F&I and the great debate

October 15, 2020

A unified path is needed to move F&I forward, one that embraces digital, focuses more on the client persona, and ensures good practices are being conducted to boost consumer confidence.

Finance and insurance (F&I) has arguably been the slowest department to evolve within the auto retail industry, due perhaps to the many different visions that dealers have about where it should be heading.

Whatever those views may be it remains that even pre-COVID, consumers expected a more seamless experience, were growing frustrated with the time it takes to go through the paperwork, and in some cases lacked awareness and were distrustful about the products being offered, according to Adam Hill, Founder and Executive Chairman at LGM Financial Services.

“We are quite far down the journey, whether the customer is buying a vehicle online or in-store, around informing financial services managers on what are the most appropriate products to position, based on a customer persona,” said Hill.

The magic of offering less

In an interview with Canadian auto dealer, Hill said the priority continues to be on getting further upstream when consumers are doing their research, and to better equip them with whatever opportunities there are when purchasing a vehicle to protect the car as well as themselves.

To do that, F&I managers will need to ask questions about the consumer’s intended driving habits, the length of vehicle ownership, and more. With this information, managers can fine-tune their product choices to fit the customers’ needs.

LGM is of the mindset that the growing trend for F&I is to be selective around the most relevant products for the customer and only present those. “We think there is magic in offering a limited number of F&I products,” said Hill. The “old days” of presenting all the products has become a flawed model, he said, since it can easily frustrate or fatigue the customer.

But with technology at our fingertips, we can now ask the appropriate questions to the customer and provide them with a custom solution of protection. And thanks to COVID-19 and the increase in online selling, Hill said there is a growing demand for this type of sales structure and process.

“I think that, from an F&I success perspective to the dealer, they win more often when they take this approach because customers can relate to two or three products that seem to make more sense to them than sometimes offering a product that has very little value to them,” said Hill.

Doing this involves a combination of strategy, technology, and a bit of predictive analytics to help to narrow down the right options for the customer. And Hill should know: the company built a tool dubbed the “Recommendation Engine” that aims to help the F&I manager walk the customer through their intentions with the vehicle, and then recommends the most relevant products to them — specific to their car-buying situation.

The tool entered beta testing pre-COVID, was being fined-tuned during the pandemic, and is expected to be available “down the road.” LGM also plans to overlay artificial intelligence to provide consumers with statistics that will help reinforce the value proposition.

The shift to digital

LGM started to fine-tune its tool during COVID largely because of a rising interest in digital retailing among dealerships, and they were not alone. The hype during this period also led other companies to launch products aimed at helping dealers throughout the crisis.

Sym-Tech Dealer Services is another example of this progress: the company started working on its Virtual F&I platform during the second week of March, moved to conducting its beta testing internally, had everything ready to go to its dealer partners by the end of April, and then started implementing it into the dealerships in May.

“This was all done within 30 days,” said Derek Sloan, President of Sym-Tech Dealer Services. “The only reason we were able to really pull it off is because we have a solid technology platform with a solid sales process that was duplicatable on a virtual basis.”

The Virtual F&I process replicates the in-person interaction in a virtual setting, which can help dealerships more safely sell F&I products and boost performance in this area.

Asked about the importance of digital, Sloan said it remains a concern in the F&I department along with the importance of mobile. “I’ve done speaking engagements where I’ve said it — all transactional items for a car deal will be done on your mobile phone.”

He said anything that has to do with driving a car, such as transactional items that do not necessarily require human interaction, will be done on a mobile phone, an iPad, or whatever is convenient for the customer.

While this is not a revelation, it is worth noting that the pandemic has accelerated the efforts to move the F&I process more towards digital and that this realization, paired with the industry’s response, has created a bottleneck. Sloan said Sym-Tech’s response to this issue is to continue to integrate with digital platforms.

“The F&I component is still a key missing component,” said Sloan. “So our continued efforts to piggyback on that or to integrate with that is going to continue. But that’s what is changing in F&I transactions. They will continue to become more digital, and that is why the digital journey for F&I needs to, and continues to be, refined.”

As for what is to come, Sloan said the future appears more the same: dealers need to have a digital strategy, and to remember that they are not compromising a sales opportunity for a virtual platform.

F&I’s greatest challenges

The digital shift is one of, if not the greatest challenge in F&I right now and it does not come without its own set of hurdles, according to Benjamin Plourde, Vice-Président of Garantie AutoRoute 20-40.

Plourde said government regulations surrounding digital transactions are not overly flexible at the moment, and that doing remote transactions is not something that is completely legal.

“The rules were eased during the lockdown period, or when businesses were able to restart their operations, but it is not something that has been properly worked out yet,” said Plourde. “Businesses that were ready to do the transaction online (such as electronic signatures) seem to be in a grey zone; they weren’t able to open the valves.”

It’s an issue that still needs to be worked out at the provincial and perhaps federal level in some cases, though Plourde also said consumers still enjoy seeing the vehicle in-person to view, touch, and feel it before making a final decision. But that in-person aspect needs to be balanced with the digital shift and dealers, he said, need to remain open to the evolution of things.

That means providing more transparency to consumers to increase the value of the products by offering a proper explanation of what the products being presented are, and then proving their value through in-person or online communication.

“Consumers are not against buying extra protection, they just need a bit more of an explanation — so we are talking about a transaction that’s a little less of an emotional experience than usual,” said Plourde, adding that greater transparency and the ability to prove the value of the products being presented are among the biggest challenges facing the F&I department.

Garantie AutoRoute 20/40 is based in Mirabel, Quebec and offers protection plans. The company started deploying its products around the beginning of the year. The timing eventually collided with COVID and Plourde said they made a decision to set up an additional rebate assistance plan for businesses on their various warranty plans — this, since they reopened.

“We wanted to help them and we wanted to give a helping hand towards the health of the economy and to all our current and future partners so that we can evolve together,” said Plourde.

He sees the future of F&I as less about price and more about customer needs, while the products and process becomes more modernized.

Embracing good practices

Arguably, the most important thing a dealership can do right now to boost the credibility of its F&I manager and earn customer trust and/or loyalty is to enforce best practices — or as Jean-Claude Rabbat, President of Solutions Globale Automobile says, good practices.

“Many customers may find the (F&I) process to be long, cumbersome, and tedious in some cases, but that’s because there have unfortunately been many bad practices in the industry over many years,” said Rabbat.

Solutions Globale Automobile, launched in 2016, is a turnkey service that aims to help dealers get the most out of every dollar spent by the sales and F&I departments. One of the ways the company is doing this is by embracing proper F&I practices.

Some of these practices include:

  • ensuring the customer is conscious of what they purchased;
  • ensuring the customer understands that all the products are “optional”;
  • ensuring they understand what insurance is, what it covers, and when it will not cover something;
  • making sure the customer knows that a replacement insurance product is for their benefit in the event of a total loss; and
  • and to ensure that if the consumer selects a protection plan or an extended warranty, they understand that it is to protect them and not just because someone wants to sell them something.

“When a client understands what they are buying, nine our of 10 times the client will buy,” said Rabbat. “The problem is that we try to maybe sell an idea to a client which may not be the right one for them, and then we wonder why they are resistant to the F&I department.”

Asked whether he believes the F&I department should do away with managers or specialists and allow the salesperson to conduct the entire car-buying process with the consumer, thereby ensuring they deal with only one person, Rabbat said the two departments should remain separate.

“If ever someone was sick and had to go to the hospital, would they prefer to be treated by a generalist or a specialist?” said Rabbat, adding that there was a reason the F&I and sales departments were separated a long time ago.

He said a solution that is more profitable, lucrative, and more in favor of the consumer would be for the insurers/authorities in each respective province to find a way to certify the F&I manager — similar to creating an insurance agent. The idea would be to provide them with some type of certification and to implicate them for their mistakes if need be, particularly for people that do not apply proper practices and do not respect the rules.

The goal, said Rabbat, would be to shift the liability resting on the shoulders of insurers and dealers to a certified F&I agent.

“I may be the black sheep in the industry,” said Rabbat. “We are different, our services are different, and that has been part of our success.”

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