Vice President and Head of the Agent Channel at Innovative Aftermarket Systems, John Lutman, joins the Agent Summit advisory board for the first time this year. Ahead of the event, he spoke with us about the path that led him to IAS, what the company is working on, and his predictions for the future of F&I.
I really enjoyed retail, but working for IAS and getting the expose to multiple dealer throughout the country is something you will never learn working in one dealership.
John, for those who don’t know, please tell us about IAS and how it’s grown in the past few years.
IAS started in 1984 in Texas. In the early days, we were an ancillary product administrator, but we have quickly morphed into the country’s first and most complete F&I solutions provider that has a huge focus on General Agents. Today we offer seven solutions for agents and dealerships – vehicle service contracts, ancillary coverages, retail technology, income development, turnkey reinsurance, a training institute, and performance marketing. The key for us is that we take time to understand our client’s distinct needs and customize our products to fit their specific situation.
What is something industry insiders may not know about IAS?
The one thing most people don’t know about IAS is that we're a jack-of-all-trades. As I mentioned above, our services are very customizable, even ancillary products and training. We don't have a cookie cutter approach to anything. We build what our clients request.
A lot of people think, “That can’t be true because that would take a lot of work.” It is a lot of work, but it’s what we do.
Can you offer an example of how you tackle that?
We have a product development team that's led by Brad Hunter, who’s been in the industry for more than 40 years. Brad’s product team takes daily requests from agents, dealers, and our national accounts customers, and they build those products specific to the customer’s specifications. I think that’s one of the strongest systems we have.
Additionally, our product line is comprehensive. We have multiple offerings for partnering clients. One of our newest offerings is performance marketing. We create dealer-branded marketing materials to use to target consumers who left the dealership without a service contract. We’ll offer them a vehicle service contract and also find out why they didn’t buy vehicle service contracts. We can help identify when a dealership’s F&I office is out of sync with their customers. We also have a software product called Dealer Wizard that does equity mining within dealerships. Finally, we can also private-label products for major dealership groups, including Sonic Automotive and Penske Corporation. We really reach deep into the marketplace.
What is your role in all of this?
I head the Agent Channel. Our team has about ten people, all with in-depth, direct car industry experience, and we partner with 275 general agents. Our job is to solely help them grow their businesses and their client bases.
That seems like a huge number of clients for nine people to handle. How much time is spent with clients?
We are constantly in touch. My team has multiple conversations with clients each day. On top of that, we have monthly business reviews with clients.
You had mentioned that data plays a large role in your work with clients.
Yes, we are a very data-driven company. We use a third-party software program called Qlik that helps us view and explore data, so we can share that data and help our clients grow their business. And in our monthly business reviews with our agents, for example, we really dive into it and show clients what products work best, along with comparisons for how they’re doing against other dealers in the region. If other dealerships are outperforming them with a particular product, we can help our client identify that opportunity and help them reach that number in their store.
The data allows us to work more closely with our clients. The review meetings ensure that we’re doing our job as their partners in every aspect of the dealership. We gather ideas, introduce them to new products, and determine if we need to develop new products and ask questions. How’s their pricing? How’s their performance? We constantly talk about those topics. We also constantly monitor our performance with the clients and gather feedback.
I’ve read about how you always take a very hands-on approach in your work and you urge others to do so, too. I found that interesting because you always hear data- and tech-driven people don’t connect with others on a one-on-one basis.
I come from a retail background, and I've taken a lot of jobs over the years that other people haven't wanted. I did that because I wanted to learn, not because I was chasing a big paycheck.
One of the things I’ve learned is that we use technology to provide information to our clients. Often in this industry, we shy away from educating consumers because it would make more work for us. But if you look at today’s customers, they know more about what goes on in a vehicle than some salespeople. We take that as an opportunity to say, “let's educate our clients as much as possible.”
I believe we are among the most transparent companies with our clients. We let them know all the information they need to make educated decisions about what's best for their enterprises, and everything we do is focused on being a trusted advisor to our clients. We are providing them with something that no other similar company can provide them.
You’ve worked on both the retail and provider side, correct?
My career path started with Ford Motor Credit Company. I was promoted into a position with dealer credit analysis. Through that promotion, I started working with all the F&I directors and managers, rehashing deals and getting people into loans.
I worked a lot of long hours for Ford Credit, and I learned a lot there. My hours were the same hours as those in the F&I offices. Although I'm glad I got the corporate experience and worked for a big corporation, I was always intrigued with the retail business. In February 2004, one of my best friends who owned asked me to become his sales manager. I'd never sold cars. I went to the desk right away.
Working at a dealership, a small business, is an education not only in your career, but in life. From your accounting team to your mechanics to your salespeople, it’s exciting and lucrative. When you’re 21 years old and want to make money and end up earning $10,000 a month, that’s an experience no one can ever take away. I loved watching young guys do that.
Was it interesting to return to the other side of the business when you joined IAS?
Yes. I really enjoyed retail, but working for IAS and getting the exposure to multiple dealers throughout the country is something you will never learn working in one dealership. IAS wasn’t big when I first started. Back then, we were an agency of about 100 people. Now, we have more than 600 employees.
It had to be interesting to go to IAS after working in a dealership and seeing F&I in action. F&I in a dealership has to be exciting.
It’s one of the most exciting parts of this industry. It’s often “turn-and-burn,” just basically moving vehicles. And with very little front end gross profit, the F&I department must fire on all cylinders. That’s what intrigued me.
And when you have a high rate of turn on used vehicles, you can see 200 of them a month in the service department. That means you’re making $18,000 to $20,000 on the back end. People don’t realize what the F&I department and the service department bring to the bottom line. Today dealership can’t survive without those two departments.
What are some of the biggest changes you’ve seen in F&I since you started in the car business?
The consumer is much more educated. As the consumer became more educated, it’s less about convincing and more about choosing the best products. There are also more programs out there that tie the deal with the consumer back to the dealership.
Dealerships are now embracing more educated customers. Now, the work is based more on a better customer experience in the F&I office than hammering home a sale. And the F&I specialists are introduced as licensed, bonded, and educated. They are very important parts of the customer experience.
Customers are told the F&I specialist is going to help them with their purchase, whether they return to our store or not. The whole point is to give the customer a very high-quality experience.
What do you think about the dealerships that have turned all F&I duties over to sales consultants?
We need to embrace new ways of thinking and new ways of doing business. This industry isn’t what it used to be. It’s no longer cookie cutter. Back in the day, you had a sales manager, salesperson and an F&I director. While that will still work for many stores for a long time, this is going to change as we get younger and younger dealers. When you get into the third, fourth and fifth generation dealers, they are thinking about how to get more in tune with the customer’s wants and needs.
I don't think salespeople as F&I consultants will saturate the market – certainly not right away. It’s a culture change. It's very hard to take the risk. Dealers will think ‘How's that going to affect me financially if I take the risk and it doesn't work?’ But I think that, at least for a company like ours, we are already starting to change our philosophy.
We tailor our process with F&I based on what the customer wants. If you want one person to work with the customer from start to finish, we can help you with that process. If you want a traditional organizational structure, we can do that. If you want a centralized F&I department for your entire dealer group, we can help you with that. If you want something completely different, we can do that, too. We adapt to the vision of the owner and help them execute that vision.
On a more micro level I wanted to ask you about F&I managers. Is there some quality that you see that makes you think someone is going to be a big success?
I do. I think there are a few. When I look at the F&I department and meet an individual that has a transparent personality, I know that person will be more successful than someone with an old-school personality of high domination.
I think that you're going to see more and more successful F&I managers that are more transparent, better educated, web-savvy, and who understand their customer bases. You're going to see that trait in a very extroverted person. I think that's what we look for and what managers should look for. It’s very difficult to find people that are driven, yet not entitled.
The successful person is somebody who has goals and aspirations in life. That’s the type of person you want. That’s the type of person who will be successful.
What do you see in the future for F&I?
The new hot thing among dealers will be ‘How do I get access to my money and my reinsurance company sooner than later?’ In a reinsurance company, the contract needs to earn before you can have access to those dividends, but dealers want upfront money and they want access to that cash for several reasons. They might want to buy more dealerships or even invest it back into their stores because the factories force them to do it. The hardest thing right now is access to cash. The dealers want to know they can access money without taking extreme measures like putting their mortgages up for collateral.