along these dimensions: To generate better information than your rivals do To analyze that information and make sound choices To make those choices quickly To convert strategic choices into decisive action Together they represent informed choice/timely action. This is Kelly Coughlin, CEO of BankBosun, helping bank C-Suite Executives manage risk and discover reward. Kelly Coughlin is the 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. Greetings, this is Kelly Coughlin, CEO of BankBosun, helping bank C Suite execs with risk, regulation and revenue creation in a sea of threats and opportunities. Just to remind you, in case you don’t recall from podcast shows from last year, a bosun is a nautical term referring to the crew member on a ship that helps the sea captain (that’s S E A ) in all areas of the ship’s navigation, operations and management. As such bankbosun, me, I’m the crew member that helps you, the C-Suite Captain of your ship – your bank – in all areas of risk, regulation and revenue creation. Got it…pretty creative isn’t it. Here’s a boatswains whistle for you.. Today’s podcast is on revenue creation. And specifically the use of audio podcasting as a cost-effective tactic to get your value proposition communicated to your market to get new customers and create new revenues. Some smart guy, they don’t actually know who, said “The pen is mightier than the sword,” implying that a person can change the opinion of others with words more effectively than with force and violence. Well, I have a corollary or addendum to that. It goes like this: While the pen is mightier than the sword, the voice is mightier than both. Some of you might remember the TV ads against drugs. I think they were in the 80s led by Nancy Reagan. It went like this. A guy picks up a whole egg. And says, this is your brain. And then the guy cracks the egg in a hot skillet with scalding hot grease and it bubbles up and he says, “this is your brain on drugs.” Well, you might ask, what the heck does that have to do with banks and revenue creation. Permit me to demonstrate. Here is a mashup of some sales pitch lines from five top financial advisors in the US. Here is what the sound like when they are READ by their intended audience in say printed material. This equates to the brain on drugs. The fried egg. I’m a professional wealth manager who provides custom financial solutions for your unique financial challenges and goals. My entire firm is passionate about helping people like you make smart financial decisions. We help people make sound decisions to enjoy a full life. My expertise is in the development, implementation and ongoing management of a customized portfolio builder and diversification strategy created just for you. Personally, my mission is to help you build wealth and successfully maintain your financial security every step of the way. Boo There it is…financial planning platitudes fried up in the skillet. Here is what it sounds like when the reader has taken your printed material and put it in their briefcase to read on the plane. Professional wealth manager…custom financial solutions… financial challenges…passionate….helping people …sound decision…expertise…implementation…management…customized portfolio… diversification….mission…wealth…financial security. Flight attendant, would you please take this and throw it out. Now, here is what they sound like when they are HEARD. This equates to the healthy brain, the whole fresh egg. I’m a professional wealth manager who provides custom financial solutions for your unique financial challenges and goals. My entire firm is passionate about helping people like you make smart financial decisions. We help people make sound decisions to enjoy a full life. My expertise is in the development, implementation and ongoing management of a customized portfolio builder and diversification strategy created just for you. Personally, my mission is to help you build wealth and successfully maintain your financial security every step of the way. Cheers Academy award nominations for that performance would be much appreciated. I hope you can see…rather hear that the human voice, your voice is the key. Your voice showing what I call the three Es: emotion, emphasis and empathy. These are the key and critical differences. Even today, in this world where people are obsessed with digital communications, email, and texting - people are hungry for the communication and connection of the human voice…your voice. Here is what I propose and I guarantee it will help your bank claim market share and grow revenues. You create a podcast channel with your brand – ABC Bank Podcast show – once or twice per month with one or more representatives of your company…from your CEO down to your product technical specialists would be interviewed and recorded. We talk about your industry; your market space; the needs, issues and challenges your customers face. And what your industry does to help them deal with those needs, issues and challenges; and why and how you are so much better and different than anyone else. We can even interview your customer prospects. Trust me on this, it’s a great way to build a relationship with a prospect. You are put in a position where you get to truly LISTEN to them and show empathy for them. An opportunity to understand their outlook on life, family, business world. It’s a great way to build a relationship with existing customers and more importantly with prospective customers. But the real hidden benefit…and it truly is the secret sauce…the algorithm…the black box….that I am going to share with you and you alone in this podcast. I call it tactical ecosystem marketing. In short it works like this…you include in your podcast program interviews with anyone and everyone who exists in  your banking ecosystem. Picture your bank and your customers as a big coral reef. And you have all these creatures, eels, sharks, groupers, all swimming around the reef. Let’s say your ecosystem is banking services for individual lending, business lending, personal wealth management and trust services, private client; portfolio management for institutional accounts and of course traditional depository banking. That’s a big reef. Some of you might not have trust and wealth management by example. Regardless, there are many, many influencers who exist in this ecosystem. You have accountants, lawyers, pension consultants, board member of pension plans, other business owners, all of whom have desires to get their brand and name exposed to your entire ecosystem. Your goal is to keep building a big-league ecosystem. The traditional way of building this ecosystem is to exchange business cards and hope like heck the other members will think of you when an opportunity comes up. And then you periodically follow-up with them to make sure they continue to think of you. A better way is to include them all in your bank podcast program. Interview them. Record it. They will want to send out the link to the podcast to all their clients, this gets your name out there in front of all their clients. They benefit. You benefit. You create value and you capture revenues. Big banks and brokers can’t do this, because they can’t possibly let their local branches create their own messages in any media, but certainly not audio podcast channel. And financial advisors don’t have the diverse products lines… depository, credit, insurance and wealth management to offer. They talk about a few of these product lines. Banks have many products and services to talk about…I’m going to list a handful so you can get an idea on what I’m talking about… Here’s some podcasts related to your bank’s culture and market position: History, Mission and Purpose of Your Bank Community Involvement in Your Bank The Importance of Community Banks in the Community Here’s some Podcasts related to Wealth Management: Why do I need a wealth manager when I can use the Internet? Is there a difference in fees between banks, brokers and financial advisors? Are brokers fiduciaries? Are bank fiduciaries? Do I need a fiduciary? What is a fiduciary? Podcasts related to Lending: Five issues that kill a business loan Which is more important for a bank loan: Revenue, Profits or Assets? Accounting records: Will and audit help me get a business loan? And how about some podcasts related to trust accounts: Can a broker serve as a trustee for my kids’ trust accounts? If a bank fails are my stocks, bonds and mutual funds guaranteed? Do I need a trust account? These are just a handful of topics. We could go into financial instruments…explaining what mutual funds are..or portfolio risk…portfolio management…the topics are unlimited. The goal is to get your target audience whether it be current customers or prospective customers, listening to your messages. Sun Tzu said, to beat your enemy you must Avoid his strengths and attack his weaknesses. The weakness of big banks and brokers is all marketing and branding and promotion comes out of their centralized corporate office. Imagine a top ten bank allowing its 500 branches creating their own podcast channel…it just ain’t gonna happen. But a community and regional bank can easily do this. So, don’t listen to me…listen to Sun Tzu, ”Avoid the strengths of your competitors and attack their weaknesses.” There are a couple additional benefits to a more human connection you get with audio it allows executives to multi-task while listening like driving, exercise, watching a sports event on TV. Now, you might ask, if the human voice is so important why don’t I just call them on the phone. Answer: Because you are interrupting them when you call them. And it’s not repeatable and shareable. With a recorded audio podcast, you give your audience the opportunity to hear from you at their time and place of choice in a non-intrusive way. And many of the business development people like trust officers, wealth management execs and credit officers at banks aren’t real keen on cold-calling…like brokers in a bullpen. But sending links to podcasts and following up on that…well that is a much different story. Memorializing your story in an audio podcast is so much more effective than sending them a printed document. By the way we transcribe all our podcasts. So you get both the printed and audio media. But this enables you to tell your story once with the energy and passion it deserves, and then have it shared between husband and wife and even kids to help them get more educated on your bank or among board members or officers for commercial business. Millennials connect with this. Since they hate talking on the phone and dread stepping foot in your bank, so we are told. Well, that’s my story, and I’m sticking with it. I encourage all of you to give serious consideration of this. It will generate new customers and new revenues…guaranteed. I know banks don’t have a lot of discretionary funds. So, I am all about coming up with a program that you can afford. The investment in this program can range from zero, for banks holding bank owned life insurance asset or if you don’t have that asset, a one-time fee to generate one or two podcasts for the year or a monthly fee to generate one or more podcasts each month. The average fees are about $3,000/month for a monthly program. Give me a call at 612-232-6640 or send me an email at Kellycoughlin@bankbosun.com Thank you for listening. 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. 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

The hawks and crows made an agreement that they would split everything obtained in the forest. One day, they saw a wounded fox lying helpless under a tree. The crows said, “We will take the upper half.” And the hawks said, “We will take the lower half.” The fox laughed and said to the hawks, "I always thought the hawks were superior to crows and as such they should get the tastier upper half." "Oh yes, that’s right," said the hawks. "No, not at all," said the crows. Then a war arose between the two parties and many were killed. The fox continued there for some days leisurely feeding on the dead crows and hawks and observed, “The weak benefit from the quarrels of the strong.” Kelly Coughlin is a CPA and 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. Hey this is Kelly Coughlin. I’m the CEO of BankBosun. Selling products and services to banks is a challenge. Frankly selling products to anybody is a challenge. And the more features, benefits and complexities you have to offer… the harder it is. Why? Mind share and attention. The only time you can get mind share and attention from a decision maker is at conferences or an office visit, your website and of course the phone and written communication. That’s it. We all know how awkward and challenging it is to search for target prospects at conferences by squinting at the name tags during the social hours. And then looking away when its not a desired target as if they were not worthy of your attention. And then you have the phone. Good luck getting that done. Do you leave a message or not. If you do, you can’t call back for at least 4 or 5 days or you are pestering…and executive secretaries are quite skilled at blocking you. Face to face office visits are ideal…but time consuming, and expensive and those are also tough to get done. You need to advance the prospect a bit down the sales cycle so you are not wasting your time and their time on a prospect who cannot or will not buy from you. The other approach is to write articles or reports. I have certainly done my share of that. But sadly, you will not get a bank executive and decision maker to read a paper longer than three minutes…that’s it. Here is what your beautifully written report sounds like in the mind of the banker when he reads it: “My company has been in this industry for over 20 years. We offer superior products and services that meet the needs of our bank customers. We are a strong, innovative, and highly successful company and our employees love to take good care of our customers. And we are so excited to help you compete, succeed and win.” That’s what your written report sounds like. So what can you do? Audio. The human voice. Your voice is the key. Audio allows you to show your passion and energy for your company, products and services. Even today, in this world where people are obsessed with digital communications, email, and texting - people are hungry for the communication and connection of the human voice…your voice. Here is what your report sounds like if you communicate it by audio: My company has been in this industry for over 20 years. We offer superior products and services that meet the needs of our bank customers. We are a strong, innovative, and highly successful company and our employees love to take good care of our customers. And we are excited to help you compete, succeed and win. Now, I’m no Robert De Niro…although people say I did used to look like Mel Gibson, in his early years. I wonder if they meant Mel Gibson when he played William Wallace in BraveHeart though…Regardless, hopefully the audio version sounded a little human than the robotic simulated written version. In addition to a more human connection audio allows executives to multi-task while listening like driving, exercise, watching a sports event on TV. Now, you might ask, if the human voice is so important why don’t I just call them on the phone. Answer: Because you are interrupting them when you call them. And it’s not repeatable and shareable. With a recorded audio podcast, you give your audience the opportunity to hear from you at their time and place of choice in a non-intrusive way. I propose that one or more representatives of your company…from your CEO down to your product technical specialists be interviewed and recorded. Interviewed by me. Where we talk about your industry; your market space; the needs, issues and challenges your customers face. And what your industry does to help them deal with those needs, issues and challenges and why and how you are so much better and different than anyone else. They need to HEAR that you know this and that you CARE about them. In short, they need to know why do you exist and why should they care that you exist. This is big picture stuff. Oh and by the way, everyone in your organization should know this. If you are selling paper clips and post its, maybe this is not as critical. But if you are selling products and services that require buy-in from multiple departments and people including the board, and if there are fairly significant vendor management quality controls and approvals in place, which you certainly have with banks and Dodd Frank regulation, then this big picture stuff is absolutely necessary. Memorializing your story - the picture - in an audio podcast is so much more effective than sending them a printed document. You will most like want to supplement it with that. By the way we transcribe all our podcasts. But this enables you to tell your story once with the energy and passion it deserves, and then have it told 100 times within the organization through the sharing of the content. It also ensures that your message is told consistently throughout your enterprise. It’s a great way to get your mission, features and benefits in front of your market…and it’s a heck of a lot cheaper than multiple office visits. So send me an email to Kellycoughlin@bankbosun.com  Remember here is what that email sounds like when I get it: “Hi Kelly, I would love to increase revenues this year in a cost-effective way. My board and boss are killing me for revenue growth…I could really use some help.” Or Give me a call at 612-232-6640 to talk…and here is what that sounds like: “Hey Kelly, I would love to increase revenues this year in a cost-effective way. My board and boss are killing me for revenue growth…I could really use some help.” Thanks for listening and one final word…FREEDOM!!... that was Mel Gibson in Braveheart. 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. 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 Equias Alliance nor any other agent, principal, employer, employee, vendor or supplier of Kelly Coughlin, BankBosun or Equias Alliance.

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 Coughlin: Greetings, this is Kelly Coughlin. I'm the program host of the syndicated, biweekly podcast, 'BankBosun.com: Helping Community Banks' C-Suite Officers Navigate Risk and Discover Reward.' As most of you know, we like to focus on three primary categories here, the three 'R's, Risk, Regulation, and Revenue Creation. I think just about all the critical things a bank does can be captured in one or more of these three categories, Risk, Regulation, Revenue Creation. Nowhere else does the results of how a bank does with these three categories, than in the valuation of that bank.     I think Jack Welch, in the eighties, first made popular the notion of shareholder value. He didn't create this concept, but he sure popularized it. I think, since then, we've kind of expanded it to include more than just shareholders, but stakeholders, and stakeholders might include all range of people and enterprises, ranging from suppliers to entire community ecosystems. At its core, we still get back the valuation, the equity value of the enterprise. With that in mind, I'm going to introduce George Thompson, a forty-year, seasoned vet in the bank deal business. George is managing director of The Capital Corporation. George, are you there?   George Thompson: Good morning, Kelly. How are you?   Kelly Coughlin: I'm fine, thanks for joining us today. George, rather than me kind of get into summarizing your background, education, etc, can you give us a minute on who George Thompson is, and why you're the seasoned vet in the banking valuation deal business?   George Thompson: I would be pleased to do so. Kelly, I graduated from the University of Missouri in Columbia, in 1976. Accountancy was my major. I went to work for one of the large accounting firms in Kansas City right out of college, and three years later, joined an individual out of Arthur Anderson, that was wanting to build a CPA practice specifically for community banks in the Midwest. I joined him in 1979, and we built that firm for the next twenty years, ended up selling it when H&R Block and RSM McGladrey were doing their accounting from roll-ups. In about the year 2000, we sold that accounting firm and it merged into RSM McGladrey here in the Midwest.     Since that time, I've been in banking and investment banking, right now, managing director, as you said, with The Capital Corporation. About 85-90 percent of our business is sell-side work. In other words, we work with the sellers of financial institutions, although we do work a little bit with buyers, and will contract with banks to go find them a bank to acquire. Appreciate the invitation to talk about the things that kind of drive value in banking.   Kelly Coughlin: George, how many deals have you been in the middle of?   George Thompson: Our firm, all we work with is banks. We do not do investment banking for small businesses. We do only banks. We have been involved, either whole-bank or branch transactions, over the past fifteen years, with approximately 125 to 140 whole-banks to branch transactions. Probably about seven and a half billion in assets changed hands during those transactions.   Kelly Coughlin: Right. I want to go immediately to net interest income versus other income, non-interest income.   George Thompson: Okay.   Kelly Coughlin: You know, the goal here is to come away with some ideas on, how can, if I'm a CEO or a board member, how can I increase the value of my bank? Now, the obvious things are, well, increase revenues and profits and free cash flow. But I need something better than those things. So I want to go to net interest income and Other Income. Because net interest income, other than getting more quantity, more assets, and more loans, there's a price. You're kind of stuck with the yields that are in the market, right? Other income gives more variability, I should say. My question to you is, in terms of valuation can a bank fetch a higher multiple in valuation, whether that be based on assets or revenues or free cash flow or earnings through an increase in non-interest income versus net interest income. Is there any difference in that?   George Thompson: The answer is yes. I can talk about a couple of specifics. We are working with a bank right now, that has built a program that they refer to as a contract services division, but it is a community bank that has built ties to the servicing, not making credit card loans, but has ties to the credit card industry. And as they service the debt that's on the outside, they are the servicer, they are the administrator. They do not hold the debt, so they do not have the credit risk, but they have built substantial contracts, for revenues. It is recurring revenue, and it has substantially increased what our asking price, and what we expect to get in the marketplace, when we ultimately can get a transaction done.     We have seen other banks that have built substantial mortgage generation machines and divisions, that, it's harder to sell and get a full value for a mortgage division, from the standpoint of, buyers look at those mortgage divisions as more transactional-based, not quite as recurring. Now, if you do it year after year after year, there is value there, but it's not the value that, perhaps, someone would pay for a truly recurring revenue.   Kelly Coughlin: Right, so it's this other income, this non-interest income, is it fair to say that the quality of earnings, I don't know if you use quality, in earnings, is higher in other income? I guess it depends on the permanence, and how long it's been on the books, et cetera, but     George Thompson:   It’s the recurring nature and, you know, can a buyer look at that potential selling bank, and are they willing to pay a multiple of that because they believe it will be recurring for year after year after year? Or is it transactional-based, to where, you know, if there's a downturn in the economy or change in interest rates, I think right now, everybody's waiting, as far as, I mentioned mortgage producing machines are revenue generators, if interest rates go back up, which is kind of anticipated now for a few years, some of that mortgage revenue is going to drop, and buyers anticipate that, so they will pay less of a premium with that.   Kelly Coughlin: Yeah, I guess, part of, in full disclosure, part of my reason to get right to that, is that, I was at one of these, you know, bank conferences, and there was, I'm not going to mention who it was, but this broker who's in the business of kind of promoting municipal bonds, made the argument that bankers might have to extend duration a little bit to get the yield they need to fetch here.     I asked him, offline, I said, "Well," in full disclosure, I'm in the, I work through independent consulting work with Equias Alliance, and we are in the bank-owned life insurance business, and I said, "Well, wouldn't the recurring nature of bank-owned life insurance, more predictable, recurring, et cetera, other non-interest income, wouldn't that be better for the bank's valuation?" He said, "No, I prefer that interest income." When I go back to my Cooper's days of doing some bank valuation work, I thought that other income would increase the value, but ...   George Thompson: It does. There's no doubt that it does. Now, we do not see BOLI being, in any way, a detriment to get a deal done. At the same time, we do not see BOLI being anything that will drive a transaction price higher. I'm involved in a transaction right now that will be announced within the next couple of weeks, whereas the seller, I believe, probably has six to ten million of BOLI already on their books. The buyer is not worried about that, is not concerned about that, welcomes that earning asset as we move forward. In that case, the BOLI certainly, I wouldn't say it helped driving price, but they like the, the buyer likes the earnings off that BOLI, that's for sure.   Kelly Coughlin: Now, this wasn't mean to be a shameless plug for BOLI, but it's one of those things that did come into my mind, and as I'm looking at banks that hold muni bonds versus BOLI, and I just wanted to kind of get that clarified with you. Let's go to another question I have. When you see a deal, what do acquirers like to see, or not see, in terms of locking up staff, how they're dealing with high-producing staff or low-producing staff, I mean, what are you seeing out there in terms of staff like that?   George Thompson: Our buyers, especially in, size matters in this relationship, but as the buyers get larger, as the sellers get larger, normally, you have a group of people, or a handful of people, that are really helping drive earnings and drive the revenue of the seller, which is what the buyer's interested in acquiring. They'll want those revenue streams and customer contacts to continue. We often see that that definitely comes into play with a buyer and a seller, where they want to try to lock up that staff, whether it be with some type of employment agreements. We have seen transactions where the buyer has pretty much made it a demand, as a part of the contract, that one, two, three, four people, sign employment agreements before they're willing to put their name on a contract to pay a real high price. They want to make sure those people are locked up.     Now, it's very difficult to get a pure non-compete. You can certainly get a non-solicitation. We've seen agreements like that, for sure. A lot of our transactions are community banks based, here in Midwestern states, and oftentimes, the primary seller, one of the largest shareholders, if not the single shareholder family, is the president and CEO. Many times, the buyers will, whether they hire them full-time, and we are seeing that more, where some of the bankers are looking ahead, asking themselves, "Who is my buyer? Where are the buyers? Perhaps I should sell this bank now, I'm sixty years old. I would have waited til sixty-five or sixty-eight, but if I sell it now and work three to five more years for the new buyer, one, I get my price, two, I get to keep working, and kind of lock in the liquidity, and not have to worry about it. I can kind of turn that over to a new buyer.     We are seeing that a little bit more often, where the president, CEO, primary seller, does get locked into employment agreements, non-compete agreements, non-solicitation agreements. The buyers want those people locked down.   Kelly Coughlin: Yeah. That goes, probably, in terms of the food chain, it goes down to the producing professionals, the credit guys, and the guys that are doing deals.   George Thompson: Once in a while, you'll see a COO or CFO that falls into that fold, but many times, it is the chief lending officer, the major loan producers, that are bringing the revenue to the table.   Kelly Coughlin: Right, right. How does the cyber security risk, it's one of those big, contingent risks, and potential contingent liabilities out there, any trends, anything that you're seeing going on there, on how they deal with the cyber security risk?   George Thompson: The buyer certainly comes in and looks at what kind of auditing processes, what programs, what compliance, you know, what does the seller have in place that has been protecting cyber security? What programs do they have that's monitoring it, you know, every second, every minute of every day, to protect the customer data and protect the bank from an intrusion? That certainly is a piece of the puzzle when a buyer is doing its due diligence.   Kelly Coughlin: Yeah. Are you finding, on the deals that you're working on, do they typically hire an outside consulting firm to help on that? That isn't the kind of expertise that you'd normally get on an accounting due diligence team.   George Thompson: The inside people for the buyer, you know, the operations people, will get out the audits, get out the contracts, get out the intrusion tests, and really review that hard. They may pursue it, if they see something, you know, "Why didn't you do this, this, this, and this?" We have not seen them go hire, at this point, outside technology companies to come in, during due diligence, and do intrusion testing, or testing of those. They're pretty much relying on what the bank has been doing to satisfy the regulatory agencies.   Kelly Coughlin: Okay. Good. Have you seen any deals collapse because of cyber security?   George Thompson: We have not, in our practice.   Kelly Coughlin: Okay. What are the top five things a bank can do to increase enterprise value for a sale? Looking forward a year. They meet with their board, they say, "Okay, we're going to position this for sale a year from now. Or, two years from now." Other than the obvious, increase revenues, profits, and cash flow, what could a bank do?   George Thompson: Yeah, and let's be honest, Kelly, there are many times that banks are sold and they didn't look out one, two, or three years in advance. I'll touch on a couple of things where the pricing could have been helped. My first comment to anybody that contacts me about selling their bank is asset quality. It seems common sense, but oftentimes, bankers that are wanting to sell, they may be trying to put the smallest amount possible, and we're not, we don't want them to put excess bad debt reserves, or allowance for loan lease losses in their financial statements, but make sure that bad debt reserve is adequate, that you've taken the marks on any problem loans you have, that you've taken the marks on your other real estate owned, or OREO. Just, fewer items to be argued by a potential buyer, with respect to asset quality, will help pricing, will help things go much smoother.     Tied to that is loan file documentation. We've actually seen a couple of transactions within the last year, where the buyers got into the loan review, and had some significant issues, and one of them was one-rated bank. Some significant issues with the loan file documentation, and the lack, in their mind, that the regulators had kind of, let that seller kind of glide along, just because they'd had very few loan losses, had kept giving them one ratings. Their loan file documentation was very poor, so I suggest sellers, or potential sellers, to clean up loan files, and make sure that all the docs are there.   Kelly Coughlin: Low-cost activity, too.   George Thompson: It is. It's something that, you know, you probably have the personnel to go through loan files, dig through them, "We don't have this tax return, we don't have this credit report," you know. "We don't have this debt service coverage calculations." Seems like common sense, but there's, oftentimes, a lot of that loan file documentation just, it doesn't get done, or loan file memos.     Vendor contracts, Kelly. We have seen vendor contracts come up and bite sellers. You know, maybe they didn't think about that contract, that seven-year contract they signed three years ago, and now they're ready to sell their bank. "Oh, by the way, you have a four-year penalty to pay off the core processor, or the ATM company, or the debit card company." Sometimes, those penalties can be substantial. As some of these groups are aging, the stockholder groups, the ownership groups, the management groups, if selling your bank is something that you're thinking about doing, frankly, any time in the next three to five years, you need to be thinking about that when you sign any of these vendor contracts, because these penalties can have a significant bite on the amount of premium you get.     Branch networking. We are seeing people worry more about the viability of some Midwestern towns, Midwestern communities. At the same time, we're seeing people that love to be in the, in county seat towns, and will continue to pay good premiums for locations that are in county seats, that are stable, growing, but there are some real communities that, you know, are losing population, may not be in a county seat, and it really is impacting the premiums that are paid by buyers in some of the communities that really aren't showing future viability. I guess ...   Kelly Coughlin: Are you saying they should be looking at closing those down, in an advance anticipation of the sale?   George Thompson: The answer is, that question should be asked, you know. If you're, let's say you're in a small town, and over the last decade, that small branch has just steadily dropped in deposits and loans. You know, maybe you're down managing it now, with two or three people, and you don't want to close it, you don't want to let people go as far as their jobs, but if a potential buyer walks in and looks at that, and says, "Well, they're just leaving it for me to close," it will cost you, when you go to sell the institution, if the buyer has to be the one that has to be the bad guy, that maybe is taking a banking service away from a community, or from other people. They're going to take that into account when they're calculating what they're willing to pay you.   Kelly Coughlin: Yeah, I guess they take the political hit, don't they, if they have to do it?   George Thompson: That's exactly right. Probably the last thing we touched on, is employment issues, a little bit, but, you know, it goes without saying that a buyer certainly wants key management to stay, they don't want to be the bad guy, firing poor performers. Many times, if there are some poor performers, the buyer will ask the seller to take care of those people before closing, so that the buyer isn't perceived as completely the bad guy.     Tied to the employment issues, unless a buyer has some long-term contracts or long-term deferred compensation contracts, if the seller has those and the buyer doesn't, many times the buyer will ask the seller to get those paid off, and pay off those employees, those long-term, let's say, deferred compensation arrangements. Because it's pretty tough for a buyer to bring home, and say, "Well, we've got three or four people, in the bank we just bought, that have long-term deferred compensation arrangements, but we don't have it here, and we're not going to give them to you, our current set of employees." Sometimes, not always, but sometimes, those deferred compensation arrangements can come into play between buyers and sellers.   Kelly Coughlin: This would be, like, non-qualified benefit plans, you're saying?   George Thompson: It would be. It would be.   Kelly Coughlin: You're saying, those can be considered somewhat negative, depending upon the culture of the acquiring bank.   George Thompson: If the buyer has them, and the seller has them, it can be okay. If the buyer doesn't have them, and the seller does, normally the buyer is not going to take in those long-term deferred compensation arrangements, and have things, employee benefits for new people, that they're not even giving to their current people.   Kelly Coughlin: Right. I know, we at Equias, we like those things, because they help, the non-qualified deferred plans, because they help the bank compete and retain good talent, and, of course, we use the bank-owned life insurance as a way to, kind of, fund those things. It doesn't have a significant impact on their cash flow, but ...   George Thompson: Well, and, you know, a bank has to, you're trying to protect somebody, and you may have had that in place for somebody for ten or fifteen years. It probably did what it was set up to do at the time, which was help you keep that person. Now, if you're in the position, after that ten or fifteen year period, you've protected the people, you provided for them, now they're going to get, maybe, an early payout, then it's up to the buyer to make arrangements to keep that person if they're making the seller cash out that deferred compensation arrangement. I'm like you, Kelly, I've seen it used very positively, many times, in a lot of banks, whether it's deferred director's fees, deferred compensation arrangements with key lending and financial officers. Don't take my comments that they're bad, complication in a deal.   Kelly Coughlin: They're a complication. Right. Got it. Okay. All right. Anything else you wanted to add? That covers most of my questions on this kind of high-level overview of valuations. One of the things I ask you to do is, be prepared to tell me, give me either your favorite quote, or, what I prefer is, George, tell us one of the stupidest things you either said or did in your business career.   George Thompson: You know, I try to never be too stupid, but, you know, going back, a saying I had, and it goes back to high school, and if you found my 1972 yearbook from my high school graduation, what it stated under my name was, "Lead, follow, or get out of the way." I've tried to live that as I've, kind of, been in my professional career. Now, what I gave them, back in 1972, to put in my yearbook, was, "Lead, follow, or get the hell out the way." In rural America, in a little religious farm town, they wouldn't put the H-word in the high school annual, but they wouldn't use the H-word in the high school annual in 1972.   Kelly Coughlin: That's good. You didn't need that on your record, anyway. But now it will be on your record, so there it goes.   George Thompson: Yeah, it's out there now, isn't it?   Kelly Coughlin: It's out there now. All right, George, I appreciate it. Thanks for your time, and we'll get this posted, and published, and syndicated on iTunes and Google Play Store, and there you have it.   George Thompson: Kelly, thanks so much for allowing me to be part of the podcast today.   Kelly Coughlin: Okay. Thanks, George.       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.  

http://www.marketdominationllc.com   If you wish you could wave a wand and magically fill your seminars and appointment book with qualified prospects and clients then this podcast is for you. With a little direct response marketing magic, you can turn your direct mail into a high ROI prospect generating machine. You can fill a seminar by mailing less to a smaller list… You can WOW your clients and turn them into referral generating machines.... You can make simple changes that make you stand out from the crowd and rise above the usual mundane marketing mush of everyone else. And all as if by magic! Today I interview Seth Greene a national recognized direct response marketing expert and owner of one of the fastest growing marketing firms Market Domination LLC.     Before his success, Seth started out as a struggling Advisor and part-time magician. He quickly discovered how to use direct response marketing to become one of the busiest and highest paid magicians in his home town. Then, he used the same direct response marketing principles to become one of the top Advisors in his firm. On top of that, Seth is the author of 6 Best Selling Books including “Cutting Edge Marketing Magic” and “Podcast Marketing Magic.” He's been featured on CBS Moneywatch, CBS News, The Boston Globe, The Miami Herald, the LA Times and the #1 morning radio show in New York City. He's worked with celebrities such as Donald Trump and is the only person to be named Marketer of the Year, 3-years in a row by Dan Kennedy himself. Today Seth reveals direct mail and marketing strategies that you can start using today to get in front of more clients. In today's podcast you discover: The “label trick” and other common marketing mistakes most Advisors make. The secret to filling a seminar room with a small (only a few hundred people) mailing list. A simple headline switch the quadrupled the response of a dinner seminar postcard mailer. Simple secrets to get prospects to open, read and respond to your direct mail. A marketing philosophy that most Advisor get wrong and will actually lower the ROI of your marketing. And much more. You'll gain valuable insights on how to use direct response marketing to attract more qualified prospects, increase your number of appointments and land more clients. If you want your marketing to have a greater impact, higher ROI and actually attract more prospects with smaller qualified lists, then you'll enjoy this content packed podcast. It's all about direct response marketing in this week's episode, you don't want to miss it.

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.  

Sun Tzu Helps a Bank Defeat Its Competition by Kelly Coughlin, BankBosun CEO,   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. Hi this is Kelly Coughlin. I am the CEO and program host of BankBosun. Today, I am not going to have a guest today but I’m going to introduce a screen play that I wrote, it’s titled: How Sun Tzu and a Harvard Professor Helped a Community Bank Crush its Competition. Here is the Play Summary: The play tells about how the board of directors and shareholders of a community bank, frustrated by an ongoing loss in revenues to big banks, financial advisors and non-bank competitors, threatened Joe, the bank CEO,  to turn it around or the board will sell, merge or close the bank. Let me start by introducing the setting: It is 2016. Main Street Community Bank is a middle market bank with $ 1billion in net capital. The bank’s board, CEO and CFO lose sleep over the Three Rs: Risk, Revenue and Regulation. His Big Bank Competitors compete against them on product and price. And they can pay their execs more compensation. The big banks drive regulatory change, partly because of their own major screw ups, and partly because of their access to and, influence of, the regulatory and legislative banking ecosystem; and partly, and perhaps simply, because they have more money to spend to buy influence and effect change. Joe also competes with non-bank financial companies who compete on technology and mobile access making them very attractive to the millennial market.   His wealth management and trust areas compete for deposits and investments with financial advisors, CPAs, independent brokers and wire-house brokers. It’s a dismal setting and many are projecting and predicting that the community banking ecosystem will no longer survive, dying a slow death like travel agencies, video rental companies, and bookstores. The board tell Joe to either fix it or they will either sell, merge or close the bank. Let me next introduce the characters: Joe, CEO, Main Street Community Bank. Joe is accountable to his board of directors, his investor/shareholders, regulators; directly to his CFO and other officers; and indirectly to every employee at the firm. And of course, he is accountable to all current and prospective customers, both business and individuals. He gets pressure to hire and retain professionals, and even more pressure to keep tight controls on expenses. The next main character is Sun Tzu. Sun Tzu was an ancient Chinese military general, strategist and philosopher, who is believed to have written the famous “The Art of War”. The third main character is Michael Porter. One of the many business case studies I read in business school at Babson College in Massachusetts was written in March 1979 by Michael Porter, a very smart Harvard University professor, titled, How Competitive Forces Shape Strategy. And another one was written in January 2008, The Five Competitive Forces that Shape Strategy. I would encourage all banks C-Suite execs to read these articles. Contact me if you have any trouble locating them. And finally, the fourth main character is me, Kelly Coughlin. I am a CPA and the CEO of BankBosun. I’m also an independent consultant for Equias Alliance. I have been working in the banking ecosystem since I was 23 years old. And that was over 20 years ago….alot over 20 years ago…ok, it was over 30 years ago. I have had senior and executive experience at PWC, Merrill Lynch, Lloyds Bank and was CEO of a financial technology and investment company for over12 years. The Three Act Play: The classic way to tell a story…or write a screen play… going all the way back to Aristotle I think, is to have a beginning, middle and end…or in screenplay vernacular, the Setup, the Confrontation and the Resolution. So with that in mind, here is Act 1, The Beginning, The Setup: Joe’s banks is losing customers, revenues and profits. It’s not attracting millennials who are using their phone, devices and the internet. It’s not attracting high net worth wealth management clients, who are using big banks, brokers and accountants. It’s not attracting institutional clients of pensions and endowments, who are using independent financial advisors. It’s losing loans to credit unions and non-bank financial companies. Joe knows that if he continues to try to compete for customers on the existing playing field, because of their capital, regulatory and human resource constraints, he will lose. Joe knows he needs a change in his business strategy and create new tactics to implement that strategy or he will fail.   Act 2, The Confrontation Act 2 is where the playwright demonstrates a loss so painful, a failure so great, that the protagonist (Joe) must confront his reality and status quo and either continue in this miserable, wretched state or change his state and condition. In my Act 2, change in business strategy and tactics” is the change is the confrontation. And for my play, I introduce Sun Tzu and Michael Porter. In act 2, we have Sun Tzu meeting with Joe and sharing his ancient wisdom with ideas like: You must subdue your enemy without fighting. Know your enemy and know yourself and you can fight a hundred battles without disaster. He will win who knows when to fight and when not to fight. Attack your enemy where he is unprepared, appear where you are not expected. The greatest victory is that which requires no battle. If you wait by the river long enough, the bodies of your enemies will float by. I’m not really sure how relevant that one is…but for some reason I like it… But two of my favorites are: Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.   I’m going to repeat that: Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. And here’s my second favorite: Avoid your competitors' strengths; and attack their weaknesses. So the idea here is the advice and wisdom of Sun Tzu leads Joe to think clearer and more strategic about confronting his dilemma, which requires him to confront his enemy and his competition. And to avoid his enemy’s strengths and attack their weakness and change the field of battle to a location and venue where his enemy cannot effectively compete. And then to help our protagonist identify where this field of battle is, I introduce Michael Porter with his brilliant Five Force Analysis. These forces are: Threat of new entrants 2nd of the Five Forces: Bargaining power of suppliers, in banking the key suppliers in my mind are human resources…the competition to retain and recruit talent Bargaining power of customers. Customers certainly can drive fee income. If customers know they are key, they will demand lower fees or lower interest on loans; higher interest on deposits. Direct rivals: these are other community banks that compete head on with Joe’s bank. They are most likely banks that are stuck in the old business model paradigm, that is, they haven’t met Sun Tzu, Michael Porter, or Kelly Coughlin. But these rivals ironically are NOT the most significant competitor of Joe. And that leads to the fifth and final force. Substitutes. This is the biggest competitive threat. These include big banks, and other substitute providers like non-bank financial companies, internet banks, phone banks for deposits and loans; and for wealth management and trust, CPAs, brokers and financial advisors Joe is introduced to Michael Porter, who helps him bank understand that his real competitive advantage exists in three primary areas: 1) location: he has a physical presence in his customers’ local community; 2) security: he has brand image of safety, permanence and security; and 3) service: a live person, not simply a phone contact or email contact, but a live person with whom he can speak. And while his direct rivals, other community banks in his footprint, are certainly direct competitive threats because they also share his competitive advantages; his biggest threat are other substitute competitors – big banks, internet financial companies, who do not share that competitive advantage. Joe now begins to see his wisdom. But he fears he does not have the budget to spend on fancy and sophisticated consulting ideas. And now we introduce our final character, Kelly Coughlin, CEO, BankBosun, that’s me. I introduce Tactical Ecosystem Marketing for Community Banks. Kelly explains that the terms tactics and strategy are often confused. Strategy is the overall plan; tactics are the actual means used to gain an objective, the end goal. Strategy helps you understand the question “What is our goal and objective? What are we trying to accomplish?” Tactics help you answer the question, “How are we going to accomplish our goal and objective?” Kelly describes how Tactical Ecosystem Marketing is a cost effective marketing tactic that requires Joe to do a couple basic things compete effectively with his direct rivals and substitutes on a playing field they simply cannot or will not compete: Identify the ecosystem. These are business owners, accountants, lawyers and other center of influence in the bank’s footprint including customers. Create multi-media content including audio podcasts to promote his role and importance in the community’s ecosystem and among its members and learn of his target customers’ individual and collective needs, and their product and service features and benefits. Establish Joe as a community leader who is interested not simply in earning fees from members in the ecosystem, rather, equally interested in helping the ecosystem thrive.   Finally, Act 3: The Resolution Joe meets with Kelly Kelly shows Joe how he can accomplish these within a budget that his board will approve and possibly at no cost to the bank at all. They create a plan to write 24 articles on some of the bank’s activities, leveraging some of the work the bank’s credit officers and investment team is already creating. Kelly helps Joe create a plan to do 24 podcasts over the next 12 months and syndicate them in iTunes and Google. They interview the CEOs of some of Joe’s big target customers to help better understand their needs and challenges. They create some fun and entertaining videos that explain the benefits of community banking versus non-bank financials for millennials. Joe’s bank is now thriving and he is recapturing market share. And most important of all Joe’s kids think that their dad is the smartest, coolest, most sophisticated dad in the world. Why? Because Joe’s on iTunes and Google Playstore. And they’re not. And Joe’s board of directors loves him. That’s it for now. Thanks for listening. 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.    

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.  

Kelly talks to Chris Carlson, CEO, Narrative Pros, about what business leaders can learn from a stage and theater actor about presentations to small and large audiences.   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: I’ve got my friend Chris Carlson CEO of NarrativePros on the line, Chris are you there? Chris: I’m here. Kelly: Great, Chris and I have known each other for many, many years. Chris is an actor at the Guthrie Theater in Minneapolis He’s also a lawyer and an entrepreneur, and I’m a big fun of his. Listeners are saying, why does he have a starving actor, lawyer on here? Before we get to your connection in to the banking ecosystem. A little bit of personal background. Chris: Minnesota residence, most of my life, three kids, I’m 46. I’ve been, as I said earlier acting professionally for 22 years. I’ve been an attorney for about as long. Kelly: Well let’s get into why I have you on BankBosun and your connection to the banking echo system. If you recall, I asked you to give a talk at a conference my company was hosting for banks and investment managers. I think we had like six or seven speakers there over a two day period, probably eight or nine I suppose. You got the highest rankings of anybody in terms of popularity. Tell me why you think that happened and what your value proposition, if you will, to the banking industry is. What was it that resonated with these bankers in that message? Chris: Absolutely, and I to think to answer as many of those question as efficiently as I can, it has to do with the value of genuine connections between individuals, whether that’s one on one or one to many, or many to one. The expertise that I have amassed over the years, is to how to efficiently create that. How to make that efficient, how to maximize the feedback that you get from any communication. Kelly: What does that really mean? Chris: Let me give you an example, bankers are smart guys. They tend to live in their heads when it comes to ideas. They believe if they have a great piece of advice, that that’s the end of their value. That I tell you to invest in stock A, because that will help you. But the real world has as much to do about that conversation and whether or not you say invest in stock A, in a way that is meaningful, whether it makes sense to them. Whether you’re rude, whether you’re cold or indifferent. The value of advice when it’s person to person, which is at the center of any banking relationship, depends on the connection between two people. It’s not whether or not I like you necessarily, but it’s I have to trust you. I have to respect you. I have to understand you absolutely. It has as much to do about that as anything. Kelly: How I perceive you or how a customer perceives a banker. Not necessarily how he really is. Chris: Well actually I would say that the goal is to have them perceive you as you really are, and we are many different people to many different audiences. You yourself are a father, a friend, a boxer. You will behave differently in the ring than with a client. What you need to do is harness what will be of the most value, and make the strongest connection with the audience that you’re in front of. That has to come from somewhere that’s true. One of the things that people often mistake is that acting is fake, and it actually has all to do with truth. If you see a good actor, you get them, you buy them, you connect with them. If you see a bad actor, you absolutely reject them. You don’t get it. It’s not real. Kelly: I think what you’re saying is that you learned this in your acting career. And as a lawyer, you practice this. But you learned this through your acting training to be real. Two scenarios, one is making a one on one presentation, and another is giving a talk to 20 people. What does your advice do in those two scenarios? Chris: My advice hopefully will encourage people to understand that their impact on their audience, whether it’s one person or 20 people, has more to do with how they say their message, and how they’re able to let people connect with them as real individuals. How they’re able to be themselves in a very genuine and authentic way, and then share the advice that they have. Far too often people, I call them left brain professionals. People who think a lot will sit in front of their computer and work on their outline in their PowerPoint and then get up and give it, without really spending much time on whether or not they’re giving it in a way that incorporates who they are. I think you, Kelly, are a good example of an effective delivery. That’s you, when I hear you talking, that’s the same Kelly that I hear when I’m having a conversation with in the coffee shop. People are drawn to that. For a banker to have an interaction with somebody, the more genuine they can be, the more that they can focus on that individual as a human being, and also share with them, themselves as a human being. That will make the advice that they give, that much more meaningful and valuable. In many ways it’s the same thing when they stand up in front of 20 people. It‘s genuine and real and to a degree vulnerable. That has a lot to do with fear that is natural, standing in front of a group of people or a high pressure sale. Anyway that you can wrestle that fear, and you kind of say look, “This is me, and this is what I have to say and I think it would be great if you used it, or bought, but if you don’t I understand.” That’s incredibly attractive for people to be around that kind of energy versus, “Look you really got to buy this and it’s really important to me. I don’t know what I’m going to do if you don’t, if you don’t buy this, if you don’t listen to me.” Even though it is important what the person thinks about you, or whether or not they take your advice or buy it. Showing that, gets in the way of who you are and their comfort quite honestly. Kelly: Give me a couple of takeaways that relate to preparing for a presentation and then three or four related to the actual presentation itself, beginning, middle and end that kind of thing. We’ve got some real solid takeaways, I can put some guiding principles here. Chris: Let’s start with the content, that’s where everyone’s comfort is, and most people will spend 100% of their preparation time working on their PowerPoint slides, and you definitely have to work on some kind of presentation, outline and some visuals do help. Number one, when it comes to the visuals, speaker support, PowerPoint, I would work as hard as you can to get rid of all the words quite honestly and just focus on graphs and charts, and pictures or visual creatures. There is a huge disconnect when somebody puts up a bunch of words on a slide, and reads them, or makes the audience read them. It’s just counterproductive and disingenuous to a live environment. You as the speaker need to be considered to be value bringer and you have to explain these things. I would say as few words as possible on any kind of visual support. The content in what someone says, you should outline in bullet points, words or phrases, but not in complete sentences. Don’t lock yourself into phrasing them, in any particular way. Let yourself react to those ideas and explain them, and that’s come off and it’s very authentic and genuine. Kelly: No words on slides. Chris: No words on slides. I would join the audience in cheering if I were to see less words on slides. It’s easy to do, and I think it’s actually fear. People are insecure and they’re like, ”Ah, I got to put all these words on here.” Well take the words off and say the words to people. Kelly: No words on the slide, that’s number one. What was number two? Chris: Number two outline your points in a way that you can speak to them in a genuine way instead, for example, I have been involved in the banking ecosystem since I was 22. Instead of writing that out and then reading it, you might just have something that says 22. You look at it and you say, “Ever since I was 22, I’ve been working in banking.” Let those words, let you work through the thoughts, so that the words come to you at that time. You have to have good notes but it will force you to pick the words authentically and people will hear that. That’s number two. Number three is when you pick these ideas and when you explain them, pretend you’re explaining them to your 92 year old father, or your grandma next door. In other words avoid jargon, you’ve got to be simple, direct and accessible, and I think that people who work in the idea profession tend to be complicated, inaccessible and you always want to be as clear as possible. Simplicity is not easy, it’s very difficult and working on that simplicity is an incredible investment in giving your audiences, who’s paying attention, a return of interest. They will appreciate you, summarizing things very simply and to button this third point off. Work very hard to summarize the single point that you have to make in one sentence. Imagine that your audience is walking out the door, and they don’t have time to hear your whole speech, what would be the one thing you would want to tell them. If you complain, oh no it’s too complicated, it can’t be distilled into one sentence, I would say to you that your audience is doing that anyways. After they walk out, someone’s going to say, “What did Kelly Coughlin talk about?” “Oh, Kelly is working on this cool BankBosun thing, that it’s needed, it helps out C-suite Executives in the banking industry.” They’re summarizing what you’re saying anyways. If you jump into their shoes and try to say all right, “What is the one takeaway from this? You’re going to help them do that. Kelly: That’s good, I recall again from that conference you spoke at. There was some prep work that you recommended. Chris: Sure, let me focus on one of them. A lot of acting technique or approach is focused on combating the nerves and stress of performing. That we appear, genuine, authentic relaxed. One of the truths of performing in front of a bunch of people is that you are nervous. It’s human, so what we want to do is make sure that we find another truth to counteract that. The best counter measure to stress is breathing. When we’re with our friends, or when we’re relaxed, or when we’re uncomfortable and not threatened, the human being breathes from the belly, they use … we use our diaphragm to pull in breath, and when you’re very relaxed, and actually if you watch your kids when they’re sleeping, you’ll see their stomachs go up and down. Now their stomachs are going up and down because the diaphragm is pulling in breath. When we’re nervous we tend not to breath from our diaphragm, our belly, we tend to take shallow breathes and it makes us more nervous and it changes our voice. Someone who’s really relaxed would sound like this, but if they were breathing … their voice goes up a little bit, and it gets a little breathy, and it’s just not as grounded. We can hear that, we feel that someone has a breathiness to their voice and it’s a little higher in pitch, but if you take a breath, and breathe from your diaphragm, not only does the pitch go down, but you can also project your voice further. You can talk louder. So breathing, putting your hand on your stomach and trying to train yourself to breathe so that your stomach flops out when you breathe in, is one of the most effective counter measures to stress and to get you back into yourself, to being a relaxed confident genuine person. Kelly: Let’s talk about, what are kind of some of the deal killers out there. The absolute be cognizant that you don’t do this. Chris: We’ve already touched on some them. These things would be anything that disconnect you from your audience; that separate you from them. For example, number one, the minute you start reading off of the slide, you’re not being in front of an audience genuinely. You’ve turned towards the screen, you’re reading something that everyone else is perfectly capable of reading. I mean that’s just a fundamental disconnect with one audience. “Hey buddy, I can see the slide and you’re reading it for me and it doesn’t make any sense.” Another one would be reading your speech which is very similar, and that’s telling the audience, “I’m not going to talk with you. I’m not going to share with you my ideas, I’m going to read what I wrote, and you’re going to listen to it.” At which point the audience feel like, well why don’t you just give me them for the reading, so that I can read it. Something that’s kind of fun, that I’ve uncovered, is that the average person speaks at about 150 words a minute. We can understand and we think at about 800 words a minute. That means that there is an attention gap. Every time someone starts talking over a couple of 100 words, where my mind is running circles around what you’re telling me. You always have to participate in that because if you don’t, if you don’t give them something to think about that is helping you, they’re going to think about something else. Kelly: Well don’t the non-verbal clues fill that void to a certain extent? Chris: They can, or they cut against it. Something that I was just doing some research on, hand gestures and body gestures. It’s fascinating, the neuro-scientists have studied it, and we use specifically our hands to make gestures, to help us think of a word, and so if we’re genuinely using our hands it’s because we’re trying to think of how to say something, but if you want someone who has prepared a hand gesture like a politician or a bad speaker. The hand gesture comes at or after what they’re trying to say, not before. In the real world, the hand gesture comes a little bit before what it is that they have to say. That’s what the hand gesture is for. When someone plans it, when someone says, “I think it would be good if I moved my hand like this.” They tend to do it in a way that’s very disconnected and fake, because we can tell that. Instinctively, they do it as you’re saying the word or phrase, or after it. That’s an example of another disconnection with an audience where they get the sense, and it’s an unconscious sense, it’s not, “My, he moved his hands in a way that was not matching with the phrase. Therefore I think he’s fake.” We’re not aware of that consciously but unconsciously we think to ourselves, “Wow this guy is a … he’s a fake, he’s not being real with us.” It’s very common. Kelly: Tell me about what should people do with their hands as a default, and then how should we stand? One foot, two feet, hands in the pocket, hands by the side? Give us a couple of ideas on that. Chris: It’s hard to do, but you forget about your hands. Don’t plan any gestures, let your hands go. Just like I was suggesting with your words to jot a note, and then let the specific words you use to express that idea come out in that moment. The same thing should be with your hands. Let your hands make whatever gesture. If you’re an Italian, outspoken hand gesturing person, that’s what you have to do. Kelly: Even if it’s a distraction I’ve been to talks where somebody will be using their hands, you end up following their hands the whole time. Chris: I would say to you that hands gestures become distracting when they’re not connected with what they’re saying. If they’re connected with what they’re saying, you’re not even going to notice them. You become attracted when they’re not connected. If someone has a non-verbal tick, if they’re just moving their hands and it has no connection with what they’re saying, yes it becomes repetitive and it’s a distraction. It’s just like someone who says, has a verbal tick and says um, um all the time and it’s distracting because it’s getting in the way of um, um what you’re trying to say. Kelly: What about movement on the stage? Chris: Less is more, when you start moving around, there’s a huge temptation because of nerves, the sympathetic nervous system, the fight or flight reaction kicks in, and people want to move and I see this so frequently with inexperienced presenters. They’ll start wondering around the stage, or they’ll shift away back and forth on their feet, and that is not connected with anything they’re saying 90% of the time…99. They’re just moving because they’re full of adrenaline and they feel like they should move. But, if it’s not connected with what they’re saying, it is inherently destructive. Why is someone pacing back and forth on the stage? It’s funny because I’ll get push back on that, people will say, “Well I’m trying to be more interesting and dynamic on the stage.” I have no problem with being interesting and dynamic, I have a problem, if it’s not connected with what you’re saying. When in doubt, you need to practice standing still because you’re going to want to move. Move if there’s a reason, move if it makes sense. For example, if you’re separating a point. In the first situation, the FED needs to do XYZ and I’m going to talk about this for a while. In the second situation, and then you can move on that, that might make sense. That’s an example, but that requires practice and planning. So I always recommend that people just stand still. Kelly: Do you prefer microphone that is attached to you versus attached to a podium, because you’re kind of stuck and glued to the podium, but is that your preference? Chris: Yes, a lapel or lavalier microphone allows you to forget about the microphone and that’s what you need to do with a majority of the technology that’s helping support you. Some microphone on a podium tends to trap you behind the podium, which is bad for a number of reasons. You have a temptation to lean on the podium, you’re blocked and a lot of your body language from the audience. You might have more of a tendency to look down. A lavalier microphones will allow you to just take one step to the right or left of the podium, and to find a comfortable position in front of the audience and be accessible. Kelly: That’s terrific, I appreciate that. Chris do you have a favorite quote to finish off here? I always like to get one Chris: Any good quote. Kelly: Good quotes. Chris: Good quotes. “In law, what place are tainted in corrupt but being seasoned with a gracious voice obscures the show of evil.” Kelly: Good one, Chris I appreciate your time on this, and good luck to you with NarrativePros, and we’ll be in touch. Anybody wants to contact Chris, feel free, Narrativepros.com, is that the website? Chris: That’s it. Kelly: Thanks Chris 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 interviews Wes Sierk, President and Co-Founder of Risk Management Advisors. Wes is the author of the book Taken Captive: The Secret to Capturing Your Piece of America’s Multi-Billion Dollar Insurance Industry. Wes is a recognized expert in using captive insurance strategies to manage and fund certain types of risk. Kelly Coughlin believes that such a strategy could be used to manage and fund cyber security risk. This is the first in a series of three podcasts covering captive insurance and cyber security risk management.   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: Hello this is Kelly Coughlin with the BankBosun. This is the podcast that’s the first in a series of three podcasts that are going to be related to using captive insurance strategy to manage and ensure cyber security risk and loss. I’ve talked to many bankers over my 25-year career and I have observed in the past five years cyber security going from a concern of IT guys and techno geeks to top of mind attention and concern of CEOs, CFOs and boards of directors. In fact, I was at a conference in Kansas a while back, and a number of the sessions were on cyber security risk. I was thinking, “Well, should we go to that? Should we not go to that?” We talked to C-level execs. These sessions were all standing room only, completely filled with C-level execs. It occurred to me that in this environment, we have potentially overpricing of all services related to the risk management of this risk including prevention, detection, hardware, software, consulting. I thought the subject of these 3 podcasts would be the transference of this risk. I think one of the areas that I detect as potentially being mis-priced is the cost of insurance, partly because the risk of loss is all over the map. We thought, “Let’s explore cyber security risk through a captive insurance enterprise.” To help kick this series off, I am interviewing Wes Sierk, President and Cofounder of Risk Management Advisors. I came across Wes through a book that he wrote, exciting title called, Taken Captive. That sounds good so far. Here’s where it goes downhill: “The secret to capturing your piece of America’s multi-billion dollar insurance industry.” I’m interviewing Wes remotely. He’s in Long Beach, California. Wes, you heard my introduction, and the reason you would be on this call, but let’s start with a couple of minutes on your background, how it would connect to bank cyber security risk management. Wes: Well first of all thank you for having me on the show. I started out in the insurance business in 1993 in a division of Northwestern Mutual, which was a life insurance company called CCI, Compensation Consulting Inc. Mostly what we did there is qualified and non-qualified planning, retirement plans and deferred comp, things like that. I came across captive insurance companies in 2000. My first thought was, it was a perfect alternative to deferred comp. That’s how I got into it. My background is … I’m a researcher, so I started digging into why life insurance was all the same. It was you go to a life insurance company and you get a 45-year-old male, and you say, “How much is a million dollars of coverage?” The insurance company prints out that ledger. If you had ten agents going to the market, they would all come back with the same quote. PNC is completely different. You actually have one broker who goes to the market for you and it’s much more of a negotiation, which leads into the pricing issues that you alluded to earlier in your call. My partner Jared and myself went on to form Risk Management Advisors in 2004 and all we’ve been doing since is just the design, implementation and management of captive insurance companies. On a personal side, married for about 24 years, two kids, I coach baseball, and Risk Management Advisors has a Nascar team. Kelly: Give us a definition in two sentences of captive insurance. Wes: It’s an insurance company that a business sets up to insure their own risk. It’s pretty simple. Kelly: It could be a bank? Wes: Yes. Instead of them buying their general liability, their cyber, their property, all of their coverage from AIG, Zurich, Liberties of the world, they actually form their own licensed regulated insurance company and they pay those premiums to their own company. They deduct those premiums, just like they would by paying any other company. Kelly: All right. In terms of primary motivations, my research shows that one, you’ve got access to cheap insurance rates because you’re paying them directly to your own carriers so to speak, right? You’ve got first dollar loss coverage, you can accelerate loss deductions, which appears to be a fancy term for you can over-fund the risk premium and build up tax deductible reserve. Are those the three core motivations to do this, or are there others? What’s the primary motivation to do this? Wes: I think you hit the nail on the head. One thing it does give you, if you’re an insurance company, is it gives you access to the reinsurance marketplace. Kelly: How much would a bank be saving? Are you talking 5% or are we talking 40%? Wes: Well it depends on the kind of policies they’re writing and the amount of risk that they’re willing to take. One thing is, the reason why reinsurance is less expensive is because the insurance industry, insurance companies, have thousands of employees. I read somewhere that the insurance industry has three times as many employees as the US Post Office. They do a lot of the processing of paperwork and claims and things like that, so they have higher overhead. A re-insurer can get away with having 5% of the employees of an insurance company, because they only attach at a certain level whether that’s 50, 100, 250, a million, whatever. They’re not getting involved in the day-to-day operations of the insurance company and the day-to-day pay out of claims. That’s left to the insurance company level. We see, for regular insurances, I would say you could see a 30% savings over your traditional insurance. Kelly: In the banking business we have what are called banker’s banks, and they provide banking services to banks. They don’t do anything directly with the public. So would a reinsurance company be an insurance company’s insurance company where they provide services only to another insurance company, so you cut out all of the sales process I suppose, the distribution expenses? Aren’t those the core things that are cut out plus the servicing part because they’re not dealing with million to 20 million dollar cases, they’re dealing with whatever the number is, 50 million or above, the larger ones? Wes: You’re exactly right. Your analogy is very good. Where bankers have banker’s banks, this would be like an insurance company’s insurance company. Kelly: If one were going to set up a captive, that entity would have to also sign up, unless they were going to absorb all of the risk themselves, which is unlikely. If they want to transfer or share some of that risk, they have to set up relationships with reinsurance companies, correct? Wes: Correct, unless they want to take that risk themselves, which we don’t usually recommend the first couple of years. Kelly: I suppose companies like you, this is not an infomercial for your group, but is that part of what you do, is you have these relationships and there’s probably some vetting process that you would go through to bring on a new captive client, I suppose, and introduce them and negotiate terms, etc with the reinsurance company. Is that one of the roles that your company provides? Wes: Yes it is. Clients come to us because they want us to set up and manage their insurance company for them; deal with the departments insurance; do all of the regulatory filings and in most cases, not all cases but most cases; they’ll have us go and negotiate the reinsurance contracts for them. The good thing about reinsurance, reinsurance is always sold net of commissions, unlike an insurance policy where you pay an insurance agent, we’re just negotiating on behalf of the insurance company as a manager of the insurance company. Kelly: That’s where the big savings comes from. Wes: Yeah, there’s a lot of savings in that. I’m not going to begrudge brokers because brokers bring a tremendous amount of value to clients. Kelly: There are a couple of ways to set these things up from what I can tell. You could set them up as a single parent captive or a group pooled collective type where you have a group of banks. You have a single bank, Bank A that decides, “We’re going to set this up.” It’s only one bank in there. Then you have a pooled or group approach where you have Banks A and B setting up the collective. They either do it alone or with others, like kind business I suppose, right? Is that a fair assessment? Wes: Yeah, they either do it by themselves or they do it with other people. Then within the other people, there is many different ways they can do it. Kelly: You know the context and setting that this call is about. It’s specific community banks, cyber security risk, captive insurance. If you had to Google this, those three terms would be in there. One other risk if you do it as a group or collective, let’s just say there are two banks in the collective – you have Bank A and B that are, let’s say they’re putting in an equal amount. Let’s say Bank A has great internal controls and risk management processes, Bank B has terrible ones. Bank B incurs all the loss and Bank A has insured it all. There part of the reason was to put in a bunch of excess premium perhaps, build up this reserve. Then you have Bank B eating up all the reserves. Is there a way that a bank can set up a hybrid of this where they could share say, the operating expenses, maybe consulting expenses, a number of things related to the entity? It could be another class of stock, something where the actual risk is only absorbed by the individual bank and ultimately a reinsurance carrier downstream. Wes: There could be, but I wanted to go back to one point you made, which was Bank A has great internal controls and Bank B doesn’t. The issue with cyber security is many banks have good security or great security, but it’s also the luck of the draw. The person with bad security could be fine and the one with great internal controls could have that one in a million chance where somebody comes in and breaches their security or takes millions of dollars out of their company. Within the group captive there’s also cell companies. You can have a cell captive. A cell captive is one where it basically looks at and smells like one large insurance company but each individual bank has its own cell, so they kind of wall off the assets and liabilities on a bank by bank or cell by cell limit. That could go a long way to protecting the bank. Then you go get one reinsurance treaty for all of the banks, and then you carve it off. You go get 100 million dollars of coverage and you carve it off at 5 million dollars per bank for twenty banks. The insurance companies like that because they know that if they’re writing 100 million dollars in coverage and they basically divided it at 5 million between twenty banks, they know their chance of loss is actually smaller. The frequency may be higher but the severity probably wouldn’t, and that’s where they get into the pricing. They’d much rather spread it 5 million over twenty banks, than one bank have a 20 or 25 million dollar claim. Kelly: I accept your point that Bank A may have great controls and Bank B not, but Bank A could be hacked, right? I understand that’s a valid point, but I think in this environment what is going to happen is certainly you have the Top 10 banks, they’re the high-value targets of cyber criminals. They have the budget to always attempt to put up the adequate defenses to that. I fear what is going to happen is the less target-rich environments like community banks will, as the Top 10 banks for instance, get better at defense, then the smaller community banks are going to be the target and they don’t have the resources to fund that. It’s an expensive undertaking. where you’ve got hardware expenses, software, consulting, insurance, all of this stuff, and staff of course. My thinking was that you set up this captive and you develop best practices. I’m going back to my PWC days in consulting, where in consulting business you’re always looking for best practices, but you develop best practices and you share the costs. You buy them properly, buy them at the right price, right terms, etc, and then you share the cost over twenty entities and not one community bank. The reality is these banks can’t afford to set up the high-level controls that a Top 10 bank can do it. Wes: You’re exactly right. It’s the philosophy of build your ark before the flood comes. By creating their own insurance company and warehousing dollars today, because of the way the policies are written, they basically expire every 15 months. If they are the targets of cyber criminals three years from now, they would have already stockpiled a ton of money, so they can weather a claim if they have it and maybe not have to hit their reinsurance. To your point, we both know what’s happening in the cyber marketplace as far as the premium dollars in the traditional market. The reason why … it’s because insurance companies are doing the exact same thing. They’re charging exorbitant fees today because they don’t know how big this is going to be. It reminds me of the old asbestos claims. Remember when asbestos started being a problem? All of the insurance companies started raising their rates dramatically. Then what happened was, a couple of smart insurance guys said, “You’re charging $700,000 for a million dollar general liability policy for asbestos, but if the people actually get hurt, it’s going to be a worker’s comp claim.” It’s not going to be a general liability claim, but the insurance company hadn’t thought that far ahead. They just wanted to get as many dollars in their coffers as they could in case they got hit. For cyber, you went to that conference … you’re exactly right. Five years ago it would have been just the IT people and you’d have fifteen people in the room. Now it’s actually the C-level. It’s CEO, CLO, CFO that are doing this. Kelly: The board members are the ones that are saying, “Get to the conference. I want you there.” They’re telling their CEOs to get there. Wes: It’s huge. It’s such a huge problem. I was just reading an FBI report on cyber crime. Their prediction is all businesses in the next five years will be spending at least 10% of their gross income on cyber for protections and hardware and software, and everything. You can’t even fathom that today, but it’s coming. Now we have passwords on top of passwords to get into password programs. They listed off that the FBI did a study and they went into the Apple iTunes store where people get the applications and they have all these password programs. 10 of the top 20 were programs that were sold that said, “Number one password protector.” They were sold and designed by organized crime, downloading these programs for their iPhone and their Androids, putting all their passwords in, all their banking information, and all that stuff was being directly fed to Russian organized crime. They don’t have to steal cartons of cigarettes anymore when they can make 20 to 30 million dollars in one financial transaction. Kelly: Absolutely. Wes: It’s staggering. I can see why these board members and CFOs and everyone else would be concerned about it. It’s a big issue. One of our clients was just hit with it. Kelly: Let’s say we set up Newco captive insurance for community banks. You set up as part of this synthesis of best practices and captive insurance for cyber security. I’m going to throw in another term, “best practices.” I don’t necessarily think they’re into gouging. They just can’t efficiently price it because the risk parameters or the level of risk that they’re taking on an entity basis per entity, per insured, is all over the map. When you take in a company to join the captive … would you call them a shareholder? Wes: Yes. Kelly: Okay. When you take a shareholder, they have to adopt the best practices standards that the new captive insurance carrier says. Does that make sense, that would be part of the admission process? Wes: I would say you definitely want to do that. Some insurance companies, it’s really a risk assessment for cyber preparedness. There are some insurance companies that have done a great job at this. In fact, one of them, these people developed this cyber preparedness company for Ace and Chub insurance company, as freelancers. They said, “Well we want this to make sure.” For them they realized that, “Hey, there’s a real market for this.” They basically bought company back for nothing. This was a few years ago. They’re like, “Well this isn’t going to be as big as we thought it was.” That’s all they do is analyze cyber preparedness. They give you a full report. We just had them come into ours because we have a lot of data in our stuff. We have a lot of HIPPA stuff because we run insurance companies for medical, for example. They gave us a whole big report of change this, change this, change this, and some stuff you’d never even think about. You’re like, “Whoa.” The cost to do it … I thought it was going to be very expensive but it was nothing on the scale of things. Kelly: You just hope that they’re not owned by the Russian mob, right? Wes: Yeah, exactly. Three of my clients had used them and the one that just got hit for cyber, their system was set up in such a way where they were instantly notified that this was happening. This was a server in Toronto. Instantly they had to switch the whole thing offline. They flew two of their internal programmers from here in California up to Toronto. They were back online in under 24 hours without an ounce of data. I’m like, “You know what? I’ve got to have your people come in and do this.” This is a company that does 100 million dollars in sales. I think everyone should be requiring this. Kelly: I think there’s some really cool things you could do when you have many entities splitting the cost of this. I’m certainly set up best policies, procedures, all that kind of stuff. You could buy licenses. You get quantity discount, volume discounts there. There’s a lot of benefit to having a larger group in there. Even just the project team, these banks don’t have the resources to have a really good project team to do a good vendor search, for instance. That’s a costly undertaking in and of itself is, “Well what email provider should we do?” They just don’t have the resources free to do that. You threw out the 10% number. My goal would be to let’s set it up so the goal we could make that a 5% of revenue number, not 10. Wes: Or 1%. What I was saying was, that was what the FBI’s projection of what people would be spending on their cyber stuff was. In my business, I can’t even fathom that. We spend all this money a year on hardware and software, and our business is X. If I were to extrapolate that out to say, “Well how much would we do if we did 10%?” There’s like, “There’s no way.” We could buy server hubs. We could buy everything. I guarantee you if you picked ten of your banks who listen to this, one of them is doing something great that the other nine aren’t, and so having a depository … You say, “Hey this was a great idea that this bank is doing and then you could take it over to the other one.” Kelly: Yeah, but what happens, Wes, is that everybody is going to these conferences. They get the heck scared out of them, they come back and they talk to their IT guy and say, “You know I just went to a conference. We’ve got to start controlling this risk.” Then they look at it and realize that, “Oh this is going to cost $100,000? Oh I guess we can’t afford that.” There’s plenty of ideas out there. There are some great ideas and there is some not great ideas, but there’s loads of ideas. Taking the idea and having the resources to actually implement is the big challenge. I believe that the captive program is a way to pull those things together buy cost-efficiently, do vendor searches efficiently. It all comes together there through that thing. Yeah, there are some tax benefits by throwing in higher premiums, that kind of thing. That’s great but I don’t think this is primarily a tax-driven … It just so happens that taxes will be favorable … favorable tax treatment. I really think it’s the cost-effective way to manage risk and to get best practices adopted in community banks throughout the country that otherwise just can’t quite afford it in their budget. Wes: I was going to say, and you’re using double duty dollars. Right now if they buy cyber insurance from AIG, they’re not getting internal controls, they’re not getting all of this due diligence, they’re not having somebody come in. They pay them and then if there is a claim … They still on top of their premiums have to go out and do the best practices and do all of the stuff to make sure they’re secured vs. paying premiums to their own company. Let’s say the insurance company takes 10% of all the premiums that it takes in from all the companies and then uses that to go in and install the best practices and stuff, so you’re actually using money that you would have just given to somebody else to now improve your overall business operation. We’ve had people do that with worker’s comp where, hey they can’t afford a safety guy and their worker’s comp rates have gone up, so they create their own worker’s comp company and now they use the money they were giving to Liberty and AIG and all these other companies to hire their own full-time safety person. That’s actually now just an expense of the insurance company vs them having to take money out of the bottom line of their company. Kelly: One other thought that’s a great image that I have of you is set up this captive, you have fifty banks involved and you also fund a cyber security SWAT team comprised of Navy Seals and Rangers that are deployed in the event of some ransom war type deal, right? Then they get engaged, they’re ready to go, and then they go out and take them down. Wes: Yeah, that’s a great idea. Kelly: Otherwise it’s a call to the FBI and okay, they do great work, granted, but man it’d be nice to have our own team. That could be Phase 2 down the road. Anyway, let’s wrap it up. I really appreciate your time. Let me ask you this. Do you have a favorite quote? Wes: Yeah, well I do but it’s a Ayn Rand in Atlas Shrugged they talked about Rearden Metal and it was going to be too expensive to rebuild these bridges for the trains using Rearden Metal because of the engineering. The quote was, “When men got structural steel, they didn’t use it to build steel copies of wooden bridges.” Kelly: Good one. Wes: I look at captives and things like that as you can use it as a powerful tool to do something in a completely different way. You don’t have to just use it for the same way you were always doing stuff. I would say that would be the first one that popped into my mind. Kelly: What’s the stupidest thing you’ve ever done in your business career? Give people a laugh. Give people a chuckle here. Wes: Oh, I have an album on my bookshelf. You know Bill Withers, “Lean on Me”? Kelly: Lean on Me and “Use Me”. Wes: I got an appointment. His wife called and wanted me to come talk about overall financial planning and stuff. I went to see him and I’m like, “I love your music. I love the movie and everything.” They’re just sitting there like uh-huh, uh-huh. The meeting didn’t go well and I left there. I had it confused with Stand by Me instead of Lean on Me. My dad found this Bill Withers album and he said, “Keep this on your bookshelf and any time you don’t know the answer, you won’t make a complete fool of yourself.” Kelly: Oh that’s a great one! That’s very good, I love that one. All right, Wes. I appreciate your time. How can people contact you? Wes: Yeah, my website is Risk Management Advisors. It’s riskMGMTadvisors.com and my email is WSIERK@riskMGMTadvisors.com. I create a website that’s not branded by us, but it’s captiveinsurance101.com and it just has general info on captives. You were kind enough to mention my book. The book is called Taken Captive and it’s just takencaptive.com 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 interviews Adam Mustafa, Invictus Consulting Group who talks about CECL and some of the challenges banks have in accounting for future credit loss.   elly 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 with the BankBosun. I’m going to do an interview today with Adam Mustafa, who’s one of the founders of a company called Invictus Group. There’s been so much discussion in the last couple months on this new CECL regulation that’s coming down the pike here this year some time that deals with how banks are supposed to be valuing and estimating their credit loss. I read a report that Invictus put together, a 2016 regulatory outlook. I actually did three blog posts on it, so you can go to the blog section and read those, as well, and then I’ve appended the Invictus report, as well. With that in mind, I’ll get Adam on the line. Adam, we’re going to talk about some things that are relevant to the bank industry. Why don’t you give us some background on yourself, on Invictus. I see a Mustafa name at the top of the letterhead. I assume that’s a family member. Adam: Yes, my father and I co-founded the business, and like I tell everybody I’m the smarter, better looking version of him. I do all the work, and he gets to take all the credit. In all seriousness, we started the firm back in 2008 right after the financial crisis began. Today, our bread and butter is providing community banks with strategic advisory services that focus very heavily on using analytics to get an edge in terms of acquiring other banks, being able to analyze those banks and know those banks better than they know themselves, and using analytics also to customize their own capital requirements with their regulators in the face of increasing regulation and the implementation of Basel III. Kelly: You were with Deloitte Touche for a while. It looked like a number of your other guys came from the banking or investment banking circles. What’s kind of been the genesis of the partners? You and your dad, where did you guys come from? Adam: I’ve been very much an entrepreneur. I consider myself an entrepreneur first and foremost. I did work at Deloitte, and I was in their business evaluations group. I worked on Wall Street as a junior grunt earlier in my career. I’ve seen commercial banking and investment banking from a variety of different angles. My father’s background is far more impressive than mine. In many ways, a lot of the techniques we use today, my father learned from the great Walter Wriston at Citigroup. My father worked at Citibank in the late ’70s through the mid-’80s, where he was responsible for all mergers and acquisitions, including Citibank’s acquisitions of other financial institutions. He is a disciple of Walter Wriston. Again, a lot of the techniques we use today were originated by Wriston, and we’ve just updated it for today’s times. That’s our background. We like to say we put the A back in ALCO. What we do is, on the one hand, innovative, because as soon as the 2008 crises occurred, the conventional techniques for analyzing banks all broke down. We’ve developed new analytics, but at the same time, they go back to the fundamentals of banking. You could trace their origins back to the ’60s and the ’70s when Walter Wriston was running Citibank. Kelly: So now we get at the name Invictus and Invictus Group. Can I assume that it comes from the William Ernest Henley poem, “I am the master of my fate. I am the captain of my soul,” that type of Invictus, or is it another genesis? Adam: Yes, sir. You hit the nail on the head. In many ways it was very much a metaphor for the times we were in, circa 2008, 2009, when we were in the depths of the financial crisis. Nobody knew exactly what was going to happen, but everybody knew that the industry was never going to be the same. Kelly: Yeah, one of my favorite stanzas from that poem, it describes 2008 pretty well. It says, “In the fell clutch of circumstance, I have not winced nor cried aloud. Under the bludgeonings of chance, my head is bloody but unbowed.” It describes how many of us went through a very tough period. You also had some experience with the famous Jim Cramer. What was that like? Adam: I was with him long enough to have a cup of coffee. I don’t even think he would remember my name, although he called me Ace for some odd reason. It was a great experience because he is obviously very well-known and very well respected. He’s got a method to his madness, so just being able to observe him, even though he didn’t know my name, to watch him go about his day, watch him go about his process, I learned a heck of a lot from him. I’d actually tell you what I learned was that I don’t want to be a stock picker because that job is not only very difficult but is very short-term oriented. It is very focused on what companies are going to report quarterly earnings better than what the analysts thought. It was very focused on what tomorrow’s economic indicators were. It was too short-term oriented for me. And so if nothing else, I learned that I wouldn’t make much of a stock picker. Kelly: Let’s get right into it. I’ve known about you guys for a number of years, and I have great respect for the work that you do, but what got my attention I’d say most recently was this 2016 Regulatory Outlook. As I was pouring through that, it’s about a fifteen or twenty page report, most of which most CEOs and CFOs won’t read because it’s too long, I went through it and parsed it out into three components. One was a regulatory compliance cyber security thing. Part two was balance sheet risk management, and then part three, which was more board-level issues. Just briefly I want to skip to part two that got my attention. “Invictus research found seven hundred and fifty banks with commercial real estate concentrations above 250%. Regulatory guidance suggests banks have unhealthy concentrations.” That seems a lot. Adam: Yeah, it’s very hypocritical when you think about it, because on the one hand, there is these concentration ratios that are essentially monitoring community banks, in terms of their exposure to commercial real estate, but at the end of the day, that’s what community banks are. They are commercial real estate lenders. That’s what nine out of ten of them do. In many cases, of course they’re going to have concentration ratios in that range. The regulators tend to use 300% as a threshold, and if a bank goes over 300%, that’s when they will examine them a lot more thoroughly, but that’s what community banks do. Community banks, they’re like any other for-profit business. They’re in business to make money, and they have to make loans to make money. If you try to limit the number of loans they can make, then they won’t be able to make enough money, especially in this environment. And then on the other hand, if these ratios start to push them towards other forms of lending, such as C&I, then all of a sudden they don’t have expertise in C&I. It can be very dangerous making loans in areas where you don’t have an expertise in, and then the regulators will come after banks for venturing into lines of business where they may not have what they need from a skill set perspective. If they make too much of the loans that is their bread and butter, then they’re going to come under scrutiny, but if they try to diversify, they’ll come under scrutiny for getting into lines of business that they’re not familiar with. Community banks are in a very tough position. That being said, I understand where the regulators are coming from. When you look at the carnage of the 2008 financial crisis, and you study banks that failed and got into heavy trouble, there was heavy concentration. The key is, let’s evaluate the spirit of what’s happening. The spirit of what’s happening is that regulators don’t want banks to fail, but at the same time, banks got to stick to their bread and butter. At the end of the day and we work with a lot of banks who are over that 300% threshold. At the end of the day, the regulators will be comfortable, and a community bank could have a concentration level at 500% to capital, but they have to demonstrate to the regulators that they have the toolkit from the perspective of risk management, capital management, and the sophistication to manage that type of risk. Kelly: On this CECL business, what is the basic difference between from what banks are doing now in doing some sort of loan loss reserve? There seems to be this discussion on the life of the loan, and replacing and incurred loss approach with a lifetime expected loss estimate. It seems like, on origination, FASB and the regulators are going to say, “Okay, when you originate the loan, we want you to estimate how much you’re going to lose on this loan on origination.” When they do the loan, they’re not really expecting that they’re going to be losing on the life of the loan. Every credit they grant is estimated to be a good credit, so what is the difference here on the approach that they’re doing now, which is a basic allowance system possibly based on past results, versus this lifetime expected loss estimate? Adam: The primary difference is that CECL is designed to be forward looking, whereas the current process for recording a loan loss reserve is backward looking. That’s the primary difference. Kelly: Backward looking on their entire portfolio, not with that particular credit, but their overall portfolio, correct? Adam: Yes. Let’s examine quickly how banks today calculate their loan loss reserve. It’s actually very simple, but you could then see how broken it is. By the way, I’m not advocating here for CECL, but the one thing I can tell you right now is the current way of calculating ALLL (Allowance for Loan and Lease Losses) is a joke. Let’s start with what banks do as first step. They take all of their high quality loans, they call them pass-rated loans, or loans that are currently doing fine, they put them into pools, and they will calculate how much they expect to lose off that pool, but that calculation is based off their historical loss experience. It’s backward looking from that perspective. Then with the loans that are in trouble, they have to actually analyze those loans individually, and they will look at the collateral position of the loan. They’ll look at the borrower’s financials, and they will estimate using that data, which is also backward looking, how much reserve they need to have against those individual loans. Then you’ve got this third bucket. What CFOs will refer to is as is “qualitative factors”. Qualitative factors is the plug right now, the band aid that’s trying to bridge this gap of the ALLL being backward looking, and the idea that their own loss reserve should be forward looking. Essentially, these qualitative factors is like throwing darts at a board. The CFO or the chief credit officer will look at economic conditions locally and then add plus or minus 1, or 10, or 15% to these scorecards, and then they’ll try to use these score cards to pad their ALLL. The irony is that this bucket, these qualitative factors, for most banks is actually representing 90 or 95% of their loan loss reserve. 90 or 95% of bank’s loan loss reserve today right now is based off throwing darts at a board. Frankly, that is not effective. The irony is, is that although studies have shown that CECL would hurt banks and would require banks to add to the reserve, we actually don’t see that. For strong, healthy banks, this bucket of qualitative factors is such a large component of their ALLL. We actually think CECL would help a lot of banks because it would demonstrate with more science and far less art how actually less risky those loans are, depending on where and when they were originated. Kelly: Those qualitative factors that you mentioned, isn’t there a bit of an issue as to how that data is captured. Some of it is captured maybe in memory, some of it’s captured in a Word document, maybe it’s in Excel format. It’s not like there’s a standard input of this type of data, number one, and then number two, isn’t it true that much of that data is kind of subjective? Adam: That’s exactly my point. It’s like throwing darts at a board. It’s highly subjective. It’s 99% art, 1% science at the most, and yet these qualitative factors, the number coming out of that bucket, is representing 90 to 95% of a bank’s loan loss reserve. Kelly: Okay, but they’re still under the duty to try to compile that data, correct? That’ve got to collect it and compile, and then make some decisions based on that, right? Adam: There’s not a lot of data, that’s the problem, for them to collect. Many of them are doing their best to try to collect local or national economic data and try to interpret that, but it is literally like throwing darts at a board. Therein lies the problem. This is why the FASB wants to replace how banks are calculating their loan loss reserves now and replace it with CECL. If you went back to 2008, and you studied what happened in the crisis, a lot of banks didn’t have enough in the reserve. When we’ve done this, if you study failed banks and you looked at their loan loss provisioning, you would see zero, zero, zero, zero, zero, and then a huge spike in one quarter, the quarter where the regulators showed up, and all of a sudden, the banks is under-capitalized and then two quarters later they fail. There was too much volatility. The ALLL itself is highly subjective, easy to manipulate, especially for larger, publicly traded banks. The current system for ALLL completely broke down in the financial crisis, which is why FASB proposed CECL. Kelly: Wouldn’t it be true, though, that the qualitative factors that you mentioned that led to the ALLL analysis or result, those qualitative factors will help guide the CECL analysis, correct? Adam: CECL’s going to replace that, because the regulators know, FASB knows that these qualitative factors are a joke. The qualitative factors right now is a band aid. FASB wants to improve the methodology for the reserve in instead of relying on these qualitative factors. They want to have a lot more science to the process. They want it to be far more forward looking. That’s why they want to implement CECL. Kelly: I was under the impression, though, that some of those qualitative factors were part of the calculus of CECL, though. Adam: The spirit of it, yes. The spirit of the qualitative factors right now in the ALLL is to basically say, “Yeah, we know when we calculate our loan loss reserve off our pooled loans and our individually impaired loans that that number’s not big enough because economic conditions could change, and economic conditions right now are fragile, albeit, we’re in this recovery driven by artificially low interest rates. We know enough to know the environment is fragile. We need to find a way to capture that in the loan loss reserve, so let’s come up with these qualitative factors to fulfill that. It’s not a great approach. Kelly: The basic formula is something like probability of default, times exposure default, times loss of the given default, and that equals CECL. On that probability of default, therein lies the subjective element to that, correct? Adam: Any forward looking model is going to be dependent on assumptions, and assumptions will vary in terms of how much art and science is contributing to them. The methodology you just described, it is one methodology that is being recommended for CECL compliance. It’s probably going to be the most used methodology. The key assumptions such as probability default and loss given default themselves will require some subjectivity or art to it, but there’s a lot more science that can be used in that process. That’s how we work with our clients. Kelly: All right, so let’s move to the bigger picture here. Give us your take on this whole CECL thing. Is it a crisis? Is it something that CFO’s and CEOs and boards should put at the absolute top of the front burner? What’s your take on it? Adam: I think CECL doesn’t need to be so complicated. I think there are vendors who stand to benefit from CECL, who are either subconsciously or consciously creating the perception that CECL’s going to be far more complicated than it really need to be. Kelly: Both of us worked at Big 6 accounting firms in our early careers. I can picture, I was at PWC, and you were at Deloitte Touche? I mean these guys must be licking their chops at the size of some of these engagements, don’t you think, to get in there and help these banks out? Adam: Yeah, absolutely. Take your typical community bank where it’s hard enough to make money in this environment. Our perspective on it A) this could increase my loan loss reserve, which is going to decrease my earnings and my capital, and B), the cost of putting the system in place for even doing that calculation’s going to cost me money now. From a community bank’s perspective, I completely understand the concern. That being said, let’s set the record straight. CECL hasn’t yet been passed. They’re talking about early half of this year where they’re going to make a final decision on it, although, they hinted at the end of last year it’s likely going to happen. They also said there’s going to be a five year runway for compliance. So I don’t think community banks need to overreact to CECL. I think they need to develop a plan for CECL readiness, but I don’t think they need to rush into anything. I don’t think they need to panic about it. At the end of the day, CECL does not change the actual risk of a loan. If I make a loan to you today, the risk of that loan hasn’t gone up because of CECL. Maybe how I account for that risk has changed, but it doesn’t change the spirit of making loans. That all being said, here’s some things that community banks should be aware of. You know we talked about the life of the loan, but the other thing that community banks need to be aware of is the vintage of the loan matters. If you have a properly built CECL model, what you will find is that the risk profile of loans made during the early part of a credit cycle will actually be very low, but if you’re making a lot of loans in the late part of a credit cycle, the risk could be very high. If you’ve got the system in place, you’ll be able to analyze that and not just have the accounting treatment reflect it, but more importantly, it will highlight your strategic decision-making, and it will help provide community banks with a sense of the risk/reward trade-off of making new loans in different environments. What we found is, the time to make new loans is in the early part of a credit cycle and not the second half of a credit cycle, and CECL will just bring that point to the surface, but it doesn’t change the actual risk profile of the loan itself. Kelly: All right, let’s wrap it up. Do you have three to five takeaways you want to leave the bankers with? Adam: I’m just going to leave you with one takeaway. It’s a quote that summarizes everything that we’re seeing in this environment, CECL being one aspect of it, which is, “The worst loans are made in the best of times.” The opposite of that is actually also true. A CECL model will quantify that point, but with or without CECL, that point holds true, and community banks, from a strategic planning perspective, really need to think hard about that. Kelly: That’s a good one. 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 talks to Kevin Chiappetta, CFA, Financial Institution Management Associates Corporation about bank portfolio stress testing tools that are being utilized to help banks get prepared for the new FASB rule and CECL   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: Kevin, I came across FIMAC I think, at a conference in Wichita, where I met your CEO, Greg Donner. I think Greg made a presentation there that I thought was really interesting. Let’s just start out with a little bit of just brief background, Kevin, of who you are. Then we can do a deeper dive into what FIMAC does, and what you see going on in the market today. Kevin: I appreciate the opportunity. Living in the Milwaukee area, my wife and I are the parents of two recently grown children. We’ve got one out of college, living overseas. We’ve got one who’s in college not too far from you, up in the St. Paul area. Kelly: You came over from your executive director from a company called Balance Sheet Solutions. Kevin: That’s correct. Kelly: You guys are in the space of helping banks manage their balance sheet … Both their assets and liabilities. Correct? Kevin: That is correct. We actually are two different approaches on that. We consider ourselves a technology company. We do provide the tools to do that. There are a number of them in the market place available at different price points. Different models which accomplish the tasks with slightly different variations, but we also are the consulting side of it. We use those tools to help the financial institution understand the risk that’s inherit in that, and use that risk information to make different decisions. We also want to be able to lend the expertise that we’ve been able to accumulate over the years. Both from bank CFO positions and other consulting firms to help them understand that information. Help them build that information better. Having the technology is fantastic. It’s helpful, but understanding how to use that technology is really where we’re kind of moving forward with our firm, helping those institutions understand what all goes into using technology to make better decisions. Kelly: The first point of entry is technology. Give them some tools. They start to use it, and they think that it probably triggers more questions than answers, so they need help implementing it. You’ve got a consulting area that helps the bank from that point. Kevin: Precisely. Kelly: What are some of the different business models out there to help the bank with their ALM? Kevin: The most basic approach that we’ve seen is the technology side. Here’s our model. Here’s what it cost to run it. We can help you move data in and out. Here are the results. We provide that series of results in a report, and you’re off on your own. There is some benefit to that. Obviously, it tends to be more of a low-cost entry. For those who are well-versed in that type of thing, it might be advantageous. We can see all the way up to the full consulting as we’ve described it before. We know that there are a number of competitors in the market space that provide that as well. We see some of this provided by firms who offer other product lines. Perhaps a broker dealer could offer something like that under a different feed-based arrangement, so we see a number of different ways to pay for that service. Whether you’re paying through a soft-dollar transaction type of thing that doesn’t show up on the income statement, or more on the straight feed base. There are probably three or four different ways, I think, that we see financial institutions using this information. Where is it coming from? Who’s running it? When we start to compare the models themselves, we get into what type of random number generator is being used to create rate paths and some of the more geeky stuff that comes along with the rate models. We can start to split hairs as to one model comparison to the next. I think the business side of it really breaks down into a model-only on the left-hand side, and on the right-hand side, the full-in consulting. Either you are or you’re not a full service on the consulting side. You’re just merely providing the service that brings the data in and pushes the reports out. Kelly: You certainly have plenty of brokers that are trying to jam municipals and securities into the asset side. Right? That’s one component that is somewhat of a unique approach that you guys have. Kevin: Without a doubt. We’ve run across some of those models. I don’t want to be overly disparaging. It really cuts back to something. We want to make sure as an organization that we separate duties. We do that in a lot of different areas. Those who are responsible for money coming in versus money coming out. To the big duties, we try to make sure that we split the risk-taking and risk-measuring. When you start to combine those two duties you open up the opportunity for one to kind of crowd out the other. When you have advice that’s given on an overall risk-management standpoint for somebody who’s being compensated for selling you risk, it doesn’t take long to see that the opportunity to create more risk than you wanted to was there. I’m sure there are very good people doing that modeling, but when it comes down to it at the end of the day. Whether I eat or not is dependent on you buying risk and adding it to your balance sheet. The opportunity to create an environment that looks like you can absorb more risk is clearly there. Personally, I just don’t think that you’ve done enough effort to separate those two duties to make sure that conflict of interest is removed if you’re getting the information on your risk-management and acting on that from the same place. It creates too much room to create errors either willfully or otherwise. Kelly: In other words, if you’re going to accept the business model where brokers drive the decisions, then you better have done your preparation and homework beforehand so that you know exactly what you need. Don’t let them decide which assets sit inside the bank’s portfolio at the inherit conflict. Is that a fair statement? Kevin: Yeah. I think that’s a spot-on statement. Clearly, to create these risk reports it requires a certain amount of judgement to go into some of the assumptions. I don’t want to get overly technical but if you look at the liability side, it requires a certain amount of assumption. You need to understand the impact of that assumption has on the result. If my main motivation is to sell risk asset, I can make an organization look more or less risky depending on what is necessary. The opportunities exist for that to happen. Any time the opportunity for that conflict of interest opens itself up, it has risk managers and organizations who are responsible for managing that risk. I think it’s imperative that we try to close off those opportunities. Whether or not you believe they’re there. The opportunity for it to be there and anybody with a suspecting eye is going to be drawn right to that, taking that opportunity for that risk-management problem off the table. It just goes a long way in proper governing. Kelly: All right. Another approach, that I’ve seen in the marketing out there, might be to outsource it completely to another investment management firm where they will take on the entire function. They’ll take care of finding and executing the trade. Presumably, not with their own broker, I would imagine, but in theory they could. They could be a broker dealer, they could be an investment adviser, and run the trade. Do you see much of that going on? Kevin: Yeah. We do see some of that. Some of my background comes from that particular business model, whether with or without the dealer side. It’s not too dissimilar from the role I described earlier on our consulting side, where we spend a great deal of time getting to know the organization and working along with them. In essence, being an outsourced CFO, or finance division if you will, we create that role and play that role within the organization. Along the lines with that business line, however, it’s imperative that you don’t simply take it off their table and say, “Go focus on lending,” or “File your table reports and everything will be fine.” It’s imperative that you become part of the organization, provide the information, the education, and help them understand what’s going on with that decision-making process. It might seem easy, say, in February now to come up with the reports from the year end, then tell them where they are and what they can do, but along about April, May when they need to answer for an exam a process , “ Where did those numbers come from? How did you make that decision process?” I can’t think of something that would go worse in that exam process than not being able to answer a question because you just don’t know what’s going on behind the numbers that created that decision. However, we approach that. If you don’t include management in the decision-making process, I think later on there’s going to be some difficult conversations you’re going to be having. Kelly: Why don’t we talk about what’s going on with this new FASB ruling, the current expected credit loss that is coming out here? I believe it’s going to come out this year. Correct? What are you guys doing? What should banks be doing? What are your thoughts around that issue? It seems to be a fairly big one. Kevin: It clearly is. It’s kind of been hovering out there for a while now. This sort of looming storm coming our way. As we look and see the discussion of the proposal, I think the proposal become more finite this year, so we get a lot better feel for how it comes out. It’s a slight shifting from the current allowance calculation where our allowances sort of reflect previous history on loan credit performance. It gets more into a projection. From our standpoint it really works very well with the mathematics that we’ve been doing in the forecasting for interest rate risk. It may be an eyebrow-curler but I think there some really definite, clear parallel there. We’re expected to put a present value on the projected losses for a particular loan, loan portfolio, or loan type. However we want to look at that. That really kind of goes along with the same type of mathematics we run now for expected cash flow. From our standpoint, this is more of a pivoting of how we’re going to create that projection of loan losses from a look-back historically to a forward-looking calculation. The technology that we have isn’t going to require us to make any major changes in the mathematics of it. We’re just applying it a slightly different focus. To be projecting a current value of a future cash flow, that’s kind of what our whole business is about. While it is somewhat scary, because we still don’t know exactly what it is, and it’s going to change to focus of what we’re doing. We feel very strongly that we have the tools, and the expertise in place to help management get their arms around this forecasting process. Then, sort of tweak the way put the input into a loan-stressing calculation or a forward-looking calculation. It’s so similar to what we’re doing now that we’re trying to take a sort-of … Let’s relax, focus on it, and apply that same thought process into the loan loss process. We think we’re going to be able to come up with a solution that’s going to be fairly well understood, fairly well put into place, and maybe less stress than we we’re thinking at the beginning, simply, because of the unknown. Kelly: You guys aren’t currently doing that now for loan portfolios. You’re doing it for assets. You’re doing it for investments. Correct? Kevin: Yeah. Absolutely. We’re applying that same concept to losses. What is the value of that loss? Is it the currently value of those future losses? The same discounting process that we’re going to go through. We’re just using that into a different piece of the balance sheet than we’ve had in the past. We’ll do a study so we can build an assumption built on some sort of a historic look-back as to how the depositors behave. We’ll help them understand the pre-payment speed. All the different assumptions that have to go into that technology in order to understand the behavior of the cash flows under different rate environment. We help them with that point. I mentioned earlier that I think one of the biggest assists we’ve had right now is just bringing people up to speed into what it is we’re doing. The board can handle those responsibilities that have been squarely put into their lap, but they just don’t have the day-to-day expertise to deal with making sure that they can deal with what’s going on. When they see what comes out of that technology, they get a better feel for what went into it and what it’s telling them once they see the results. Kelly: Okay. You guys are well-positioned, I’m thinking or at least from what I’m hearing, for this CECL ruling. Correct? Kevin: Yeah. We’re very confident that we have the tools in place now to tackle CECL. There’s still a lot of detail that needs to be brought out and put into place, but we understand the mathematics of it very well. That’s the business we’ve been in for decades. Just merely applying that concept here isn’t overly frightening. Again, there are detail that need to be brought out. There are certain things that we need to make sure we’re comfortable with so that we’re applying it properly to comply with the CECL guidelines. Without a doubt, we’re very confident that we have the knowledge, expertise, and the tools in place to tackle this once we get around what all the specifics are. Consciously optimistic is the right way, I think, to put that. Kelly: Okay. That’s great. Do you have any take-aways that you’d like to go away with? Kevin: Sure. Let’s start with CECL because that’s what we we’re most recently discussing, and again, it’s going to bare a repeating. We have the knowledge and the expertise in place already as banks, and institutions. We’ve been working with these concepts. We’re now applying it to a different area of the balance sheet and the balance sheet reporting. I think it’s important to know what the guidelines are, but by the same respect we want to make sure that we don’t get overly concerned with the concept of moving from a backward-looking to a forward-looking projection of losses. It’s merely applying the concepts we know into a different area. The biggest concern that we have on CECL is more making sure we understand the guidelines behind the assumption building process and get that done. We want to make sure that we don’t step into a panic state because it’s something new. From an interest rate standpoint, one of the things that we’re trying very, very hard is to get people to conceptualize as they get into the balance sheet management process. Not merely the interest rate reporting process. What do we mean by that? As I’ve mentioned before, we have the technology side of our business. We do a great job of getting the information, and reporting that information. What we do with that information becomes the big next step. From the consulting side, what we’re trying to get organizations to understand is more the movement up the scale towards this modern portfolio theory. We want to look at the balance sheet as an entire entity rather than component, as most things are done now. For instance, organizations that run an investment portfolio with a certain set of guidelines, because we don’t want risk here. We take risk elsewhere. That isn’t necessarily beneficial to the overall organization, or to the balance sheet. We want to look at how a decision is made in a loan portfolio. It has an impact on the balance sheet. We want to understand that. A decision made in the investment portfolio has an impact on the balance sheet, and we want to understand what that is. Understanding how things interact with each other when we’re going through the risk management process is one of our biggest challenges. Trying to evolve organizations out of the component style management into a more holistic balance sheet style management. In order to do that, you really need how the balance sheets react to each other. In order to do that, you need to be able to break down interest rate risk reports that we’ve provided. In order to get to position, we have to take three steps backwards. We need to make sure the policies are written correctly, that the management understands what we’re doing, that the process of doing testing, stress testing, movement rates, and seeing how different decision’s reactions appear on the balance sheet. All of those things become critical in order to look at the balance sheet management as opposed to component management. When we start using this information to make management decisions as to merely reporting what our risk profile is, that is a huge step forward in getting everybody aligned. We’ve got Board alignment through line management alignment. Everybody understands what we’re trying to accomplish. Everybody understands how things impact, and we know that before those decisions are made. We just feel that’s a much better approach. One that if we embrace the holistic approach, the decision making process becomes more a matter at looking at the menu and picking which we want to have as opposed to hoping that things work out our way. Kelly: Great. Very helpful. Do you have a favorite quote? Kevin: There’s one from a business standpoint that I was told a long, long time ago. I try to remind people of the same thing. When you find yourself in a hole, the best exit strategy is to stop digging. You see how people try to manage their way out of that hole. It sounds kind of basic. Maybe a little too folksy, but it makes a whole lot of sense. Whatever put you in that spot, you need to stop doing it first. That’s our first strategy. Stop doing what put you in that world of hurt, and start trying to come up with ways to get out of it. Kelly: That’s great. 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 interviews Donald Moore about generating more revenues from trust and wealth management clients and managing risk in that business line. Moore is a former OCC examiner.   Donald Moore Jr., CEO of Bearmoor, LLC has over 20 years of experience in the asset management and fiduciary industry. He has served in senior fiduciary positions with various US Treasury agencies, as well as a leading financial services consulting firm. He began his career as a Trust Examiner with Office of the Comptroller of the Currency. He has examined over 50 trust divisions, including the lead position at two of the nation’s largest trust institutions. He has assisted in the development of national policy and guidelines at both the Comptroller’s Office and the Office of Thrift Supervision. 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: I’ve got Don Moore CEO of Bearmoor LLC. Don, how are you doing? Don: I’m doing well, thank you Kelly, I appreciate the opportunity to chat with you today. Kelly: Don, you’re in Boulder? Don: I’m not quite in the Republic of Boulder, I’m a little bit closer to the Breckenridge area up in the hills of Colorado. Kelly: You’re happy because the Broncos just won the Super Bowl, I take it. Don: I’m slightly indifferent to the Broncos winning, although they had their ginormous parade yesterday down in Denver. Everyone’s excited that Peyton got his Super Bowl, but again, I think it was the defense that won it for him. Yeah, we’re happy here in the state. No one’s going off the edge yet. Kelly: Let’s get right into it. Tell me what Bearmoor does. What’s your value proposition? Don: Basically, it’s the optimization of risk-adjusted revenue from an organization’s existing fiduciary activities portfolio. It’s basically their personal trusts, their investment management accounts, their retirement accounts, foundation endowments and custody. All those off-balance-sheet activities within the fiduciary world. Again, the optimization of their risk-adjusted revenue from their existing portfolio. Kelly: First of all, it’s banks that are in the wealth management business. They have trusts, they have wealth management capabilities, correct? Don: Correct, a lot of organizations that are clients, their definition of wealth management differs, but it does include trusts, insurance, and private banking. Kelly: You help those kind of banks do what? Don: Optimize top-line revenue. What we mean by that is, I like to use a quote from Bono, the lead singer for U2, he was up at his concert and doing one of his social announcements where he was clapping his hands and he said, “Do you know, every time I clap my hands, a child in Africa dies?” And someone screamed out, “Stop clapping your hands.” We don’t focus in on expense because for the past 10 years in the industry, the industry’s been focused on nothing but expenses. The expenses have outpaced revenue growth 6 out of the last 10 years. Their focus on expenses I don’t think, has been all that fantastic. We like to say, “Well you’re already focused on expense reduction, we want to help you grow top-line revenues.” Our value proposition leads to an increase to revenue top-line. Kelly: Before we get into how you do that, let’s talk about some personal background. Don: All right, I’ll start out with education. I went to school, got a degree in finance and accounting, after I graduated from that I went to work for the United States Treasury Department as an examiner with the Office of the Comptroller. The currency, the OCC, I found an opportunity to begin examining in the fiduciary world and I became a fiduciary examiner. Through that, I went to Washington, DC. For those of you in the fiduciary world that have an understanding of Regulation 9, when I was in Washington, DC I helped draft and write that regulation that now national banks follow. For most states, it’s been adopted verbatim on that. I left there, and went over to another Treasury Department, the Office of Trust Supervision, which has now been rolled into the OCC and wrote their fiduciary training program and some of their examination procedures over there in a fellowship capacity of 18 months before leaving and going to the consulting world, and focused on consulting in the fiduciary world, and that brings us to where we are right now. I am married to my wife Toni, we live out here in Colorado, we have four children. Hobbies; I would say right now we’re doing lots of skiing, got some good snow out here in Colorado, so that’s one of my hobbies. Do a lot of running, outdoor activities is me. That’s who I am, I’m 52 years old and I feel it every day. Kelly: Don and I have known each other for probably 15 years, and we made a good connection when we found out you grew up in Minnesota, correct? St. Louis Park? Don: Yeah, sure, you betcha. Kelly: Let’s talk about the business. How do you help these banks make money? How do you help a wealth management bank make some money? I want to come up with let’s say five take-aways on how our listeners can make money through what company like yours offer. Don: Let’s start out with, the opportunities for increasing top-line revenue within your fiduciary activities exist. They are out there. I like to use the phrase, “You’re standing on a whale, fishing for minnows,” because there’s already opportunities to increase your top-line revenue within our organization. What we mean by that is we go through and do an analysis account by account basis and identify opportunities in three phases: one, gap analysis which is, “Hey, where are you missing it?” From the standpoint of what you think you’re getting. You may have some system errors, system inaccuracies that can help you identify opportunities, that’s one phase. Second one is competitive analysis. Where is it that you would like to beat your competition, and where is it that you actually are? We ask you what your business’s strategic plans are, we go out and do mystery shopping and competitive shopping for the organization to make sure that they understand where they are and where their competition is, and where they can go with their current level of pricing. The third analysis is a regulatory analysis. What’s changed in regulation that allows you to either understand the regulation and generate additional revenue, or do we have some risk there? Again, gap analysis, competitive analysis, regulatory analysis to help you identify those opportunities, because they do exist. I would say that’s the first area. Kelly: You exposed that just recently, gap analysis. You’re looking at pricing, and how competitive they might be in pricing in addition to more of a qualitative, these are the type of services they would offer? Don: Along the lines of both, Kelly, with regards to the types of services we want to break it down so we understand the types of services they offer. Then the pricing that they have on each of those services. When we talk about pricing, we all know that there are committees, and then there are boards, and we’re talking about the board-approved pricing for these services. Kelly: This is for wealth management services. These are the basis points. This is how much we charge for a $5,000,000 fiduciary trust account, correct? Don: Correct. Absolutely. Those are established by, I would say, the business line which then goes to the committee and the boards approve. These are the pricing and it would include not just basis points, but it would include minimum account fees, it would include fees for ancillary services such as real estate administration, closely held business administration. Maybe there’s a tax prep fee or a tax information letter fee. Maybe there’s a stand-alone fee for extraordinary type services. All the fees charged for the services provided within wealth management on the fee schedule. We then go through and see what accounts are actually on that schedule, and what accounts are not, what accounts have customization, what accounts have discounts. It doesn’t make sense for the level of service being provided. What’s critical with that, from a Bearmoor perspective, is what I would say would be the second take-away, which would be a risk understanding of your accounts. If you haven’t done a risk assessment on an account by account basis, it would be highly recommended that you do so. This would allow you to identify the level of risk for each account and type of account using system information. This isn’t something that’s subjective, it’s based upon system criteria that you’ve established and put risk weightings on it. Let’s say you have an account that is an irrevocable trust account with two co-trustees, five beneficiaries, some unique assets in there, and maybe it’s over $2,500,000. You would assign various risk criteria to each one of those factors. Maybe that has a higher risk than a revocable trust. Kelly: You’re not talking about portfolio risk, you’re talking about risk of an unhappy client (other than portfolio volatility). Don: Correct. What we’re seeing is a fair amount of, I hate to go back to the regulatory side, but a fair amount of regulators are saying, “Hey, we can risk rate loan accounts on the banking side, why can’t we individually risk rate these off-balance-sheet trust accounts from an administration standpoint, from a level of risk?” and then get some understanding about what may be some levels of capital might be for this entire portfolio. It’s not investment portfolio risk management, for lack of a better term it’s complexity rating the account. Kelly: Give us three things that you like to look at, that might go into the calculus of that. Don: I would say type of account. Kelly: The fiduciary, non-fiduciary. Don: Correct, you would have the fiduciary accounts would be those revvocable and irrevocable trusts, investment management accounts, foundation endowments, IRAs. Then the non-fiduciary lower risk would be a custody account, where you don’t have any investment management responsibilities. Another item would be the type of assets in there, so maybe less risk would be a mutual fund portfolio, that’s made up of a bunch of mutual funds to meet the account’s objective. A higher risk would be, “Hey, it’s a stand-alone investment in a large piece of commercial real estate.” High risk on that. The third thing would be type and/or number of beneficiaries. The larger the beneficiary pool, the more risk you may have because you have different competing objectives. Some of those might be income beneficiaries, others might be remainder beneficiaries, or growth beneficiaries. Kelly: The high-risk account would be one in which there’s a fiduciary relationship to your holding assets that are perhaps individual securities and not mutual funds and the third? Don: Number of beneficiaries. Kelly: Number of beneficiaries. Is that because the more people you have in the equation, the more likely it is you’re going to have somebody complaining about it? Don: More likely there’s going to be a complaint there, but more likely that there’s going to be conflicts of interest. What I mean by that conflicts of interest is those beneficiaries may all have different needs and you as the fiduciary that’s managing that account, have to take all those into consideration and make sure you treat them equitably and fairly based upon the information you have. Kelly: Tell us how you help the bank make more money. Don: From that account by account analysis on the gap analysis and identifying opportunities within their portfolio. Not just from a best practices from what we’ve seen over the past 15 years of doing this, but also what’s taking place within their lines of business and their strategy. Overlaying that on that analysis and saying, “Hey, here is the opportunity, and here’s how that opportunity impacts each account.” Kelly: This is for your part one you look at the market, you look at competitors, and you say, “Oh, your competition’s charging 200 basis points, you’re only charging 150. You could charge 180,” for example. Don: Correct. If you still want to be the low-cost provider and the lowest-cost provider is charging that 200, and you’re at 150, you could go all the way up to that 200 and charge 190, 180. Right. Kelly: Right. Don: Do that complete analysis. Or your minimum fee is stated to be this, we’ve done in a cost analysis of your portfolio and you’re not even covering your costs with your minimum fee. You’ve got to adjust your minimum fee. Kelly: Don’t you think most banks know their competitor? Let’s say pricing, and their level of service, because they either get clients poached frequently, or infrequently, and if they find out why, then it’s well, his is cheaper, or better service, whatever it was. Don’t you think they know that? Don: That’s what we thought. That’s what we were counting on, but when we started doing the mystery shopping, because we asked our clients who are their competitors, who do they want us to mystery shop. Then we also provide them all the other information that we have. That, other than the actual opportunities, was one of the most highly prized pieces of information that we provided to our clients was, “Oh, look at all this competitor information.” My business partner and I looked at each other and said, “Wow, we didn’t realize how valuable this was. We thought you guys knew it, we’re showing it to you to let you know that we know it.” You would think they would know it, but a lot of times that isn’t the case based upon the information that we were able to gather and the reaction that we get from those. I think they have an understanding of it, but once they actually see the documentation and support for that that we’re able to gather, that brings it full circle. Kelly: I’m intrigued by, and I always have been intrigued by you being a former regulator with all due respect to your former profession, the dark side I suppose, or actually I think when you go into industry, they say you’ve gone to the dark side, I believe. However you look at it, how a former regulator can help on the revenue side is always been amusing to me. I know you do have a pretty good reputation out there, so kudos. You’ve been doing it quite a while, I believe. Don: Yeah, I appreciate those comments. Perhaps my capitalistic views weren’t always the right forum to be a regulator, so maybe I’ve always had to get back to this side. Maybe I was on the dark side and came back to the light. Kelly: Any more takeaways? Don: I would say re-acceptance, and what I mean by re-acceptance is, based upon the information that you have today on your existing accounts, the level of administration, the level of responsibility, the potential problems associated with the risk audit compliance items, the regulatory issues, and the revenue that you’re making on it, would you re-accept the accounts in your portfolio today? If the answer to that is no or maybe, you need to actually go through and do this risk assessment and the revenue opportunity assessment to make sure be able to answer that question yes or these are accounts we no longer need to be a part of. Kelly: It isn’t just no longer be part of, it may be no I wouldn’t accept it under these terms. These terms being pricing, but would you accept it at 50 basis points? No. Would you accept at 150? Yes. Isn’t that as much of a relevant question as acceptance or non-acceptance, it’s how should we price this thing? Don: Proper pricing is critical. We have top 10 risk piece that we do and one of the top 10 risks is appropriate pricing, so you’re absolutely right. “Hey, I wouldn’t re-accept it because of the assets.” That’s one thing. I wouldn’t re-accept this because of the price and the assets. Could we price it accordingly where you would accept it? Absolutely. That’s part of the analysis we do. Kelly: Why don’t you post on our website the top 10 risk pieces in a blog post? Don: Absolutely, I can do that. Kelly: That’d be nice to accompany this. That’s it for now, give us your favorite quote. Don: It’s Milton Friedman the great economist. “The question is, do corporate executives, provided that they stay within the law, have responsibilities in their business activities, other than to make as much money for their shareholders as possible?” My answer to that is, no they do not. Basically, everyone should stay focused on generating revenue for the shareholders for where they have their fiduciary duty. Kelly: What’s the stupidest thing you’ve said or done in your business career? Don: This is classic me, and this took a long time to live down. This was years ago. I basically said, I used another quote when I was giving a presentation because someone asked a question with regards to revenue enhancement and I said in front of this entire group, “Life’s tough, but it’s tougher if you’re stupid.” Yep. Kelly: Good one. Don: I was much younger. Kelly: Don, I enjoyed talking to you, thanks so much for your time. 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 talks to Dan Hill, CEO, Sensory Logic, about how the latest face recognition techniques and technology can tell you many things about people before you agree to do business with them or hire them.   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: Dan, I want to do introduce you and talk to you briefly about what you’re doing with your role as CEO of Sensory Logic, and generally get some of your background and talk about the science of what you guys are doing with this technology. My summary of it is something like you’re using technology to objectively measure 12 human emotions. They range from joy to sadness, and anxiety with the purpose of evaluating personality traits, measuring personality traits, to determine how neurotic or how normal people are for the purpose of identifying matches with whatever the goal might be to using that. Is that a reasonable estimate or summary of what you guys are doing? Dan: We are trying to capture and quantify emotional response and that can apply to consumer’s reactions to the advertising, website, and other touch points of thanks for instance, but if you move over to the more personal side in terms of financial advisors or trying to reduce risks when looking at hedge fund managers, yes, then you start getting into the personality dimensions. Obviously for hedge funds you want to make sure that they are prudent investors and not someone given to overly large risks. There’s both a general consumer application we are talking about here, and one that’s more personnel driven. Kelly: That sounds interesting, using technology to evaluate those things that are clearly has been in the realm of subjective interviews and personal objective evaluation is fascinating. Let’s go over a little bit of your background, Dan. Currently you’re CEO of Sensory Logic, and a little bit about what you are, who you are, and then who Sensory Logic is. Dan: I started the company in 1998, and I got lucky. Someone I knew at IBM sent over to me an article about the breakthroughs in brain science and how much people are emotional decision makers. You may know the conservative estimation is that at least 95% of peoples’ mental activity is subconscious. A lot of what happens to us and for us is below the water line so to speak, and it’s important to access that and the emotional part of the brain sends ten times as much information to the rational part of the brain and vice versa. As to the ratio of emotional to rational in terms of the interactions it is a ten to one ratio. Kelly: Presumably we have a rational mind that’s informing our subconscious mind, correct? Dan: Sure, the mind is very interactive so there is an interplay back and forth, but I think the real thrust of the breakthroughs in brain science in the last 25 years aided by technology and from MRI brain scans for one thing, is that we really have to change our viewpoint. We probably have run for 300 years with Dick Hart’s assumption that we are rational beings. The famous comment, I think therefore I am. Ambrose Bierce, a contemporary of Mark Twain said, “I think therefore I am.” That’s probably a lot closer to the truth. In the financial industry you want to go to the numbers and facial coding gives us a chance to bring numbers to something that otherwise might have seemed rather soft and squishy which is emotions. In reality there’s really two currencies in the business world. Dollars and emotions, and we’re after the second one on behalf of the first one. Kelly: Not to be outdone with your quoting of philosophers, I will reference Aristotle who also used the concept of having, of creating habits that are natural to the human that just make it part of the unconscious, subconscious mind so that your naturally inclined to do, he felt like, the virtuous, the right thing. That took kind of integrating the conscious mind, the rational mind, with the subconscious mind. Is that consistent? Dan: I think the metaphor that Aristotle used actually was that human beings is as if they are in a chariot, and it’s driven by two horses and one’s the rational horse and one’s the emotional horse. He was already acknowledging, obviously, the importance of emotions. I think what the neuro biology advances have suggested is that maybe the darker horse, the emotional horse, may be the stronger of the two, most likely is. Kelly: Dan thank you, you crushed me on your quoting of Aristotle. Thanks, I appreciate that. Dan: That wasn’t my goal, but whatever helps illuminate things for people. Kelly: And I went to a Jesuit school! So let’s talk about your education. You have a PhD. Tell us about your education. Dan: I do have a PhD in English literature, not psychology as some people might assume, but I’m an inquisitive learning sort of guy and really what happened is once I got this article brought forward from the IBM person, I really started on a second education. I don’t have a formal degree, but I have spent a great deal of time reading and talking to experts in neuro biology and psychology over the last 20 years to understand really one of the drivers of human nature and just to give you some feeling for the groundings here. If you go back to Latin motivation and emotion have the same root word, move, to make something happen. That’s how essential emotions are to human behavior, and the person who first realized the importance of emotions was Charles Darwin. In his work on evolution he essentially said to himself, “Okay, emotions must give us an adaptive advantage, otherwise they would have gone away. How can I best capture emotions?” That turns out to be the face, so what we do is use facial coding to be able to bring science to bear on emotions. Kelly: Dan, where do you live? Tell me a little bit about your personal, family life. Do you have any hobbies? Dan: When I have the time, sure. I like to play tennis. I’m an avid movie goer. I enjoy traveling so I’ve been to about 80 countries including a year ago or so was in Botswana on a non-hunting safari. It’s whatever can broaden the horizons. There’s readings, there’s films, there’s tennis, there’s travel, obviously time with my wife, so there isn’t anything remarkable there, it’s just try to be a busy and engaged guy. Kelly: Let’s get down to some business stuff. Tell me in fifteen words or less, roughly, what the value proposition of Sensory Logic is. Dan: Actions speak louder than words, and there are things people can’t or won’t say, and if you can get to emotions you can get below the surface and get to the real thing. Kelly: In terms of the banking ecosystem which is the ecosystem we are navigating through, what is the applicability or this, not necessarily your company, but this technology if you will, that value proposition, how would it benefit, how is it connected? Is it connected now, or is it an area that you guys want to be connected to. Where’s the applicability? Generally speaking. Dan: There’s really two realms. Let’s start with the one we’ve historically been in, because I’ve run my company for 17 years, and we’ve done work for nearly half the world’s top 100 consumer facing companies, so things outside of the industrial realm and so forth. That’s plenty of things in the financial services industry. It’s a long list of banks and institutions, also in the insurance industry, as well that we’ve done work. From that point of view, obviously if you have these touch points with consumers you want to connect effectively. I think the place you have to start is that of course, trust is the emotion of business. Trust is not an emotion you can capture through facial coding, but you can capture its opposite which is contempt. Contempt means I don’t trust you, I don’t respect you. If you’ve ever read Malcolm Gladwell’s best seller “Blink”, facial coding was the only tool described in the book for some 30 pages. At the University of Washington in Seattle they have a love lab where couples come in who are in distressed marriages, they use facial coding to figure out whether they can save the marriage. Contempt is the most reliable indicator that the marriage will fail, so if it’s not good for a married couple you can imagine it’s not good for a company and its clients. We use this in advertising testing and websites to understand how people are responding. There’s several varieties of information that is important. The first one is actually do you engage them. Do they emotionally respond? You don’t want to waste your advertising dollar, you don’t want to just be talking to yourself, you need to make that emotional connection. That’s one of the first things we go after. Kelly: Put yourself in the place of a community bank CEO and they’re in the business of making business loans, by example. How does that CEO or that credit officer, how could that credit officer utilize this technology? Not your company, but the technology. How do you envision that this technology could be employed by a credit officer at a community bank in any city in the USA. Dan: There’s actually a template here. I mentioned Charles Darwin earlier, but there’s a man named Paul Ekman, E-K-M-A-N, who’s been honored by the Smithsonian who has been cited by Time Magazine as one of the 100 most influential people on the planet. Paul worked as a colleague at the School of Medicine in San Francisco. Over the course of about 15 years he created what is called the Facial Action Coding System. He figured out from 43 muscles in the face what are the muscle movements, the action units, the activity that reveals seven core emotions which you alluded to earlier. They run from joy, the high end of happiness, through things like fear and contempt. These muscle movements correspond to the emotions, this is relative public knowledge, also in a book of mine, and that information for a loan officer if they were to do their due diligence, and take some homework assignments, and actually study this a little bit, would give them a feel for the person across the table. There is no lie muscle in the face, it’s not that simple, but there are patterns you can look for. Obviously if the person is unusually anxious, if they show contempt, if there’s an unusual rhythm to how they’re emoting, if the emotions seem inappropriate to the conversation. There’s probably a half dozen little ways in which you can get a feel for whether the person is solid and honest, and therefore a loan risk worth taking, or ones that are passed on. Kelly: These quantifiable and emotional metrics, I’m just going to quickly list them. Joy, and they’re more or less in a continuum here, starting with joy going down to anxiety. Joy, pleasure, satisfaction, acceptance, curiosity, alert, skepticism, dislike, contempt, frustration, sadness, anxiety. So you guys can measure these twelve emotional reactions that appear on a person’s face, convert those into a profile. The profile has to equal 100%, so it comes up with a profile. Again, back to the CEO that’s going to potentially do a loan to this business customer. It comes up with that profile and then what? Dan: In our case we were trained directly by Dr. Ekman, so you are right. You get to a pool of 100%, so you distribute which emotions are occurring based on those muscle activities, and as to the output. Once you know the emotional profile of somebody, I would suggest, for instance, they index very high on anger, or what we call frustration, that should be of concern, because frustration obviously is an emotion about I want to hit you. I want to break through barriers to progress, I want to control my destiny. That all sounds good except the hit part, so someone who is violent or combustible, if they index high in frustration, is there a greater chance that someone is at risk? Definitely for you as a banker. If they are really high on anxiety, why are they so anxious? What is going on here? How solid is the scheme in which the bank is taking a chance. I think particularly when you look at the negative emotions you’ve got to be careful, because we have more negative core emotions as human beings than positive ones, not because we’re negative or Dr. Ekman is negative, but rather it’s a survival technique. People hear bad news more loudly because it helps defend themselves. You want to look at negative emotions like the two I just mentioned, also contempt. Frankly it often corresponds to a lack of honesty or a lack of connection back to you as a banker. If I had to highlight three, those are the one I would probably go to. Although I will say that someone who is overly happy, it’s a nice emotion in terms of it’s embracive, it’s accepting, but a really happy person can be sloppy with the details, so strangely enough, there, too, a banker might face a bit of a risk factor. Kelly: You also have the external environment, for instance, that can influence a person’s behavior on that given day. Could be they just got in a fight with their wife that morning, or their favorite football team lost so they’re having a proverbial bad day. Especially if you have this human subjectively scoring this stuff. I’m intrigued by that, so you have some kind of de facto shrinks up there kind of ticking off, watching the video saying, “Oh look at that he frowned, we’re going to check off he dislikes this,” or “Look at her eyes. She looks a little sad, we’re going to mark her down a little bit for sadness.” It scares me a little bit that police interrogation might be using this. Dan: Quite often that cat’s already out of the bag. Dr. Ekman has done training of the CIA and the FBI. We worked a bit with a company trying to automate facial coding for the TSA, so yes, this is a huge interest, obviously, to anyone involved with national security or policing matters. Whether it’s used properly, whether inaccurately, whether it’s done within the boundaries of the law. That’s really outside of our purview, that’s not how we’re trying to use facial coding, but there’s no doubt that obviously every angle of life people are looking for advantages and security, and because if you’ve never been lied to in your life, congratulations. Facial coding gets you past the lip service to behavior, to actions, as to how people respond based on what they reveal in their face. It’s going to be of interest to a lot of parties. Kelly: From this data that these scores are measuring they are taking that data, and then scoring it. I’ve seen some stuff that talks about the big five model, ranging from extroversion, agreeableness, conscientiousness, openness, to neuroticism. Tell me about that. Dan: I have ten US patents, most of them related to facial coding, and one of them does involve personnel. I have been at work for a few years now looking to see if we can come up with an emotional formula and algorithm so to speak, that can match these big five personality traits. I wouldn’t say we have anything definitive at this point, but I am making the effort because the one thing that bothers me about all manner of these self-reported psychology personality profiles is that it is self-reported. Self-report is a big problem. People tell lies. Dr. Ekman has estimated the average person tells three lies per ten minutes of conversation, but the biggest lies in life are the ones we tell ourselves. I’m reasonable, but everyone else in this meeting is crazy, etc., etc. Self-reporting is rather dubious, and so yes, we are looking for a way around that to say that by picking up these muscle activities, which by the way, all have numbers to them, and I realize you might feel it’s subjective, but we’ve done coder reliability. We have been trained by Dr. Ekman, so we know which muscle movements correspond to which emotions. Studies would indicate that human coders well-trained and versed in doing this will be over 90% accurate. Kelly: What would the goal be for this credit officer, he probably does this subconsciously anyway, but he certainly is making some judgements alright, how normal, how neurotic is this guy. Am I able to pry this data out of him and he’s in charge of sales? What’s the likelihood that this company is going to be successful if I have to pry this stuff out of him.” Same with openness, right. Agreeableness. I don’t know how you would determine conscientiousness. Does he show up to the meeting on time, and doesn’t care, I mean that’s kind of a real fuzzy one, that conscientiousness. Dan: Actually that’s one of the traits where we have some of the inklings of an algorithm or a correspondence. You’re not going to want someone who is overly happy and blissful. I already mentioned that if you really index high in joy you tend to be a bit more of free thinker, which is great, but you can also be sloppy with the details, so that doesn’t square very well with conscientious. Being hot-headed and having really intense anger doesn’t work, but actually the face shows eight different versions of anger, from slight annoyance to outrage. The lower grade versions of frustration can actually be helpful from a conscientiousness point of view, because one of the definitions or understandings of frustration is I want to be in control of my life and I want to make progress. If that is done in a way that is not overly combustible then you have the makings of someone who might indeed, if it’s leavened by some other emotions, be conscientious. Kelly: Give me the three to five takeaways that a bank CEO should take from this. Dan: One is they’re going to be making some outreach to people so let’s start on the marketing side. Presumably they’re going to have a website. It’s easy for someone inside the organization to think that their website is really clear, and I can tell you from doing usability tests for all sorts of companies on websites, that it’s often about as clear as mud. So I would say the first takeaway is they should think if their website a lot more like it’s the drive through lane of a fast food joint. That may seem demeaning to them, but these people know how at quick service restaurants to get it across to people and quickly and let them keep moving. If they look at their website from that perspective, and it doesn’t resonate, and it’s not quickly understandable, they’ve got a problem. The joke that has to be explained to you in life is never as funny as the joke you just get, so think in terms of hut, hut, hike. If the connection isn’t about that readily done, you’ve got a problem. The second thing I would suggest is probably a lot of banks will at least, if nothing else, have some print ads or some mailers at times. We’ve discovered that if you put your company logo in the lower right hand corner which is where ad agencies love to put it, that is typically about the second to last place anybody will look at on a piece of paper. That’s bad news because we’ve found that people read quickly, they barely read at all. The banker, the CEOs, the bank may think that people are going to study my marketing material closely, read it word-by-word, not the case. Likelihood is they’re going to spend three to fifteen seconds on it. If you advertise for yourself and it’s unbranded in effect because they don’t get to the logo, then you’ve got a problem. I’d say that’s the second one. Third one is you’re in the people business. If they come into the bank or the bank branches, we respond to nothing more strongly than other people. We can tell the difference, human beings. There is a difference between a true smile and a social smile. Social smile is clearly less authentic than the true smile. It is hard for employees to be able to manage a true smile repeatedly during the day, especially on demand, but knowing that that emotional connection with the customer is important. I sit on airplanes often for my business, and I facially code the people who are serving us in the isles, and look for those little moments where they give away weariness, or something else that’s a little off putting sometimes. Dan: That’s three for you. I think we’ve already touched on the loan officer, so I’ve got you up to four. I guess the fifth one would be, frankly, who you hire, and taking a little more care. Not just look at their credentials, but look at their personality which is what Southwest Airlines does. Kelly: What does Southwest airlines do, briefly? Dan: They actually have their people look for a sense of humor. They ask them to tell little stories about themselves, or incidents, or I think even, if I’m not mistaken, at times literally play comedian for a bit, and try to tell a joke. They don’t want to hire somebody who’s just ultra serious and has no levity to them because if you have no levity you can’t be flexible, and if you can’t be flexible you can’t adjust to your customer’s needs. Kelly: To that end, I’m going to ask you what’s the stupidest think you’ve ever said or done in your business career? Dan: That would be numerous no doubt. I would say one is, someone asked me once if I was quote/unquote a “rebel” and that’s the way they phrased it. I simply said, “I suppose so.” That’s not the answer I should have given. The truth is I’m a reformer. I’m not interested in rebelling against something, I am interested in improving something. Whether it’s market research or in the financial sector, making sure your advertising dollar is not wasted, and that your customer service is better, I go back to my earlier quote. “There’s two currencies: dollars and emotions, and you need both of them and they interact with another.” I’m not a rebel, I’m a reformer and someone who is eager to make sure that people aren’t inefficient, don’t waste their money, make the best progress, the best connection they possibly can. If you step closer to the customer you can step ahead of the competition. Kelly: And since you’re an English lit PhD, I’m going to see if you can identify it. If you can’t, I will think very lowly of you. Dan: Wonderful, wonderful. Kelly: “Arise and go now. I will arise and go now, and go to Innisfree.” Dan: That would be Yates. Kelly: Very good. He’s my favorite writer. Dan: Yates is a tremendous poet. I was in Dublin a couple of years ago, there was special exhibit on Yates’ poetry, and I fell in love with all over again. Kelly: Good for you. Now I’m uber impressed. Do you have a favorite quote? Dan: I have so many favorite quotes. It’s probably one of them is from Groucho Marx, “Who are you going to believe, me or your own eyes?” Kelly: Very good. Dan, I appreciate your time. CEO of Sensory Logic. How can people get hold of you? Dan: We’ve got a website, of course. Sensory Logic.com should be able to do the trick 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 interviews Peter Weinstock, Partner, Hunton & Williams, Dallas Office. They talk about bank M&A deals and minority shareholder actions to gain control of bank management. Peter Weinstock’s practice focuses on corporate and regulatory representation of financial institutions. He is Practice Group Leader of the Financial Institutions Section and has counseled institutions on more than 150 M&A transactions, as well as provided representation on securities offerings and capital planning.   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 Coughln from the BankBosun. Hope everybody’s doing fine. I’m going to do an interview today with a deal guy. He’s with a law firm in Dallas, Texas. We’re going to talk about the types of deals that are getting done. Are they P&A deals? Are they stock deals? There are distressed deals out there, there are strategic ones, and what is he saying in terms of M&A activity in the banking sector. With that, we’ll get Peter Weinstock on the phone, from Hunton & Williams. Let’s talk about deals, Peter. I have kind of a basic question on general trends. In bad banking economies, it seems that we have a lot of P&A deals, where I think the seller is normally the FDIC, correct? Peter: Right. Kelly: We must have had a lot of those in 2008, 2009, possibly up to 2010. Peter: Yeah, I agree. For really almost a four, four and a half year period, there were more deals sold by the FDIC than there were private sector M&A transactions. Kelly: Then today, better economy, better banking environment, we don’t see many of those, correct? Peter: Very few. Kelly: Would you say that the number of P&A deals is a leading indicator, lagging indicator of economic conditions of banks in general? Peter: Yeah, it’s certainly a lagging indicator, just like capital as a protection is a lagging indicator because what tends to happen is asset quality issues or concentration levels or interest rate risk, some of those other factors, the metrics indicating those issues are becoming problematic kick in long before capital starts declining and capital starts declining generally long before or moderately before problem banks are looking to sell or the FDIC takes over. The number of P&A transactions, which again, we’re down to very few, are more reflective of the fact that the economy seemed to turn sometime in 2012 and we’ve had now three full years of, even though it’s not a great recovery, we’ve had some recovery. Kelly: How many P&A deals have we seen in three years? Peter: I think we’re only up to two so far this year, where we were, in 2009 through 2011, we were having dozens and in one of those years over one hundred bank deals. Kelly: The two this year, are they in, say, oil patch regions that are struggling economically or somewhere else? Peter: That’s an outstanding question because the answer is, it’s not. That’s not to say that the oil patch or the commodity price areas are not under stress. Certainly, the ag economy is under some stress, but again, it gets back to your first question about lagging indicators. The banks that are failing now are banks that have been circling around the drain for a long time now. They’ve been shrinking to maintain capital ratios, but they can’t get recapitalized because of the legacy assets that they have from the downturn, so we still have a significant number of banks that are undercapitalized and unless something happens, they could fail because they have elevated problem asset levels and those problem asset levels are what would bring them down. At December 31 there were 78 banks that were still somewhere undercapitalized or only adequately capitalized, which is down from, at one point, the problem bank list was over 600, but the 78 institutions that are adequately capitalized or worst, as of year end, are ones that are suffering from the last downturn, rather than the next one. Kelly: All right, you mentioned 78 that are undercapitalized. What’s the metric that you use? Peter: These are banks that are not well capitalized, so they’re adequately capitalized or lower, which is they have to have a leverage ratio of 5% in order to be well capitalized. Then you have the Basel III metrics. Right now, you’re talking about a total risk-based capital ratio of under 10% and total leverage ratio of under 5% to be adequately capitalized or, in that case, undercapitalized. It’s not an incredibly high bar that they’re not able to chin, so these 78, you would think that they would be able to recapitalize themselves, but the big challenge that they have is their elevated asset quality levels. Kelly: You have these 78 banks. Are brokers out there, investment bankers out there trying to get them to sell? You guys probably don’t do that. Lawyers don’t hustle for business like that, I don’t think, right? You’re not making cold calls? Peter: We’re purist, man. We would never do such a thing. I’m sure that all 78 of them have been shaking the trees and have talked to anyone and everyone who they think could be an avenue for capital and for addressing their problems, but at some point, if you’ve got capital of 5 million but you have problem assets of 15 or 20 million, at some point the numbers don’t make sense for an investor and that’s why these institutions are still on the list, some of them. Kelly: Let’s talk about the good side of the market, not the problem areas. Let’s say last year, you being a proxy for the market, how many deals were related to distressed banks and how many were for strategic acquisition reasons or market expansion? Peter: I would tell you the vast majority of them were strategic and few were problem bank acquisitions. What I mean by strategic isn’t necessarily that the seller was in great shape and they sold for a very high price. What we’re seeing is a number of sellers are kind of giving up the ghost because in this interest rate environment, with anemic loan demand, very competitive loan pricing, there are sellers that look at their compliance costs and their IT costs and their personnel costs and they’re saying, “We’re not big enough to do a deal. We’re not big enough to survive on our own and make our shareholders a fair return, so we need to look at doing something else.” The something else is not necessarily selling for cash and going on down the road. One of the biggest trend lines we’ve seen in the last two, three years, is the willingness of sellers to take illiquid stock, stock from a privately owned financial institution. Kelly: In the acquiring company. Peter: To take illiquid stock from an acquiring company, that’s another community bank like they may be, sellers are much more willing to do that than they ever have been before in my 30+ year career. I think the biggest driver of that is that on the operational standpoint, the challenges of being a bank are such that skill matters and then on the shareholder valuation standpoint, I think they recognize that this may not be the greatest pricing time to sell out, so they look at doing some kind of strategic combination to be part of a bigger, more profitable organization, even though the stock is illiquid. Kelly: Let’s say, in those situations where you’ve got a reasonably healthy bank, they see that if they don’t do something they might be in part of the 78 again, but they might go down that way, so they’re proactive. As a part of that, they have to lock up some of their good producers, right? Their good credit officers and those things. One of the thing we do in our business is help with non-qualified plan benefits to try to use that as a way to lock in good senior management. Do you see much of that going on as part of the deal criteria? Peter: It surprises me that more banks that are potential sales candidates don’t do more. In community bank America, it almost doesn’t matter how big you are, you’re a potential target. I’ll give you an example. One of my clients is a $5 billion bank in California and they merged with an $8 billion bank in December, they announced it. The reason is because our client, that’s $5 billion, felt that they needed to get bigger in order to compete. The $8 billion bank felt like they needed to be bigger to compete, so now they’re going to be $13 billion. If you’re not an $8 or a $5 billion bank, if you’re smaller than that, you might say to yourself, I don’t need to be bigger to survive, but my efficiency ratio sure as heck would improve if we got bigger. I would tell you that almost every bank is a candidate to be sold, they’re a candidate to buy and they’re a candidate to be sold. KPMG did a survey in 2014 and it indicated that over 50% of the banks thought they would engage in an acquisition, but 3% of banks thought they would sell. The numbers wound up in 2015 being something like 4.4% of all the banks sold. Every bank out there, it seems, is thinking about doing an acquisition, but every bank and community bank America is a potential candidate. A long way around to your question is because the banks are all potential merger candidates, then they really should look at putting in place protections for their employees and really locking them up, but when they’re doing that, they also need to think about not hurting shareholder value. The way you could hurt shareholder value is you provide some kind of agreement, let’s say a change in control agreement, that provides on a change in control the employee gets paid if they leave the bank. Now we hurt shareholder value because the buyer knows that they could lose that person because there’s an incentive for that person to leave. Really, it takes somebody like you to think through not just how to protect the person, not just how to lock them up, but also to do it in a way where it creates or at least preserves shareholder value because the buyer is not looking at that contract and saying that that contract harms me because I’m going to lose a valuable producer. Your question is a good one and I would even go further and I’d say what exists gets paid. If people want agreements to be in place, they need to put them in place because if they exist they’ll get paid, where if you wait until a potential acquisition, then what’s going to happen is the acquirer is going to say, “You can do that, but if you do that it comes out of the shareholder’s purchase price,” and I don’t think you want to be negotiating those types of agreements with another person with their elbows on the table. Kelly: I’ve got a lot of experience in other financial sectors like financial advisors and broker dealers and the common theme with them is you’ve got much more highly paid execs, but the notion that the assets go down in the elevator every day. It’s more or less the same thing with many banks and not locking them up one way or another in an acquisition, it always kind of surprises me. Let’s talk about surprises in an acquisition landmines. It seems to me that when we’re talking about banks that are not a huge footprint, a community bank that’s got 1 to 15 branches, isn’t it a fair statement to say that more of the acquirers or interested acquirers are going to be a current competitor of that bank and doesn’t that always present a bit of a due diligence challenge or problem, where you’re going to release sensitive, confidential information to your competitor? Peter: That is absolutely correct that that’s a possibility. The reason for that is because most financial institution mergers are driven by cost savings. Where do you get the most cost savings? In a market deal or an adjoining market deal. It is very likely the party that can pay the most is going to be an existing competitor. That absolutely presents challenges in terms of protecting your employees and your confidential information. Obviously you’re going to negotiate the heck out of the non-disclosure agreement, if that’s likely buyer, if you’re the seller. The other thing is you’re probably going to want to hold back on when you deliver information until there is an agreement on all of the relevant terms and then the due diligence becomes more in the way of confirming diligence than it does in terms of setting the price. You’ll release some key information, including whether there’s a termination fee as a result of the transaction on your data processing agreement, changing control agreements with employees, give all of that pricing type information, but you might hold back the loan review and the customer review until the deal is essentially set. Kelly: The customer name is withheld until the deal is a little more mature. Peter: We’ve also done it where you redact the customer names, but in an in-market deal it doesn’t take a lot of information for the buyer to know who that player is. Kelly: Yeah, right. Back to my other question that we started on. Surprises? Peter: I’d say the biggest surprise to buyers is that the seller’s compliance issues could infect them. I’ll give you an example. When MB Financial was acquiring Cole Taylor, Cole Taylor had a major compliance issue and the transaction was held up for about a year, while the regulators got comfortable with the resolution of that compliance issue. Similarly there have been a number of red-lining cases and BSA cases where the compliance issues of the target have held up the deal. I think that’s a surprise for a number of buyers because if you’re engaged in a potential transaction, you’re locked into that transaction. You’ve agreed to try to get that deal closed. If you wind up with an extended regulatory approval time period, that could prevent you, preclude you from going after a deal that becomes available six months, a year later that might be a better deal for you. Similarly for sellers, even in cash deal, if there’s a surprise that the buyer’s compliance issues can be such a hold up and what we’ve seen is we’ve seen AML, BSA, KYC issues that have held up approval of deals for two or three years in UDAP and some other consumer compliance issues that similarly have held up deals. As a seller, you have to perform some reverse due diligence, some extensive reverse due diligence on the buyer, even in the transaction that’s a cash deal. For a lot of sellers, that’s a surprise to them. Kelly: Do regulators hold up the deal or does the buyer intentionally hold that up? Peter: Generally it’s the regulators because from the buyer standpoint, they become aware of the issue and they adopt a plan of remediation for the issue. It’s one thing for a private sector party to get a handle on an issue and have a plan of remediation and feel good that they can implement it. It’s a whole other thing for an agent, say, to get their arms around it in a time frame that seems reasonable. The Federal Reserve has two analysts in Washington who handle compliance issues with regard to applications. Kelly: The buyer would just haircut the valuation. At the end of the day it’s a contingent liability, right? They would just haircut the valuation on it. Peter: If it’s a known risk and it’s one that they have presumably priced in. If it’s not a known risk and they become aware of it, then they may go back to the seller and say, “We’ve got all of these costs related to it, we need to reduce the price,” or if it’s significant enough, they could decide to walk the transaction. Kelly: In terms of surprises, known compliance issues and I suppose the ‘know what you don’t know,’ whatever that term is. You know those issues, it’s the unknown compliance regulatory issues. Any ideas on pre-detecting, early detection of those things? Peter: That’s really you just have to engage in some pretty thorough diligence of the other party to really understand where the risk areas are. Kelly: I suppose you look at their internal controls and their timely filings or substantiation and all of those things on the control structure. Peter: You do. Something that I like looking at as a starting point for diligence is nowadays banks have to do risk assessments. Seemingly a banker can’t walk out doing a five-page risk assessment. Those risk assessments are the other party’s self-confessing, if you will, where they see their own challenges or concerns. The beauty of that for the other party is that gives them a roadmap of things to look at in diligence. Kelly: I was director of risk management for asset management subsidiaries of Lloyd’s Bank out of London, and this was many, many years ago. Regulatory issues and compliance back then just didn’t quite get the importance. They actually did in the UK, but things have ramped up in the US quite a bit, that it’s probably more on par with what it was with the British banks back then. Peter: If you parachuted back, if you were Mr. Peabody and you got in the Wayback Machine and went back to 2000 and you had a full-time, dedicated BSA officer, and how many banks had full-time, dedicated compliance offer and how many banks had a full-time, dedicated risk officer, and how many banks had a full-time, dedicated IT person, and you compare those numbers to the way they are now, it’s just shocking. The bigger the acquisition, the more you want to look at areas that you might not want to spend the money on if you’re a smaller institution. In a bigger deal, you absolutely want to evaluate IT exposures and make sure that there have not been or in place potential breaches. Kelly: Why don’t you give us parting thoughts you’d like to give. Speak to both buyers and sellers. Peter: One thing we’re seeing for banks that may not want to be a seller is there is a lot more activism. We had six private banks in the fourth quarter that had proxy sites, tender offers. One even had a TRO, a temporary restraining order, filed against them. That’s continued in the first quarter of 2016. One thing is to put in place protections and recognize that your risks can be from your existing shareholder base or people who buy in. The world’s awash in money and people out there know if they could buy stock of a bank at eight-tenths of book or book and then wrestle control of the board and get control, then the bank on the sale might be worth book and a quarter or book and a half, book seven, where they could potentially even more than double their money, buy the stock and flipping it in a control situation. We’re seeing activism creeping down into the community bank, into the private bank sector, and that’s something clearly you want to watch. Kelly: You’re not talking political and social activism. You’re talking about business acquisition, venture capital, investment activism. Peter: Absolutely. We’re talking shareholder activism. Then just another thing that we’ve seen on the buyer’s side is buyers tend to be most focused targets who are of sale who sent them books. We talked about some of the compliance challenges of the application process. Just because somebody sends you a book and the book says, “We’re for sale,” doesn’t mean that they’re the greatest candidate for you to buy. What you want to be careful about is being locked up on a deal in the regulatory process that is somebody who doesn’t really move the needle for you. It’s got something that obviously is worthwhile, but maybe it’s really not consistent with your strategic focus. We’ve seen potential buyers almost shift their strategic focus just because an investment banker sends them a book on a potential target. Kelly: Two good points. I always like to finish with two things: Your favorite quote and the stupidest thing you’ve either said or done in your business life. Peter: There are a lot of the latter. Upon the former, I like the Warren Buffet quote, which it really resonates when you’re talking about shareholder activism. He said, “I prefer to manage my business for the shareholders who want to stay in and not the ones who want to get out.” I may be paraphrasing it, but that’s the thought. I like that quote a lot because that’s actually directors of the bank. Those are the people they have a duty to. The second one is the stupidest thing I’ve ever done in my career? Kelly: Yes. Peter: One thing that I learned a long time ago not to do is something that’s emotionally gratifying because in business it almost always is a bad decision. Early on in my career I would get testy with regulators and that’s never a good strategy. Gray hair and maybe even the loss of hair and some experience, I’ve learned the wisdom of working together with regulators a lot more than trying to beat them up. Kelly: Can you recall one that you said something to? Peter: I remember when I was a third-year lawyer, I went to a meeting with the Federal Reserve and I’m not exactly sure what I said at the point, but this person with the Federal Reserve got up and it wasn’t quite Nikita Khrushchev banging his shoe on the table, but he was animated. Kelly: All right, Peter. Thank you very much. I appreciate your time. I wish you the best. 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.

  Winning the Game of Life VIDEOS Seth is a Nationally Recognized Direct Response Marketing Expert. He is the only person in history that Dan Kennedy has nominated for marketer of the year three years in a row. Seth Greene is the author of six best-selling books, including Podcast Marketing Magic. Seth has been featured on CBS money watch, cbs news, the LA Times, the Boston Globe, the Miami Herald, and the #1 morning radio show in New York City. Seth has worked with some of the biggest names in the business like Jack Canfield, Ron Legrand, Ted Thomas, and dr. Dustin Burleson, to name just a few. Seth has spoken on stage with Dan Kennedy, Jeff Mask (Infusionsoft), Dave Dee, Darcy Juarez, Sam Bell, Dustin Matthews, Dave VanHoose, and many other marketing luminaries. Seth has been written about in three best-selling business books, the top industry trade journal, and in Dan Kennedy's NO BS Newsletter. Mike Koenig's put him in his launch videos as one of his all-stars. He represents everyone from local bricks and mortar businesses to 4 Fortune 500 companies. Seth is the founder of one of the fastest growing direct response marketing firms in the country, Market Domination LLC, and he's here to show us how to attract new customers like magic, so I'm excited to welcome Seth Greene! http://wgl.fm/ http://mediaauthorityshawnchhabra.com/ http://shawnchhabra.com/ http://shawnchhabra.com/      

Seth Greene is a Nationally Recognized Direct Response Marketing Expert.   He is the only person in history that Dan Kennedy has nominated for marketer of the year three years in a row. Seth Greene is the author of six best-selling books, including Podcast Marketing Magic. Seth has been featured on CBS money watch, cbs news, the LA Times, the Boston Globe, the Miami Herald, and the #1 morning radio show in New York City. Seth has worked with some of the biggest names in the business like Jack Canfield, Ron Legrand, Ted Thomas, and dr. Dustin Burleson, to name just a few. Seth has spoken on stage with Dan Kennedy, Jeff Mask (Infusionsoft), Dave Dee, Darcy Juarez, Sam Bell, Dustin Matthews, Dave VanHoose, and many other marketing luminaries. Seth has been written about in three best-selling business books, the top industry trade journal, and in Dan Kennedy's NO BS Newsletter. Mike Koenig's put him in his launch videos as one of his all-stars. He represents everyone from local bricks and mortar businesses to 4 Fortune 500 companies. Seth is the founder of one of the fastest growing direct response marketing firms in the country, Market Domination LLC, and he's here to show us how to attract new customers like magic, so I'm excited to welcome Seth Greene!