Saturday Cup of Joe: a lending and techish newsletter

Friends & Colleagues:

Good Morning! I spent some time yesterday reading about Brexit and really should have taken the possibility of “Leave” more seriously. I did not take it seriously believing that it was not likely to happen. David Cameron and I have this in common, I suppose. I heard a British journalist refer to him as a “dice roller” prior to the vote and in some ways you have to respect that. For now…onto the news at hand…

Of Interest: PricewaterhouseCoopers’ Consumer Finance Group released the Mortgage Risk and Compliance Highlights report for June 2016. It is a comprehensive look at a variety of areas such as compliance, risk, analytics, tech and servicing in the mortgage industry. I won’t discuss the whole thing. Instead, I’ll highlight something that caught my attention. PwC identified 8 areas of a Risk Management Framework. The 8th and final area was “Talent management processes.” Having not seen talent called out this specifically in a risk assessment, I was intrigued. The more I read into it and thought about it, though, the more sense it makes. How are you incorporating personnel/talent management into your risk reviews, internal controls and governance framework?

The Takeaway: Talent management is the ultimate internal control. Not only the ability to attract and retain highly qualified folks, but also to maintain the institutional knowledge and stability that will end up benefiting the organization overall by avoiding problems before they begin (and saving money!). Top performers will:

  • Influence operational effectiveness which directly relates to customer experience mitigating operational risk
  • Create a positive customer experience, which coupled with proactive management, will mitigate reputational risk
  • Navigate innovation and changes in the industry mitigating certain market risks

If data is the raw material of an organization and data analytics are the tools to shape the raw material, the people (i.e. the talent) are the craftsmen that your organization needs to not only build something amazing but protect you against threats/risks. Talent management is critical to risk management.

Have you heard?: Innovation is everywhere. But beyond the startups and review sites, there are some interesting partnerships developing between traditional banks and newer fintech companies. The Boston Globe published an interesting profile of one such partnership between Radius Bank and Gradifi. The bank will allow certain accounts to return “cash back” toward paying down student debt. I was particularly impressed with the way Gradifi founder described “an ecosystem” for customers to access different financial products in new ways. I think this is how employers, financial institutions and startups can all work together to benefit customers. A bias toward fintech startups will often include wild predictions of the end of traditional banking. Here is an example of traditional banking partnering with fintech to benefit consumers. The article goes on to mention other companies who have found ways to connect with other institutions to bring creative solutions to market. Interesting stuff.

Got Me Thinking: The changing landscape of household composition is only likely to get more interesting and complex not less so. In a recent marketing blog post, I found some insight for how mortgage companies can position themselves in certain markets. In this case, I’m thinking of multigenerational homes and in general, simply getting more comfortable with the thought-process and lifestyle of a major segment of our customers. The article calls this “communal living” and I’m wondering if we’ll see a rise in communal living beyond Hispanic or Asian households. What if the entire country moved toward communal living? We hear a lot about “helicopter parents” and “boomerang kids” these days, so as these individuals grow into the next stage of life, what’s to stop them from continuing the family unit under the same roof? Similarly, are peer parents likely tobegin communal living as a way to share resources while maintaining an urban lifestyle? How can we get ready for these shifts? Or better yet, what can we do to be on the cutting edge of new approaches to family and child-rearing?

A Look Ahead: How will changing America’s urban centers change homeownership? I came across something this week that profiled America’s “most walkable cities.” A big theme in Detroit’s downtown revitalization has been connecting neighborhoods to green space to retail to the central business district. One reason is that young professionals are drawn to where they want to live even before finding where they want to work. Gizmodoranked walkable cities and many on the list trend young. I’ve always said DC is underrated and a much younger city than people generally realize.

What this research does not provide is whether changing landscapes and trends in urban centers will change how people rent versus buy. Rent vs. Buy: The chief economist at Zillow, Svenja Gudell, expressed concern. “It doesn’t paint a pretty picture…you’re really blocking out a group of buyers from owning a home. They’re truly living paycheck to paycheck, and that does not put them into a good position to buy.”

All this has created a paradox in Washington DC, specifically. The research shows incomes are rising, generally good for buying a home, but homeownership is declining. Down over 4% in the last 10 years in the area.

Maybe we’re not looking far enough ahead for clues. I can’t help but note a forecast published recently that discussed the future of the Northeast and hit particularly close to home for me. If Boston to DC becomes a so-called megacity, what’s the future of the Red Sox-Yankees rivalry? According to Connectography author Parag Khanna, we might be looking at one massive East Coast city that would include 50 million people. The really interesting thing for homeownership, travel and connectivity is the graphic associated with a proposed high speed rail system weaving together all major metros in the US. See attachment or the article.

Sidenote: Did you know there was a private stock market for sneakers? StockX, yes based in Detroit and co-owned by a local Detroit billionaire, is an online marketplace for buying and selling sneakers. In truth, founders actually would like StockX to become the online stock market for all consumer “things.” Kinda like a high-end eBay where bids and deals are tracked over time in order to set market rates. Last week Eminem signed on both to invest and to contribute some rare sneakers to the site. Either way, sneakerheads — as apparently sneaker collectors are called — have a new place to find rare items and it remains to be seen whether an online market exchange will grow from it. Thought it was interesting.

Today’s Thought: Our lives (and therefore our businesses) can be thought of as an active construction site. Or better yet, should be an active construction site. This metaphor first came up in the context of not allowing the initial work or initial activity to discourage someone from starting a business or beginning the work of self-improvement. The beginning is always the messiest type of thing. I think it applies whether starting your own business, looking to improve a current business or trying to begin a new habit or practice. If you look around the construction site of a major skyscraper there is always dirt, dust, materials, orange cones, hard hats, yelling and portable toilets…you get the idea. Yet, everyone involved knows it won’t stay that way; it’s a necessary step to something bigger and useful. Slowly the progress turns into a gleaming brand new building (often it takes years). Bottom line is we cannot let the messiness of the construction site scare you away from that big undertaking you want to achieve. The messiness is part of the process. It must be! Nothing we do will ever be perfect. We gotta build it and we have to be ok with uncertainty, clutter and some yelling, especially at the start, to make it work. Embracing a construction site mentality embraces the thing that deters most people from even starting.

Blog of the Week: Last but certainly not least, I stumbled upon a fantastic reminder on management and leadership this week. Henry Ward, CEO of eShares, published this piece on Medium.com and I think there’s a lot there for all of us. One part I found particularly interesting was Ward’s complaint that most managers start from completely the wrong assumption. Do we start by assuming the employee did good work and tried their best? Or do we start with “what went wrong here”? Ward writes, “Most managers attempt to minimize an employee’s bad work instead of maximizing their good work. When 98% of an employee’s work is great and 2% is not, managers give feedback on the 2%.” Let’s all spend this week focusing on the 98%!

Have a great week and I look forward to writing again soon if we don’t cross paths in the meantime.

Continued success,

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