Crystal Ball an advisor and consultant, I wear many hats: independent thinker, problem-solver, hand-holder, weather-forecaster, and confidante. Oh, I sometimes send cookies. I am occasionally asked to wield a hatchet or carry an olive branch, but I never pull out a crystal ball. Careful analysis can go a long way, but no one can predict the future.

Now that 2014 is more than half over, it’s time to think ahead to January 2015, and the fall of 2014 as well. It’s hard to think about falling leaves, hot chocolate and snowmen when it’s 85 degrees outside, but it’s even harder to imagine starting the new year without a measurable, attainable, and well-thought-out plan for the direction of your financial institution. Here are several thoughts I’ll leave with you as you set out on that most humbling of processes, the strategic planning cycle:

  • You’re preparing for next year.

There is no dreaming about next year. There is no hoping that it is better than this year. There is no predicting. Focus yourself and your team on preparing for potential microeconomic  and macroeconomic bursts of change. They’ll come. The height and length of the wave as it crushes down around you may vary from what was planned, but that wave, that change, will come to your world. Now, that’s not to say that you shouldn’t stay abreast of things like the economy, interest rates, and the geopolitical whirlwind. It’s all part of the preparations.

  • Check that. You’re preparing for at least the next three years.

More often than not, financial institutions create one-year business plans. The annual business plan differs from the longer, richer, and, yes, looser, strategic plan. The annual plan, and accompanying budget, is simply a component of the strategic plan. I think three years is plenty. However, don’t relieve yourself of this duty by saying things are changing too quickly. That’s the voice of a salesperson getting you to buy something. Just about everything that’s going on is incremental in nature. The industrial revolution, the PC, and the Internet are epoch-setting events. A cool ATM is not.

  •  Tie it to risk. Enterprise-wide risk that is.

We like to think in terms of seven categories of risk. Yes, all ye bankers, it is based on NCUA guidance, but it’s a clean list and easy to communicate and reference. We think you’ll like it. These are the components:

      • Credit risk
      • Interest rate risk
      • Liquidity risk
      • Transaction risk
      • Compliance risk
      • Strategic risk
      • Reputation risk

There is certainly more detail to this as we consider specific factors within each category of risk. Also, it would be handy to learn your traffic signalization. Red-yellow-green light metaphors are used repeatedly during this stage of planning.

  • Communicate the plan. And then, communicate it again.

Get the word out. Prepare the troops and not just the generals. It is your duty to make sure that everyone is apprised of the plan. Whether they buy into it or not is a human resource matter. Selling it, and more importantly, living it, is a primary focus of the management team.

So, put aside that crystal ball. I don’t have mine. It’s not useful to you or your organization to be overly focused on predicting. I’m sure it’s not in your job description. However, bets are there is something in that same description about making sure everyone that wants to be prepared is prepared.

Our quarterly review of the economy: 2Q2014

Economic Review

The Second Quarter of 2014: A rudderless economy in a sea of stronger capital markets

The Indices You Love

The Dow Jones Industrial Average, as well as broader US capital markets, settled into an upward momentum in the second quarter of 2014. The DJIA gained nearly 370 points for the quarter, moving from 16,457.66 to 16,826.60, or nearly 2.25%. The S&P 500 gained nearly 88 points, or nearly 4.7%. It increased from 1,872.34 to 1,960.23. The NASDAQ enjoyed equal success. The 5% increase, or nearly 210 points, speaks to the strength of technology stocks. The index, which closed at 4,198.99 at the end of the first quarter, leapt to 4,408.18 by June 30, 2014. Growth in the second quarter was decidedly different from the negative or sluggish growth experienced in the first quarter of the year. This is a good thing.

However, banks did not fare as well in the second quarter. The NASDAQ Bank Index lost nearly what it gained in the first quarter of this year. The index slipped nearly 63 points, or 2.35%, losing all of the spring in its step. The index fell to 2,605.67 from its March 31, 2014, close of 2,668.29. Based on SNL Financial’s compilation of data by bank asset range, the smaller community banks fared somewhat better than larger community banks. The following details the gains and losses for the quarter:

Index Quarterly Change
SNL U.S. Bank < $250M Up 1.52 points, or 2.47%
SNL U.S. Bank $250M-$500M Up 3.73 points, or 1.31%
SNL U.S. Bank < $500M Up 7.6 points, or 1.38%
SNL U.S. Bank $500M-$1B Down 3.25 points, or .53%
SNL U.S. Bank $1B-$5B Down 18.13 points, or 2.46%
SNL U.S. Bank $5B-$10B Down 22.72 points, or 2.59%


The Broader Economy

The Institute of Supply Managers Purchasing Managers Index showed a slight gain for the quarter. It moved up to 55.3 from 53.7, up 1.6 points, or 2.98%. However, we should take note that the index is lower than the December 2013 figure of 56.5. Consumer sentiment, according to the University of Michigan Index of Consumer Sentiment, dipped to a low of 80 in March of this year. It has since rebounded to 82.5, which it reached in December 2013. Employment continued to improve as well.

However, it remains a rudderless economy. Politics and government interference aside, we believe that continued wage stagnation along with geopolitical instability will keep things cool. It’s not a prediction. It’s preparation. We certainly hope things increase at a better pace. Regardless, upcoming planning sessions should reflect a desire for continued growth and pursuit of better economies of scale.

The Challenge of Interdependence Day


How ’bout them fireworks?


During a recent client presentation, I shared a great deal of information with a stellar group of professionals in the financial services arena. About half-way through my presentation, I made a reference to a lesson I learned many years ago when I worked for a large financial institution. Here and there, words and phrases that have become a part of my professional advisory process found their way into the conversation. And then it occurred to me. Those ideas were certainly the result of 25 years of my own personal professional experiences, but also the experiences of my former colleagues, managers, and professors.

As a consultant, I have always prided myself on my ability to provide fiercely independent analysis and direction to our clients. And as an American, I am independent down to my red, white, and blue core, right?

But in reality, I’m neither a rock nor an island. From the educators that gave me the facts and insight that opened my eyes to the world of economics, to the lessons I learned when I first started out in the banking business, to the current projects I am currently leading, I’ve learned something new along every step of the journey with the help of so many different people.

So, on this Independence Day 2014, I challenge you to go beyond independence. I call on all those that believe that independence is the ultimate to grab a pencil and piece of paper and follow along. Or not. You are, after all, free to do as you please. Well, I say that knowing there are provisos, and, of course, limitations.

Force is never forceful

Independence is the direct result of having, on prior occasion, terrible dependence on some other force, be it voluntarily or involuntarily. Many have come to understand, unfortunately much later than they would prefer, that force is not forceful. That is, force cannot make a person do what they do not want to do. So, be it with ourselves, our spouses, our children, or our colleagues, force cannot lead to a positive and replicable outcome: trust. The same applies to systems-level thinking, such as religion, political and governmental systems, and social structures. Force does not work. In my readings of late, this concept often crosses my path.

In the graphic below, with force, we seek to contain a person to inside the circle. That simply will not work.


Independent living demands all of you

Independence and freedom are oftentimes linked to one another. The reality is that both require a great deal from the individual. And both of them require a great deal of focus on your duty to yourself, your family, your community, and then, ultimately, to all beings. Independence comes when you are able to think for yourself, create a new paradigm, and enliven your intellect. It does not mean that you can do whatever you want. For doing whatever you want will ultimately force someone else to live by that paradigm, which we decided is not forceful and is certainly not helpful.

Independence means to move outside your circle, but it still places the focus on person #1 in your life, you.

Interdependent thinking challenges you to go beyond

Change the arc of independence and challenge yourself to think interdependently. Dr. Covey spoke of interdependence in his classic, The Seven Habits of Highly Effective People. On this Independence Day 2014, do not think solely on the independent nature of those around you. Thank those around you and honor those that have gone before you for they have provided a  great deal of advantage in the life you lead. More importantly, strive to leverage your independence to advance an organization, a nation, and a planet by employing a culture of interdependence. Go beyond yourself.

Happy Independence Day!