It takes the following things to be wildly successful in your F&I department in 2020:
- Best-in-class F&I products attached to the appropriate profit participation program. (Retro-Reinsurance – DOWD)
- Defined processes with layers of accountability.
- Professional coaching & mentoring.
Defined Process with Layers of Accountability
Processes do not fail. People fail the process. It is critical to follow a defined process and have someone hold that process accountable. By doing this you will be able to measure results and ultimately increase profitability. As we travel across the country visiting dealers, the ones that lack process perform at a lower level than those with a process. We also found that if nobody is holding the process and the department accountable, it performs at a much lower level, costing the dealership money. Without giving away too much of my secret sauce, below is an example of my Ascent Dealer Services “F&I Blackbelt Road To The Sale.”
- Early F&I Introduction
- Sales Manager/Sales Professional Conversation
- Deal Audit
- Needs Analysis
- Structure/Restructure Deal
- New/Used Factory Warranty Presentation
- Menu Presentation
- Close and Disclose
- Ensure Customer Satisfaction
Win with Coaching & Mentoring
If you are looking to grow your sales and F&I department, it is critical that you have quality coaching and mentoring on a consistent basis. You cannot expect your team to grow if you do not provide them with the proper tools to do so. Coaching is a non-negotiable ingredient to success. Coaching and mentoring are not exclusive to the F&I office. Sales managers, salespeople, and even General Managers benefit and grow from coaching and mentorship. Growing the sales department is the fastest way to grow your overall finance gross. Every sale becomes an additional opportunity for F&I. Coaching will fully fuel your reinsurance or DOWC .
Dealers have more options today than ever before when it comes to the F&I products they offer their consumers. They can offer the manufacturer’s insurance products or they can use a third-party administrator. What is extremely important for the dealer to understand is the wealth-building side of the F&I products and how to make sure that they are not being taken advantage of by the insurance company or general agency. Dealers need to know all their options so they do not end up in a program that could put them in a vulnerable state. Understanding how to optimize on your profit participation program can yield some incredible wealth.
In my profession, I have some accounts where my company, Ascent Dealer Services, has 100 percent control of the F&I department. We train every F&I manager on the same process and we tweak things to fit the culture of their individual personalities and dealership culture. We then hold that process accountable by measuring results and providing feedback when deficiencies arise. By doing this, our F&I managers increase PVR and F&I product sales.
Reinsurance v DOWC
Reinsurance has been the best option for dealers for a long time and it has worked great for dealers. When I meet a dealer that is not involved in reinsurance, it is typically because they do not understand how it works. It is simply transferring the risk from the insurance company over to your reinsurance company that is usually set up offshore. They are extremely easy to set up and the cost ranges from $3500-$5500 for the formation. The dealer pays the administrator a fee to administer claims and the rest is ceded into your reinsurance company where it is invested in the market. Reinsurance is a good option for a dealer to participate in the underwriting profit instead of allowing the insurance company to keep all of it.
Is Reinsurance the Best Option?
The Dealer Owned Warranty Company (DOWC) has been around over four decades and over the past three years has become WILDLY popular. There is a big difference between reinsurance and a DOWC as the DOWC is simply insurance. The dealer sets up a domestic company in the state that they are doing business in. They operate under insurance regulations resulting in greater returns and longer tax deferrals. The DOWC cuts out all the unnecessary fees associated with reinsurance and allows the dealer to build wealth on a much faster scale. This is not a one size fits all solution and some dealers do not qualify for this structure.
Profit participation has always been viewed by dealers as the icing on the cake. That is true, I guess. Let us look at it from another angle. What if you ordered dessert at a restaurant and the cake was awesome, but the icing was average? I do not think you would consider that to be the best piece of cake you have ever had. I am not even sure it would even qualify as good. That is the problem with looking at profit participation this way. You cannot achieve a black belt in finance without the best profit participation in the business. Profit participation is also made out to be more complicated and more difficult than should be. It is really limited to two options in 2020, reinsurance and Dealer Owned Warranty Companies.
When you compare the two, it really comes down to Insurance vs Reinsurance. Insurance is just easier. Reinsurance is complicated. Reinsurance has been a great way to generate wealth and income for dealers for years, but there are some serious impediments to reinsurance. It is complicated and it is not transparent. It is expensive and you are extremely limited with investment choices. You also pay tax on your investment income. Dealer Owned warranty companies are 100% transparent (all fees are disclosed upfront). Investments are all run through a professional brokerage account resulting in much higher investment income, and you do not pay tax during the deferral period. There is really no comparison. Reinsurance is a cake with average icing, a DOWC is the best piece of cake you have ever had.
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