Episode 43: Bill Fink

Jack Hubbard  00:01

I've had the privilege of being in and around banking for more than 50 years. Lots of changes during that time. We've gone from Ledger's to laptops, typewriters to technology. One thing, however, remains the same. Banking is a people business. And I'll be talking with those people that make banking great here on Jack Rants With Modern bankers. 

Welcome to Jack Rants With Modern Bankers brought to you by RelPro, and Vertical IQ. Each week I feature top voices in financial services from bankers and consultants, to best selling authors and many more. The goal of this program is simple, to provide insights, success practices and to bring new ideas to the table that you can use to maximize your results. 

My first guest of this year is Bill Fink. In part one of this wide ranging discussion we talked about the economy in general, interest rates, and what to expect in an election year, among many other topics. Today, Bill and I chatted about small business, coaching, sales and banking among many other topics. Now, just a reminder about Bill and what an amazing intelligent individual and experienced banker this gentleman is. Bill earned an undergrad and an MBA from St. Joseph university. But there's a lot more than that. Bill is a lifetime learner with leadership and risk management among other certificates from Notre Dame, Wharton and Stanford, if that weren't enough, he's a CPA too. 

Bill's EVP and head of US commercial bank strategic partnerships for TD Bank. He's a regular speaker, podcast guest, and he publishes three quarterly newsletters. I don't know how he has the time to do this but he does it about CFO issues, the economy and more. It's part two, with Bill Fink, on Jack Rants with Modern Bankers for 2024. Here we go. And so in part one, we talked about the election year. That is some of what I'm about to ask you might be predicated on what happens in 2024, that we're in now, for our part two of this recording. And that has to do with legislation. I'm curious, if you look into your crystal ball, what do you see for legislation, both for non banks, industries and banks that might affect growth and and and their prosperity in 24? 

Bill Fink 02:38:

Well, I would say, Jack, we had this conversation today and very timely. Last week, we had the seven heads of the two investment banks and the five largest commercial banks before the House to talk about the Senate, I need to rephrase it not the House, the Senate, and capital levels become very, very contested. And I will not say whether I believe they're necessary or not necessary. But clearly, they have an impact. And depending on what happens there, I'll give you an example. And I did check this statistic, and this surprised me. 70% of residential mortgages today are granted by non commercial bank players, people outside the industry. And that has evolved very quickly, in the last 15 years. If capital levels go up and go up significantly, it will put commercial bank products at a disadvantage and a big question is what level do these capital levels apply to bank assets? There's been lots of ebb and flow on that. 

So some smaller banks may feel that they're immune, some of the smallest banks are likely to be immune. But how far does that reach go down? And one of the outcomes of that is potentially, like the residential mortgage business, that business may not be profitable to a bank or certain avenues of business may not be profitable to a bank, and they can't price effectively, and it drives it outside of the purview of the commercial banking space into the private credit markets. That's yet to be determined. But I would say that would be the number one issue that would likely be of concern as we look at 2024 into 2025, 2026. If you're a student of history, I would say the other issue that hasn't been identified, and I'm gonna wear my CPA hat here, for a brief moment, I would say if you're a student of history, it is likely that we will revisit, as we have done many times in history, as we change administration's or continue a current administration, you'll look at tax bots. 

I don't believe in the present Congress, that there will be a big appetite for changes to the current tax policy. But it's been on again and off again over the last eight years, about the corporate income tax rate, depreciation rates, all of the above. And I would say, if you are a proactive and astute student of history, you can pay attention to conversations that begin around tax policy. There is no question that in the last seven years, particularly in the last four years as a result of the pandemic, our federal debt level has gone up. The debt level by some measures is becoming a real impact on the outlook for term premiums on treasuries. 

There are lots of people smarter than I who point out that that will be something that doesn't go away. And so when you look into how we deal with the federal deficit, and I, I look at, we've got to look at revenue, and you got to look at expenses. And I think it's a combination of fiscal policy going forward in taxation policy, and at some point, there will have to be a meeting of the minds beyond where we are today.

Jack Hubbard 6:56

Let's talk about something that I think really is important to Main Street and to community banking. And it's something that you have been involved in for years, not specifically now. But that small business. If I'm one of the questions I loved, that you asked earlier on in part one, when you said you were you would go out with your bankers, and you would go out and make calls is, how does your company make money? And you said it was so good, you said, I could put two companies that exhibit nearly exactly the same situation, same industry, etc. And they make money in different ways. And that's true in small business as well. And if I'm a community banker, I have a responsibility not to advise because I gotta be careful about that but to help small businesses with ideas and insights and best practices, what should a community banker be doing to help small businesses going into 2024?

Bill Fink 07:54

Oh, Jack, I would open it up with really one simple question. And that is, do you understand the small business owners, the entrepreneurs' motivations? Everyone often responds that they want to make money, or they want to be successful. And my question, in a most professional way, is, what does success mean for that small business owner. And I have found in my own personal history of managing relationships over a number of years, is that success may mean, stability of the business, to employ extended family, offer opportunities for the family, to grow, to have opportunities for things in life that we've all come to appreciate and hold dear. For other small business owners. They don't have extended families. And it's about building a name for themselves. It's about profit potential. I've had people say to me that, you know, by the time I'm a certain age, I want to be this revenue size, or I want to make this much money and net income after tax bases. 

So I would say number one, start with what that motivation is. And then what forms does that motivation give opportunity to? Is that growth? Are they looking to grow organically? If it is, then what are their primary products and services? What's the opportunity in the marketplace? To expand those to go deeper and take those products or services into new markets? If it's not, how can I help that client, find new opportunities for either acquisitions or evolve into new markets if they're We're not going to buy another company, or build out a product or service more extensively. If that all becomes the opportunity to engage. 

If it is, then what's that mix? What's that debt to equity mix? What do they need? Are they intending to be patient? Are they going to do that with bank debt? Are they intending to blend that with equity? And today in this world, there are companies that come in and we face this quite regularly. They can bring it to a private equity Park. We and Jack are one of the areas and I know you, you know this from our discussions over the year, we have found, as I talk with you today, in the last 60 days, we have funded two significant ESOP loans. And as you're aware, I teach ESOP at one of the leading universities for continual professional education, and we've come to the forefront. 

Private equity has a very good time in place. And it offers a tremendous opportunity when well used but private equity doesn't necessarily fit every situation, particularly when an owner may want to ensure rewarding his, his or her employees. Over periods of time, we had a situation where we had a client who was at a private equity opportunity. I was asked to come and speak with them, because of my background and Aesop's when we sat down and we walked him through. And I will tell you, my number one question is to them, and this was less than 60 days ago. What's your ultimate motivation? What do you want to achieve? Do you want to walk away with a big pile of cash and go enjoy many of life's opportunities? 

The person said, Absolutely not. I want to ensure for my family and I went, we have that opportunity. But I want to protect the employees. I think there's more growth opportunities. I have concerns about selling out what it will mean to having that control. And we've caught through all the intricacies of an ESOP, what it means, what it is, how it works. And in those cases, they made the decision that a sell out to private equity wasn't necessarily the right thing. They're going to grow their business, expand their business, and develop in another market by doing an ESOP. And we're going to fund that ESOP. 

So it can be friends and family, it can be ESOP, it can be traditional debt financing, it could be private equity, but understand what that motivation is, and then begin to look at building out kind of an action plan. And this is where the banker becomes a part of the team to bring in the accountant or accountants, in a plural to build out what that projection looks like? We may need to bring in some specialists if they're going into new markets, all of that a banker can be the catalyst for that, whether it's small business, whether it's midsize business, and actually, the banker has more opportunity in those contexts than sometimes they do with in the largest upper echelons of middle market, corporate and public companies.

Jack Hubbard 13:23

Well, it's so true. It's so true and small business is so close to my heart. And I think community bankers need to work if they're too small to have a leasing company, an international division, or an insurance division. Too often what happens is community bankers just don't even ask the questions because well, we don't sell that product. But this is where correspondent banks can come in. Your organization has a great correspondent bank, South state bank, and many, many others. You need to get to know if you don't use a correspondent bank. Or if you don't trust your correspondent bank, you need to know other people in the community that run leasing companies that have insurance agencies, so that you can really help that full business really maximize what they want out of life,  It's so true.

Bill Fink 14:15

Jack, I've had someone say to me once and I've never forgotten it, I'm sure the listening audience will have the same experience. And that is specifically I've had insurance, brokerage clients, and I've worked with clients who have needs, and I brought client and client together to be able to interact. And I've had that one of my clients tell me that there is no higher vote of confidence and reward. In business than for you to introduce someone who is your client to me who is your client, and I look at it you can of course There's a risk if it doesn't go well. But and so that's where you really have to know your clients and be cognizant of personalities and how people interact. And I would say, in all, protection as a business person, I usually introduce two or three of my clients, if they're in that business and say, Why don't you talk to A, B, and C, because I recognize that this is something beyond the professional expertise, you have to be comfortable with the person. And I've had enormous success, I can positively say, and I'm thankful for this. I've never had a bad experience for my client, but there's a risk of doing it. But you got to do your homework. But if you do your homework, it can marry to relationships that are much deeper for you in the future. And I've seen other banks come and knock on their doors. And their view is, you know, unless you're giving me the money, I'm not leaving my banker.

Jack Hubbard 16:01

Yeah, it's a good point. I was so much looking forward to this interview. But the last question I wanted to ask you, I've been saving for last because it's something that's near and dear to both of our hearts. You are, where a phenomenal salesperson still is, you go out on calls. But you're one of the best coaches I've ever seen. Talk to me about what you believe, what you've seen at TD and other organizations? What's the state of coaching and sales in banking today?

Bill Fink 16:32

Well, Jack, I can't be more pleased for you to say that to me, you were the teacher, I was the student. And I would like to believe I've learned from the best and you're in that group. So thank you. I look at it, Jack, that we were evolving, we're evolving well. But I don't know that as an industry. We've married the whole concept of sales, proactiveness and sales planning. With the data, we get just a multitude of different data points, multitude, so much so that they become almost inhibited. And where I find it, I look at the next five to 10 years, there's going to be increased nonbank competition. It's a reality, we have to accept that we have to work around it, you accept it, you know who your competition is, there will be intensifying competition among banks. 

So what we need to do is not engage the client, it's too late when the client has a demonstrated need. If you wait till the demonstrated need has really been voiced. You're behind the eight ball, so to speak. The idea that we're engaging earlier account planning, we should be talking to clients we should be, this should have already been done looking at, we're at the end of 2023, we should be talking to them about what 2025 is going to bring 2024 At this point should be pretty much baked. So thinking ahead, thinking about their lines of business, where are their opportunities, and again, we I like to think we've graduated from the viewpoint that we think in terms of our product, bringing to our clients, I want to turn that paradigm and I believe the industry will ultimately turn that paradigm around and say that our clients fulfilled a need that's been identified some time ago. 

So I would phrase this that we need to refine our needs identification process much more fully than we have over the last 10 to 15 years. Certainly, we're getting better at it but I should know that if you're building a vacation house in Florida, and I'm your commercial banker, I should pick that up in a conversation and I should have you introduced to our construction loan department or our residential mortgage department for opportunity, Jack before you engage the architect. And you may say to me, Bill, hold your horses here. And I don't even I don't even have my wife aligned about the vacation house and I or the second home in Florida, and I look at it and I'd say I want to plant that seed so that you know when that process begins, don't think it is already there. And you know, when you're looking at artificial intelligence, artificial intelligence is emerging rapidly. 

A lot of people don't even know what it means for their business yet. They hear about it, it's, I would say, it falls into the category of fear of being left behind. You don't want to be at a disadvantage, but they don't know,I  look at it. I'm spending a good bit of my time, outside of the bank, really getting in and looking at what is artificial intelligence? What's that opportunity to bring into business? What industries tend to lend themselves more directly than others? What does it mean in certain industries? Give you an example. I think there's a tremendous opportunity in manufacturing, to further automate today. But to sit down is, what does that mean, I'm investing a good bit of my personal time to be able to do that. I think those offer tremendous opportunities, so that when the next banker comes in, and traditionally offers a quarter or a half, maybe more in the way of reduction in rate, if they do or a non bank player comes in and offers that, you're able to be clear in your value added to your client. And they'd say, that's good. But my banker brings to me so much more, that is valuable, and foresight into my industry opportunities to integrate and embed technology that I'm not sure I'm going to get and it's not worth the risk to change at the end of the day. And that's where I see that so sales coaching really comes into view. Are we in fact doing that? Are we in fact having those conversations? Are we looking at the data related to our relationships, not at the point where the need is demonstrated, but we begin to anticipate that more for the future? 

Now, if you've got someone who's, you know, I would say it was been in the business a number of years, having that conversation about what's the transition plan for the business, introducing them to a wealth management area of the bank, or if it's not the bank, to someone in the industry, to talk about to talk about if they're thinking about that. Aesop's, to look at inject, you know, I've done this because of my tax background, having conversations about, you know, talking to professionals about estate planning, how does that work, you work, you built this business, you don't want to see it be impacted by taxation, you want to ensure its longevity, if that's your plan, you know, how do we in fact do that those are all conversations. They're sensitive conversations are difficult for some people. A banker doesn't have to do it by themselves. Certainly, they can bring out people to support them and their wealth management or if they have trust operations to do that. But these are all conversations that should be taking place in the span of a lifetime of a relationship. And the earlier we do them to demonstrate the thoughtfulness, the skill, and really coming back to that phrase I dislike because it's overused, truly being a value added banker. That's what's going to protect the industry and protect individual banks and bankers for the future.

Jack Hubbard 23:35

So true bill. Well, you've been so kind with your time, and I really appreciate it. And you do provide the kind of value that you're talking about, you've got something called the CFO newsletter, talk to people about how they might receive it, or how they might contact you. 

Bill Fink 23:45

Well, they can contact me certainly through LinkedIn, and I post it to LinkedIn. Every quarter, I happen to post it this morning. So the December issue was posted this morning. In addition to that, I do a publication on private equity market outlook. And I happen to do something on the middle market, industry outlook. So there are three that I do every quarter that I just look at as they add value to our relationship managers, but I post them to bring value to the industry. And if you contact me through LinkedIn, would like me to get on my direct email to the office. I'll be glad to provide you that, to be able to do that. And if you have a desire to contact me directly, my email at TD is [email protected]. And I'm glad to entertain any inquiries.

Jack Hubbard 24:44

Well, Bill, you've been so kind with your time, I always tell people, Bill Fink is one of the top three bankers I've ever met in my life. And it just is amplified by these two programs that we did. And I'm also proud to say that you're one of my best friends in the industry, one of the things I miss is not being able to have our annual dinner at Capitol grill but we'll make that happen again, thank you so much for your time.

Bill Fink 25:10

Jack, Thank you and best to you and your family for the holidays. Be well.

Jack Hubbard: 25:15

Thanks for listening to this episode of Jack Rants with Modern Bankers with Bill Fink. in quarter one of 2024 my guests will include Ned Miller, Joanne Black, Anthony Iannarino and Dave Curlin. That's just for starters. Jack Rants with Modern Bankers is brought to you by our friends at Vertical IQ and Relpro. Join us next time for more special guests bringing you marketing sales and leadership insights, as well as lots of ideas that will provide your bank or credit union that competitive edge you need to succeed. This LinkedIn live show is also a podcast. Subscribe to get the latest Jack Rants With Modern Bankers and leave a review as well. We're on Apple podcasts, Spotify, Google Play, i-Heart and many others. Visit our website, the modernbanker.com for more information and don't forget to sign up for that free public library at themodernbanker.com/publiclibrary. And all throughout 2024, make today today and every day a great client day!