George Grant tells Jo Tacon about the recent strategic changes
at Bank of Scotland Dealer Finance
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Managing change is never easy, as George Grant, director of Bank
of Scotland Dealer Finance (BoSDF) well knows. Since he took the
reins at the unit in June 2006, there have been significant shifts
in strategy and structure on all levels. “It’s been a long
process,” Grant acknowledges. “After six months of taking stock,
talking to dealers, colleagues and customers, a picture of the
business took shape and by spring 2007 we had a clear idea of what
we wanted to do.”
The first step was to change the unit’s name from Capital Bank
to Bank of Scotland Dealer Finance (see MF Nov 07) in order to
emphasise the connection to its parent bank, and its close links
with the motor retail sector. The second stage, which has just been
completed, was to put together the senior management team which
will drive the process of change (see box), as BoSDF moves to a
business model which ties together three interrelated but distinct
disciplines: distribution, strategic accounts, and products.
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By GlobalDataGrant believes the new tripartite arrangement is a “logical
progression” for BoSDF – “an evolution, rather than revolution.” He
adds: “Now that we have built up a significant store of experience
and knowledge of our specialist areas, we decided it was time to
make ourselves more flexible,” although he is quick to point out
that the strategic shift is “not a cost-cutting exercise” and that
while staff may be redeployed, there will be no job losses
involved. The sums spent on the programme were “not huge”, with the
aim a long-term one of changing people’s views.
Grant says: “The business had gone through the specialism
stage but when we were looking at how we operate as a business, we
found people were having to spend too long in the car, rather than
with customers, which was not good from a work-life balance
perspective or an environmental perspective. We could have multiple
staff visiting the same dealership on the same day, to discuss
leisure finance, or point-of-sale, or wholesale funding, which was
inefficient.
“Looking at why we’d done this in the first place, it was
to develop specialisms which we now have, so we are now able to
manage relationships in a more efficient way at head office level.
We provide products, such as dealer development, insurance and
wholesale funding. The rest is distribution – working with showroom
staff to deliver products.”
Peter Cottle, as director of strategic accounts, is in
charge of “finding out what the market wants”; Paul McGill is the
“chief coach” on the distribution side whose task is to get the
best out of BoSDF staff; Simon Cotton, as director of products, has
to look after suppliers, both internal and external. “The new roles
play to each director’s strengths,” Grant notes.
Developing dealers
“The core objective of the reorganisation is for BoSDF dealers
to be able to say that they earn more, sell more and achieve better
customer satisfaction index scores than the competition,” Grants
sums up. He believes a successful implementation of the new
strategy is vital if dealers are to protect their profits in an
ever-more competitive market with margin pressure coming from all
sides. Grant is proud to point out that BoSDF has retained all its
customers throughout the changes taking place. “We did lose one
customer to a competitor – but only for a week,” he adds. “He was
soon asking to work with us again.”
As part of this commitment to the retail sector, one of the new
products BoSDF has launched is a dealer development training
programme called Elevation, which will provide tailored finance and
insurance sales training to dealership staff – for a fee.
Whereas previously BoSDF would provide finance and
insurance sales training to its dealer partners on a complimentary
basis, in future there will be a “monetary consideration” attached
to the programme, Grant explains, as he believes that dealers will
place more importance on gaining the maximum benefit from training
if it is a bought service rather than seen as a ‘freebie’. The
Elevation courses can be bespoke (for larger dealer groups) or
general courses, run either at BoSDF’s dedicated dealer development
training suite at the HBOS site in Speke, Merseyside or anywhere
that is convenient for the customer.
It is still early days for Elevation, although initial
reactions from dealers have been “very encouraging”, Grant says.
Retail groups Perrys, Macrae & Dick, and Marshalls are three
dealer development customers which have already provided positive
feedback, with Julian Pilkington, group finance, insurance and
warranty manager at Marshalls commenting: “With a varied training
portfolio and the ability to deliver bespoke courses on our
request, without a doubt [Elevation] has been a major factor in
driving our performance, and one we are happy to
continue.”
While manufacturers offer training courses to their
franchised dealers, Grant believes that Elevation training can be
of use to both franchised and independent dealers. “We offer
dealers an independent, F&I-focused perspective,” he points
out, “while manufacturers may be interested solely in ‘moving
metal’.” The courses are IMI-accredited, with grants available from
the IMI for women who take part, as part of the Institute’s plans
to encourage the advancement of female staff in the motor
industry.
The necessity of change
Grant is adamant that dealers need to up their game in finance
and insurance if they are to stay profitable. “The danger is that
unless dealers learn fast, business will drift off to brokers,”
Grant warns, citing the example of B2B car sales as an arena where
dealers in general have lost out to brokers due to a lack of
education about the best way to handle B2B customers.
He is concerned that insurance sales could be the next
avenue lost to dealers, as they are scared off by the Financial
Services Authority (FSA)’s new guidelines, and the recent furore
over mis-selling of payment protection insurance. Losing further
revenue streams is a “big risk” for retailers, Grant notes:
“Dealers simply cannot afford to lose the income from insurance
sales.” In response to dealers’ fears of regulation and possible
FSA censure, BoSDF launched a method of selling finance and
insurance direct to carbuyers, with dealers receiving commission
for every referral. “This helps shore up dealers’ margins without
the hassle of becoming FSA-registered,” Grant explains.
Product innovation is also high on the agenda. The
impending Consumer Credit Act (CCA) will shake up the motor finance
industry, Grant predicts, and one way that BoSDF will deal with the
changes is by encouraging customers to take out a personal lease, a
product which he believes is of benefit to both lender and
consumer. “In a slack credit environment, we have seen some
disciplines in credit disappear, which is not good for either
party. We need to move back to a situation where the loan is
aligned with the depreciation of the vehicle.”
From October, lenders will be obliged to send annual statements
to motor finance customers, which will make people far more aware
of their position vis-à-vis the value of their vehicle, and perhaps
more inclined to invoke the right to a voluntary termination –
which could be very bad news for financiers, Grant emphasises. “The
solution may lie in a more planned approach to personal motoring –
in other words, the personal lease,” he says. If dealers treat
customers as needing a “personal transport solution rather than
just a car”, Grant adds, the personal lease could take off. He
points to the success of the Motability scheme, with its 420,000
leased vehicles, as an example of UK consumers choosing leasing,
and does not see why its success could not be replicated for all
customers.
Underwriting criteria tightened
The credit crunch has prompted BoSDF to tighten its underwriting
criteria, Grant said. At present, around a third of proposals are
automatically approved, a third are automatically declined, with
the remaining third referred to the Dealmaking team whose job it is
to negotiate an agreement acceptable to both parties. Grant reports
that the proportion of proposals which were automatically declined
rose throughout 2007: “We raised the underwriting bar.” Since
January of this year, however, customer quality has improved, with
higher average Delphi scores, he says. “The average balance has
decreased, so we are running below plan on volume but ahead of plan
on cases, while the loan-to-value ratio has fallen by 3 per
cent.
“Customers are putting down higher deposits, making our
book better quality with lower risk, despite the fact that the
average term length has ticked up slightly. There’s lots of good
news there,” Grant states. However, he admits to frustration over
the view of City analysts who “have very definite ideas of what a
bank should or should not do” and who fail to recognise that dealer
finance is a long-term game rather than a short-term one. “It’s
difficult to keep everyone happy, and I am not sure anyone can say
where we’ll be in a year’s time,” he sighs. “Our core business is
decided by market forces, so it’s up to us to sell more products
without increasing the need for capital.” His hope now is that the
reorganisation of BoSDF’s divisions will set the finance house on
the road to long-term growth, while keeping the shareholders happy
in the short term.
Key personnel across the country
Distribution director: Paul McGill
Regional managers
South-west: Ian Austin
North-east: Gavin Ferneyhough
Internal sales: Mike Gaffney
Anglia: Zoe Hollingworth
Midlands: Paul Kawalec
North-west: Raymond Poole
Scotland: Iain Prescott
South-east: Duncan Shephard
Strategic accounts director: Peter Cottle
National accounts: Richard Atterbury
Contract hire and rental: Peter Crabtree
Leisure and motorcycles: Chris Turner
Manufacturer: Paul Whitaker
Products director: Simon Cotton
Dealer development: Philip Barker
Consumer: Andrew Brown
Service delivery: Brendan Mcque
Wholesale: Jim Trace
Business: Mark Whelan
Insurance: TBA
Motor Finance Issue: 41 – March 08
Published for the web: March 28 08 11:4
Last Updated: March 28 08 12:4
