Shannon Robertson - AFIP - NADA Stage
Greg Uland Hi, I'm Greg Uland with Reynolds and Reynolds and this is Connected. Today I get to talk with Shannon Robertson, who is the executive director of the Association of Finance and Insurance Professionals, or AFIP we'll call it for short, but we're going to talk through a bunch of different things. I appreciate your taking time to chat.
Shannon Robertson Thanks, Greg. I appreciate being here.
Greg Uland Yep, absolutely. So why don't you start just high level AFIP. What does the organization do? What's its purpose and kind of what's your role there?
Shannon Robertson Absolutely. So it's a nonprofit organization, been around since 1989. The purpose and the reason why AFIP was created was take the finance manager position, but it's vital to it of a professional designation. And in the early days, AFIP was what is a law now, was not a law. But after we've morphed into this year, we're really deep into a lot of the other policies, procedures, government enforcement action. But we're still a nonprofit organization. This is why we were created. We don't have a vested interest in the process for a dealership. So it allows companies like Reynolds and Reynolds to bring us into a dealer to provide those federal state laws. In the last year, we've done about 200 classes, whether it be onsite or virtual. I think the numbers we ran were just under 2000 certification for the year 2022, with Reynolds being a big part of that. Yeah, Reynolds Reynolds staff, their trainers are AFIP certified. And just so you know, if you go through the docuPAD training, week two of docuPAD training is AFIP certification. I've really liked the partnership that we have together and I've even gotten through docuPAD training. It was an amazing training program and really fascinating to see everything that your system can do.
Greg Uland Yeah. And we're continuing to build it out to where we're doing a lot of stuff here at the show in Dallas. It is taking it really to the next level, right? So there's the sales piece of it, there's the compliance piece of it. But then you get into this world of eContracting and funding and making sure that everything is able to be done in that fashion. It's pretty cool. What's happening in today's world?
Shannon Robertson It is. I think you guys did a good job of seeing the market demand. And a lot of companies were way too fast to go to the market and they missed some steps in that process. I think the fact that you guys took a little bit of time, made sure you had the best product available and went to market with that product was, in my opinion, the best game plan. And it is very impressive. It's user friendly and from a compliance standpoint, if you design it right, you eliminate a lot of the compliance risk by simply having everything automated and less controls for the user.
Greg Uland Yeah. So when you think about that compliance piece of it, just real quick, if you think about the processes that need to go into place, whether they're automated or they're manual, there's a lot in the F&I office, boxes you have to check, which is really your wheelhouse, right?
Shannon Robertson 100%. And I mentioned earlier that early AFIP was what is a law, what is not a law. Compliance back then, there was no compliance. It just was it a law, yes or no? This is how I did it. And today's enforcement environment, we have to say, is it a federal law? Is it a state law? Is it an agreement? Is it part of the agreement with our funding source? What is the compliance requirements for the dealer? And then what's the dealer policy? All of that now goes into what does an F&I manager need to do to do their job correctly. So there are so many more steps that are incorporated in that which docuPAD does incorporate that. But all those additional steps make it more complex for the finance manager today.
Greg Uland It does. So go into a little bit from your perspective or maybe from dealers that you've talked with or worked with, why it's so important? So you have these things in place and I think everybody knows that it matters, but it's not always front of mind. You can get into the groove where you're doing deal after deal after deal after deal, and you got to get through them, right? You got to get people in and out of that F&I office, you got to sell product. You got to get deals done. How can you keep it top of mind? How do you ensure that it's important for every F&I manager on every deal?
Shannon Robertson When it's enforcement, you have to have rules in place. It's a great question and it's one that we are constantly interacting with dealers on. If you look at an F&I manager, their job is one or two part. One, I have to sell product. And as a bonus and as a pay scale, it is the most part for what they're hired for. Two, I have to do it compliantly. And I have to privately disclose the contract. I think a lot of the times the dealers put so much weight in number one, they missed the opportunity to educate on number two. So I think if I do number one right, and I don't do number two at all, I'm now exposing my possible profit, my reputation. But what the dealers need to do is be aware of what the compliance focus is. And I think the conversations we have with dealers is if you set their approach from the top down and the expectations that this is what you do, then it's easy for the dealer. When they don't reinforce, they don't educate. Those are the dealers that struggle with that compliance component. All of our dealers do at least one meeting a week, whether it be sales or F&I. And we go over the sales numbers. We call out the lowest salesmen. We call out the highest salesmen. We go through the trends. It doesn't take much to take 5 minutes to say this is the compliance thing for today.
Greg Uland That's a good point because as you were talking, I was kind of thinking, all right, so how do you codify it? And then how do you inspect it? Because that's the big part of it, is looking at it and saying, hey, Johnny, great job with this. Billy, we got to make sure we do this every time. And making that a part of the conversation. That's a good example of at least once a week, taking 5 minutes and looking at that as a part of your staff meeting.
Shannon Robertson 100%. We're assuming the dealer does those things you talked about. The auditing and knowing where your staff is, is an important part that a lot of dealers miss. Any lawyer we bring in here will say if you self-audit, you will immediately be able to argue your fine to a lesser amount. Because you can show some type of due diligence. A lot of dealers don't self-audit. And if I don't self-audit, I don't know where my gaps are and I don't even know what to talk about in my Friday meeting about compliance. So that's an important step of the process that you brought up.
Greg Uland Well and it's documentation, whether it's manual documentation or ideally it's through software. But if you have to do it manually, you have to document it. But then what we're seeing is, is a bigger focus in those meetings on different types of things. You mentioned selling product. And one of the big ones that I've heard a lot of dealers focusing in on, especially with F&I managers, is what percentage of deals are they eContracting and what percentage of deals are they not eContracting. So you think about, you have a lender that is capable of eContracting a deal. I use GM Financial or Ally. Just pick one. And theyll eContract the deal. And when you eContract the deal, they'll look at it and say, okay, every contract, a deal, I have cash in bank in a day and a half. And on every paper deal I have cash in bank in seven and a half days. And then I can look at my F&I manager and say, all right, Billy sent every contract as an eContract. And his days to fund was awesome. Johnny, he only sent 50% of his deals to GMF and only 50% of those were eContracted and the rest of them were all paper deals and they took eight days to fund. So Johnny, we need to talk a little bit. So then you can take that and expand it to your point and look at especially if you have the documentation and do the same thing from a compliance perspective.
Shannon Robertson 100%. I was in an education session on Thursday on the floor and one of the F&I directors attending asked the question. I have an F&I manager who doesn't consistently use the menu. Persistently paper contracts and doesn't follow the process. What do I need to do? And it's an important question. He says, I track it, I look at it, what do I need to do? And in the audience went quiet. That person upfront gave his answer. My answer would have been a little different. My answer would have been, that is your biggest compliance risk at your store. And the comment he also made, it's my highest producing F&I manager. Which I've done enough auditing. The highest producing F&I manager that has the highest percentage of deals that are not consistent are not following the process is my biggest risk exposure. So if you track it, you watch it, you see it, you are able to determine where is your focus. And there's something about our industry where we let the finance managers at some dealership dictate the process. And that's not the appropriate approach. Those exceptions are your risk exposure. Those are the ones that you say you follow the process or you don't have a job here. In my opinion, it's a very clear communication and a lot of the dealers are afraid to have that, is they're concerned about losing that highest producer.
Greg Uland Well, and I think something that can get lost, too. So you think about your highest producer, it's your superstar. It's the one that you want on your team. And you can put that across any industry. You can make a sports analogy, whatever you want to do, you want to take care of that person to make sure they're on your team. But at the end of the day, they're your highest producer because they're talented. And they'll sell. You just got to tell them the rules of the game. And enforce the rules of the game. It's not because they are not playing by the rules that they're selling the most. They're still going to sell the most. You just have to enforce the rules.
Shannon Robertson You do. Let's do sports. Let's take the Giants and Lawrence Taylor. Lawrence Taylor was not a role model citizen. He was given exemptions. He was late to practices because of his talent. He was given exceptions to the process. It was disruptive to that locker room. It was disruptive to the team environment. And when people with the same talent acted that way, they didn't understand why they didn't get the same exemption. And then if we look at some of the other teams, we look at the Chiefs, but if we look at the Chiefs or some of the other organizations, there's a process there. It's consistent. Bill Belichick, everybody follows it no matter what. No one person is better than the team. And if you look at the success level that he has versus the other, it indicates what you're saying. I'm a firm believer that my number one top finance manager isn't just about the number. What example do they set for the team? Are they helping those below them? Are their deals compliant? Are their chargebacks the less? So I think what we have to look at is how we rank and how we determine who is our top finance manager. And I don't always think it's based upon highest producer, highest growth. I think there's factors in there. How many products per customer are they selling? I think there's a lot more factors we need to start including and letting that person be that example for our team.
Greg Uland Yeah that's spot on. I want to circle back to something you mentioned. You mentioned a word earlier reputation. And I want to circle back to that because in a lot of cases, the F&I manager is the last interaction that customer was going to have before they walk out of your store. So it's the last memory they're going to have of what your dealership can provide them. And you're trying to retain that customer through service and to sales the next time around. So go down that path. And if it doesn't go anywhere, we can circle back on somewhere else but go down that path of what that interaction looks like, what that means to your reputation and how it can impact your relationship with that consumer and other consumers going forward.
Shannon Robertson Well, I think regardless of where we do business, our memories as long as what's the last interaction we had. That's what sticks most. And negative interactions last longer. As we talk about dealers and dealers building a brand, every dealer's trying to build their reputation. And in most of these big cities, I have seven Honda dealerships, five Chrysler dealerships that I can go to. So as the dealer tries to establish their brand or their reputation, what they have to look at is are they hiring the right employees that are an example or a role model of the reputation? Do they fit? Does their personalities? Does their approach to the customer? Does it fit? And I think it's a more of a top approach, not so much as an individual approach, is if you hire the staff that fit into that model, then the what customer leaves with is that positive interaction and your reputation, and they will share that information. So the power of social media today is strong. So they will share it. They had a great experience. Most people will share it, especially if they've had a negative experience somewhere else. So what you want to be is that exception to the way everybody thinks is the rule. There are some good dealer groups that are not large dealer groups that are known throughout the U.S. simply because of their reputation. And everything they do is based upon that.
Greg Uland Right. So let me ask you then, in an industry that historically and is still today has pretty decent turnover. It's difficult to be disciplined enough to not have a bad hire. You got to have somebody in that seat. So if you've been two months and you're down one or two people like you got to get somebody in that seat. So maybe you're hiring in salespeople and your salesperson is going to move into an F&I role or maybe you're hiring in an open F&I manager. But regardless, the people that you're hiring, you got to get butts in seats to sell cars and to do everything else in the store. So how do you stay disciplined enough when there's pressure to get those seats filled? And maybe you haven't seen a great candidate or a perfect candidate?
Shannon Robertson I don't know if there's one answer to the question, but I think it's patient. I worked at a dealership. A lot of people here will tell you your first job is sell a car, then we'll give you training. Work for a week, see how you do. Then we'll put you through a new hard training program. And that was the old school mindset for a long time. We need somebody on the floor. We'll bring you in. You're 100% commission. If you don't sell, we'll let you go. And there's a lot of dealers that have that approach. I think the proper approach is you have to have a hiring philosophy. You have to have a way that you determine, are you a good candidate or not? I worked for a leasing company. We had to go through personality testing before they hired.
Greg Uland Yeah, we actually just started doing the Wonderlic test. So it's like I feel like an NFL quarterback.
Shannon Robertson Yeah, there you go. But it helps to determine who they're going to hire. They know what strengths they need to be successful themselves. And I think if you're patient and you hire appropriately and you train and you give them what they need, that turnover debate goes away. If you hire the right people, have the right environment and you educate and give them what they need, they last longer. They want to grow within the company. They see other growth. This guy started here. This is where I am today. Those are inspirational stories. When they can see if I stay here for four or five years, I could be at this level. So I think some of that just having that process eliminates that obstacle, in my opinion.
Greg Uland That's fair. And then what have you seen work the best when it comes to growing those people? So you have a good process in place for hiring them. You get them on board and then you guys do a ton of training, which is kind of where I'm going with this and asking is what's the most appropriate cadence for ongoing training and growth and does that need to be structured and laid out from the start, or do you see it more effective to cater to the individual in the situation?
Shannon Robertson Good question. I would say at this conference I've had about five meetings, they've asked what can we do to help with the hiring and training process and the growth process. There's a gap in our industry where we're not providing training to managers on how to manage. And we don't have a clear cut growth plan for our stores. The skill set from one level to another level are not the same. Because I'm good in sales doesn't mean I'm a good GSM. It doesn't mean I'm a good finance manager, doesn't mean I'm a good finance director. Though I think companies that are looking for low turnover and hiring the right people have to have a clear cut growth plan for their employees and ways for them to determine this is what we look for. In that role, though, you can display those skills at a lower level, work on those, and then there needs to be some type of education or training program. Your managers need to sit with those salespeople, ask them those career goals. Where are you trying to go? Here's some goals. And that's something that's missing in our industry. For somebody who is in that industry or has that business, this is a good place to go with that model because dealers are craving that right now.
Greg Uland Yeah. At AFIP, you have different tracks. And you've created different tracks. Are you seeing that with the dealerships that you work with through where they're trying to lay out a different path or really career progression in that F&I world? That first time F&I manager to the F&I director to somebody who's going to cover more stores or something like that. Are you seeing that firsthand, too?
Shannon Robertson I don't want to say I'm seeing a large increase of it. But what I can tell you is dealers that have a compliance officer and have an actual compliance department, it gives them those employees that can help build those out. So the dealers that I see that have it have somebody in place from an HR compliance standpoint that is putting that into place. To ask your GSM to create a training program. It's just not going to happen. You need to have that compliance department, put that in place and then they can coach the GSM and the finance directors and sit with the employees and teach them how to use that.
Greg Uland Yeah. So those compliance departments or even just a person. An individual compliance director, the dealerships that you see have those, is there a correlation between people that have implemented that and the ones that you mentioned earlier that have really positive reputation outside?
Shannon Robertson 100% There's a direct correlation with that. And I'm going to take a step back because not all of them have a clear cut compliance plan. But I think what I see there's a correlation between a top down approach, the owners having a clear game plan. This is our code of ethics. This is how we do our business. The finance directors, GSM's, and your compliance officer are all on the same page. And they communicate that from the top down. That's where we start to find those organizations that have that and they make the decisions based upon that. They enforce it or hold those accountable. I was at a store in Arkansas a couple of weeks ago. They said I had to let go one of my longest tenured sales guy that was highly successful. He made a bad decision. Yeah, but he said it violated the code of ethics. Clearly, I did not want to let him go. He's going to go across the street and work for our competitors. But he said, I cannot expect my staff to follow the code of ethics if I don't enforce it. And he said it was the most difficult decision he's had to make.
Greg Uland It is hard. But to your point, it's necessary. And you got to think long term. You got to think beyond tomorrow and think a year from now or two years from now. And if you have that code of ethics. So when you say that, it's written down and you review it and you live by it, it makes not easy but easier or at least you have a path to make that decision versus if you don't have it written down, if you don't have a code, it's much more of a gut feeling. It's much more of is this the right thing to do? Is it not the right thing to do when you can look at a piece of paper or electronic document or whatever and you say, no, it's pretty clear that this isn't a fit. We got to move on. And yeah, it's hard. And you like the person, you like the individual, but when you can clearly go to something and say you did X, that violates Y. I'm sorry. And it makes the conversation much more palatable.
Shannon Robertson It does. And you send a message to everybody else, right? We're not going to allow this. I can tell you, when I walk in a store, I see their code of ethics clearly printed where every customer can see it. That's a different class from an AFIP standpoint. They're more engaged, they're more interactive. They have a higher knowledge level just by walking in and seeing that I already know what type of store I'm walking into.
Greg Uland Yeah, that's great. So one of the things I wanted to touch base while I have you is really the evolution of compliance, right? And you were talking about how what's a law, what's not a law and what you do today versus what the organization did 10-15 years ago. We talk with dealers all the time about, we actually have a scroll that has a deal single printed on it and we stretch it out. 39 feet of paper. End to end. So you look at it, it's like, holy cow. And so you look at it and you go, man, this thing's not getting any shorter either. Compliance is just going to continue to grow and continue to grow. It's not like one day we're going to wake up and regulators are going to say, you know what? Never mind. It's fine. So where do you see things today from a compliance perspective? What's important? Where do you see things going tomorrow? What should everybody be focused on?
Shannon Robertson There's a direct representation to how we treat our customers and government interaction and regulation. Everything the government does and they've told us is driven by consumer complaint that we can argue the percentages, we can argue that valid whether their research is valid or invalid. But the bottom line, what drives everything is complaints from a government standpoint. So that's the first thing. The second thing is a lot of the dealers just need to get up to speed today with what the requirements were from 2003. You have to have a compliance officer, have to have a department. You have to provide red flags, safeguards, privacy. There's this base disposal. There's just basic training you have to have. So a lot of the dealers need to do this, get caught up to what's required today. Then we get in today's environment. Today's environment is different. Now that I'm up to speed with the basics, what is the government looking at today? And one of the focuses of the government is one junk fees. So now we need to go back and look at our products. Are we charging more for a product than what its actual or perceived value is? Yes, that's a subjective definition, but we have to find a way to quantify it. Whether we go back and we look at loss ratios, there's ways to do it. Junk fees is one of them. The second thing we need to look at is disparity. The government is using disparity a lot in their enforcement action. So as a definition disparity takes place when a member of a protected class receives a rate product price or something that's different than a member of a non-protected class, when all the other variables are similar. Though with that said, that's the second focus. NADA has two great policies out there that dealers can implement to be compliant. We have the Fair Credit compliance policy and the voluntary protection product policy. And what I mean by applying those are I see a lot of the dealers are I have that policy and then we teach it. You have to add the five bullet point. You implement the full policy. You don't pick and choose what you want. So and then the third thing that comes into play is just managing your rights. And I talked about that on our last podcast. I'm going to do another hour on it, but the importance of having something in place, manage your complaints so you know what's going on at your stores. You're resolving issues and you're running reports. Why does 80% of my complaints come from the same two people? You actually have the information to use to go back. So that's where compliance is today. It's doing the basic minimum requirements and then putting those other policies, procedures in place, tracking it and enforcing.
Greg Uland That's good. I kind of went all over the place a little bit, but you know what haven't we talked about that you want to dive into today?
Shannon Robertson I think if I was to add one thing to our conversation before we closed. In the Dodd-Frank Wall Street Reform Act, provided the FTC and some of the other agencies with the secondary way to enforce a fine on dealer. Called UDAP. Unfair and deceptive acts are practices. I'll make the same joke I made last time. I felt like a middle age m&m, there is no cap on a UDAP fine. And the CFPB has UUADP. They added abusive to it. UDAP is a scary thing to think about. If the government comes in and they can argue and prove in court that our actions were unfair, deceptive, and their acts or practices, there is a secondary fine. And it's not about written rules at that point. So with that and there's no cap, though, I tell dealers all the time, you try to figure out where the gray is, you'd have cover and you're great. The you have to have rules in place when you do things. Because what will get you in trouble for you, Deb, is making decisions without a guiding policy or procedure if you can't justify the action. With the policy procedure, you're subjective to a possible UDAP violation and it's important they connect that. That's why I see there's is no exception unless it's written in the rules as an approved exception. The other things that dealers need to understand with UDAP is you do have some protection, right? If you make decisions and put policies in place using legal counsel and following that, you do get a little bit of safe harbor due diligence depending on what state you're in. Yeah, you can use safe harbor for protection. So you can do that. But others will call and say, can we do this? We charge a fine for this and we charge a fee for this. And it all comes down to what is your legal counsel say, what's your written policies and procedures, what protection do you have? If audited and you're asked to justify that decision, you're subject to a potential UDAP violation. Payment pack, UDAP violation. Dump fees. Violation. They can in choosing how we price our products the dissimilar customers a potential UDAP violation. An inconsistent charging of rate. Potentially UDA violation.
Greg Uland It is a scary concept.
Shannon Robertson And it's expensive to fight. There are some dealers that have been fined in the last 18 months, significant amounts. In speaking with them. They felt like that if they could have potentially maybe argued some of those case points and maybe even won some of those case points. But the cost to fight it would have been so expensive. It was easier to pay the fine and move on.
Greg Uland It take so long and yes, it's crazy. Good deal. Shannon, I appreciate you talking. It's always a pleasure. And I think everybody gets a little more educated from listening to you. So I appreciate it and I hope you have a great rest of your career as usual. We'll hopefully talk again soon.
Shannon Robertson Thanks for your time. I appreciate it. I've always enjoyed the conversation. Thank you.
Greg Uland Absolutely.