Leasiing Life Awards The Finance and Leasing Association
By Emma Crawshay Jones on 18/09/18 | Category - Asset Finance

"So, what do you do for work?" a common question we are all asked at every drinks party you are made to go to or when you meet a distant family friend. Working in Asset Finance is perhaps not the most common of all answers, let’s be frank! Many of my close friends if I asked them probably would not know what asset finance involves.

Considering that asset finance provides the funding to support 35% of investment spending by businesses in the UK economy (FLA, 2018) we are an important player in the economic success of the UK market. But, does the industry do enough to explain to the younger generation what we do and the career opportunities that exist? 

Previous generations, did not join a high street clearing bank (Barclays, Lloyds, RBS etc.) but instead joined the "hire purchase and leasing" subsidiaries of the banks. For others, it was an "accidental" rather than deliberate career choice. I personally fell into asset finance because of a family member. A significant minority in the industry today like me, joined because a family member was already involved in the industry. Which leads me to two questions - (a) would I have been aware of asset finance as an industry if my father had not been involved, and (b) is it an attractive industry for young people, graduates and non-graduates, to join today.


Well firstly I don’t think I would have joined the asset finance industry if it wasn’t for family. I do think we need more promotion of the industry at university level and the awareness of all the different areas one can go down in asset finance. In saying this, are people going to university less now? With the fees having increased we are seeing less children wanting/able to go to university. According to the Independent Commission on Fees, in 2012, there were 15,000 "missing" applicants who might have been expected to have sought a place on a degree course that academic year but did not. So if less people are going to university, how does the asset finance industry encourage the young to join? Perhaps one answer is for asset finance organisations to go into schools to promote the industry.

I do think the industry is attractive to young people. It is consistently growing and developing in resources. However, there is a lack of training for young people coming through and indeed if you are an employer looking to make new hires there is currently a dearth of talent to call on between the ages of 25 – 35 years of age. This needs addressing urgently as banks are now reducing staff and returning to standardised products.

As the industry moves on so do the people. Whether that be changing careers or retiring, we have to welcome the younger generation to come through and sponsor the industry. On the flipside, the issue of the younger talent replacing those who will be leaving with 30 years’ experience behind them, has been talked about for many years. There is no substitute for experience, especially when it comes to dealing with market downturns and economic recessions. But once they have left, where does that leave the younger generation, and how are we going to close this gap? Will this knowledge be taken with them or previous mistakes that were made in the past, reoccur? I think these people with such experience and knowledge should be encourage more to go into teaching or mentoring, so that their knowledge can be shared to the next generation coming up behind them.

After attending The Leasing Foundation’s,‘Young Business Finance Professionals’ at Hush Mayfair - April 18 2018, I wasn't amazed with the volume of young professionals that attended. As well as the Leasing Foundation; Young Business Finance Professionals programme, there is AF-PA,(the Asset Finance Professionals Association) that regularly holds networking events. So there are organisations out there to help people in the industry to network but is it enough to reach a wide audience of young asset finance professionals, especially those working outside London? Perhaps one way to improve awareness of the industry to the younger generation is to market more on social media, using trends and blogs. Looking at reaching schools across the UK and injecting knowledge to children from a younger age than university.

With a market that has grown dramatically over the past five years, and new business (primarily leasing and hire purchase) growing by 10% in May 2018 compared to the same month last year (FLA, 2018), there is certainly plenty of evidence that we need to support the growth of this industry by educating and promoting to the younger generation to get the word out there that working in asset finance is awesome!

By Laura Gosshawk on 01/08/18 | Category - Asset Finance

After a recent round table with the FLA regarding how to value an asset, the importance of people became even more apparent. With more and more automated processes, automated systems, out sourcing and generally placing as many layers and as much distance between the provider and the customer, I feel lucky to still work within a sector that knows the importance of people and a company that prides itself on maintaining strong relationships with both banks and lenders and our customers.

Computers are great, but they’re quite frankly, scary and our dependence on them giving us all the answers I find quite unsettling. A whole discussion on Artificial Intelligence and the future of that is another matter!

The importance of understanding the value of an asset at the beginning of its life, but also the end of a finance agreement, is paramount to how you structure a deal, for the customer and also to get the best out of the asset. With comments on future automated decision making for asset valuations, something I’m not even sure would be possible for some asset types, the value of the human element is key.

When it comes to people in asset finance it has to start at the very beginning and the customer understanding their asset for the finance to be truly effective, and let’s be honest cost effective. Knowing how it works, how long it will last, what it’s potential down sides are and working around, or within those parameters.

This translates into the customer relaying that through to the finance, either a bank/lender/vendor directly or an intermediary. That key contact should get to know the customer to really understand how they can help, where they can add value and start to build on a relationship rather than one off transaction. It’s this contact that will also determine how a transaction is structured and also presented internally for any kind of sanction or sign off.

A credit committee rather than automated decision on a customer allows for ‘story type’ deals to pass when they might otherwise not. In a world when a set list of parameters gives a ‘yes’ or ‘no’ answer, with nothing in between and no human element to the transaction, where will the more difficult but equally as fruitful transactions go? How will they be placed? And where will that leave start-ups or SME’s with limited financial history?

At the round table discussion, it became apparent when placing a value on an asset at the beginning of its life and also the end, a person with good knowledge of an asset sector is vital. We’re lucky to work with a strong, independent valuation company that gives data driven information on asset sectors/types and their future/residual value. They are also a company comprised of human beings with decades of experience that talking to and gauging further opinion, proof and provoking discussion with can give us more answers than the numbers on a piece of paper sometimes. It’s about getting the right people to work with, not people that give you the answers you want to hear.

This personal element can allow us then to understand the asset values when speaking to lenders. We’ve experienced in the past, some lenders where the internal asset team may not understand the assets as well as they could and this has caused uncompetitive quotes. But it’s not just about accepting this; to get the best of out of lenders for a customer it’s about understanding at what stage of the finance process this is having an impact and addressing it. Taking an asset team to physically see an asset and a customer may sound ridiculously obvious but it also, and I fully appreciate why given constraints on people’s time these days, appears to happen less frequently before a deal is incepted. Having an asset inspection after an agreement has been incepted is a well-known process, however getting to know an asset and customer before quoting on finance can greatly improve an understanding on whether it is something or someone you may wish to work together with.

Inspection of an asset at the end of its finance life also has a substantially important human element. There are return conditions set in legal agreements, but an independent valuer that also understands and knows the asset types being inspected helps asks the right questions at the right times, that sometimes may not otherwise be broached. They may not produce a different outcome but if the customer knows they are being treated fairly it maintains a legitimate and strong trusting relationship. It’s looking at an asset and using the legal framework given, but translating that through to a customer; This takes logic, common sense and good manners that a computer or automated system would not be able to replicate.

From start to finish of the asset finance process and agreement, humans are vital key elements, but lastly I wanted to touch on the human element throughout. We pride ourselves in wanting to build long standing relationships both sides of the fence and it’s this sitting by a customer throughout a life of an agreement that gives insight into what works, what doesn’t work, what they may want to change next time; This could be anything from term, usage, to type of finance. The information they need or want to receive throughout the asset life, the format they want this in, what frustrations around system constraints they endure. It’s also having this contact set up and working with the people in different areas, from procurement to fleet, finance to purchase ledger as they will have different needs and requirements once the finance is in place.

Our human interaction with customers and banks over the years has always been maintained throughout every part of the asset finance process. It’s something that may be impacted by automated decision making and automated valuations in the future, and something we may need to adapt to. However, for now it’s something we pride ourselves on and something, as you will see from the CFO of Veolia UK below, something our customers appreciate too.

David Gerrard, Chief Financial Officer. Veolia UK

"Over 20 years, Veolia has procured one of the UK’s largest fleet of leased commercial vehicles. Throughout that time, we have used the services of First Asset Finance plc to assist in managing all aspects of our leasing programme, from lease inception to termination. The team at First Asset Finance plc have helped to deliver flexible funding solutions throughout the economic cycles and their personable, efficient and knowledgeable approach is respected throughout our group. The team is not seen as one of being a supplier; they are seen as trusted partners."


By Patrick Sherrington on 10/07/18 | Category - Asset Finance

Harry Reasoner once said:

"The thing is, helicopters are different from planes. An airplane by its nature wants to fly, and if not interfered with too strongly by unusual events or by a deliberately incompetent pilot, it will fly. A helicopter does not want to fly. It is maintained in the air by a variety of forces and controls working in opposition to each other, and if there is any disturbance in this delicate balance the helicopter stops flying; immediately and disastrously. There is no such thing as a gliding helicopter." Harry Reasoner, Approach Magazine, November 1973.

Whilst not a direct comparison, the successful financing of a helicopter compared to a more routine piece of equipment can also feel like you are working with "a variety of forces and controls working in opposition to each other".

Helicopters are high value, complicated pieces of machinery, requiring not only regular and careful maintenance in order to preserve the life, and therefore value of the machine, but also exhibit a number of other distinct characteristics, which can sometimes make the financing of them more challenging. To name but a few;

The manufacturer will often require significant upfront payments before considering taking your order, and delivery times can be 18 months from order or more. This presents an immediate financing challenge if the purchaser wishes to preserve their own capital whilst waiting for delivery. In addition to this, helicopters are usually sold in either USD or Euro. This is fine if you, as a Purchaser, have revenue or financing facilities already available in these currencies. However, if not, careful consideration will need to be given to hedging the inevitable exchange rate fluctuations between order and purchase.

An obvious statement, but helicopters are an aviation asset. Many banks have an "if it floats or flys, we don’t fund it" policy.

Helicopters are a mobile, global asset. This is clearly useful for both preserving the value of the asset and opening up potential revenue streams for the asset. However, it does present financing challenges, as many funders will be uncomfortable with the asset being located in jurisdictions they themselves do not operate in; even if a logical case can be presented in terms of demonstrating security and ability to recover the asset. It is therefore important to consider whether your financing partner is either global in it’s operations or has a more limited geographic focus.

Contracted revenue streams; what happens if your bank will only finance in USD but your client wants to pay you in GBP? Another challenge facing the purchaser will potentially come from a mismatch in the revenues generated by the helicopter vs its purchase and financing costs. This can of course be hedged, but this is relatively expensive and uses up further credit lines with your banks.

Beware the Loan to Value test! Whilst helicopters exhibit fairly stable long term values there can be short term spikes in values but again consider the currency angle. Values are usually underpinned by USD or Euro therefore causing issues if your financing has an LTV test and is denominated in anything but these two currencies.

All these considerations, plus a few more to discuss, contribute to narrowing the pool of lenders available to helicopter purchasers, which is where using an independent specialist like First Asset Finance plc can really help. Decades of experience in the helicopter financing sector and a deep knowledge of the Asset Finance market means we can arrange financing facilities bespoke to your individual requirements by partnering you with the right profile of lender not only for your credit but also your asset profile.

 

By Robert Taylor on 11/06/18 | Category - Asset Finance

The Finance and Leasing Association (FLA) lists 79 member firms in its asset finance division, comprising 29 bank owned lessors, 38 independent players and 12 captives.

On the face of it, this diversity should represent a wide choice of funding sources for any business seeking asset finance for business growth, especially SME’s as virtually all the 79 FLA members target the SME market. Indeed most independent and many bank owned providers operate exclusively in the SME sector.

However, does this really result in a wider spectrum of financial choice for SME’s? Even the mid and large corporates who are not served by as many lenders as the SME market do not seem to be receiving the breadth of solutions available as they had on offer several years ago.

 

Financial Choice is reducing whilst Financial Sources are increasing.

I believe the reality of the asset finance market is that most customers actually now face limited financial choices and solutions being offered to them by an ever increasing pool of liquidity. With a few exceptions, independent SME funders operate with similar business strategies, with identical product offerings and have the same appetites for credit and asset risk. Their only USP then becomes price and/or service. And we can all remember what happened a decade ago when liquidity chased pricing.    

Increasing competition among SME asset finance providers has also resulted in the "commoditisation" of asset finance products as bank owned lenders have changed their business models by simplifying their processes closing branches and downsizing staff numbers (especially experienced staff who are more expensive but have seen business cycles), and focussing on delivering "vanilla" asset finance products via online platforms. Maybe partly so regulators can more easily see their books, maybe it’s to have a greater return on capital employed, but if you don’t have the experienced staff and everything is "productized" then innovation is removed as is financial choice for the customer and that ultimately will hurt the UK economy.

Collectively , SMEs now account for 60% of the new business volume originated in the UK leasing and asset finance market and I expect the SME sector will continue to dominate our market in the next decade especially as SME’s are now picking up more and more Government Contract business as larger firms are struggling to manage their contracts effectively. 

The supply of capital targeting the SME asset finance sector has also increased, from new market entrants including challenger banks and disruptor lenders backed by new sources of capital such as private equity and the British Business Bank (the latter are truly focused on finding innovative ways to support UK SME’s).     

You might expect this influx of new capital to result in the market shares of the larger players being diluted, as customers enjoyed a wider choice of funders. In fact, the opposite has happened, according to the latest Asset Finance 50 report published by Asset Finance International. This shows that the combined market share of the UK’s top 10 asset finance providers has increased from 54 % to 58 % over the past three years. Whilst there are challenger and disruptor lenders the larger players are increasing market share, and without doubt we will see more market consolidation in the next 3- 5 years among the newer and emerging asset finance providers (as we are seeing in today’s banking market) , which will also reduce the customer’s financial choice as the range of solutions on offer continues to reduce.  

So, where does this leave the client that requires a more innovative asset finance solution that cannot be provided by a limited product range delivered via a "one size fits all" approach?

Customers in this category will include the 7,000 mid-cap and large businesses in the UK that exceed the size definition of an SME. This group generates a total business turnover that is almost the same as the turnover produced by the whole SME sector. Their asset finance needs, in areas such as operating lease solutions, structured finance and managed services contracts, will simply not be met by funders whose business model is designed to service the straightforward hire purchase demands of SME clients or for that matter, any client.

  

Those funders who are able to offer tailored solutions for larger value asset finance transactions, are often unwilling to underwrite appropriate asset residual value positions, either for risk avoidance, financial reporting or capital adequacy reasons.   

Our aim at First Asset Finance is to deliver a range of solutions that meet the specific needs of both larger asset finance clients and their funders. This includes investing our capital in asset residuals, developing structured finance solutions, managing funder selection through our proven tender panel approach and handling the "nuts and bolts" of deal completion.  

We recognise and appreciate the importance of SME s (to UK PLC), but our mission is to ensure that the asset finance market remains open to meet the wider needs of all clients, particularly in operating leasing and to widen the financial choice of solutions in the market not reduce or commoditise them. We are actively supporting not just the "high street" known names but giving Challenger and Disruptor Lessors Residual Value investments to their customers to enable them to provide operating lease and other solutions that they otherwise could not provide.

We need to widen Financial Choice not reduce it otherwise our economy will not compete domestically or internationally.

By Laura Gosshawk, Head of Administration on 11/04/18 | Category - Asset Finance

As a relatively small company, we knew that GDPR was coming, we knew it would affect us, but were not entirely sure how. 

Having always held Data Protection Licences and complied with banks requirements to have these, is there much more to do?  The answer seems to be yes, but it shouldn’t be something to be afraid of if you are already processing personal data in a safe, considered manner.  You need a good, solid plan and make the most of the multiple resources currently out there, including the ICO Guide - https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/

With the compliance and implementation date looming on the 25th May 2018, I attended a course led by Paula Barrett, Partner, Global Head of Privacy & Information Law, Eversheds Sutherland, held at the FLA - https://www.fla.org.uk/

This was equally as fascinating given the timing of various news stories circulating around Cambridge Analytica, a firm that has allegedly used personal information harvested from more than 50 million Facebook profiles without permission, to build a system that could target US voters (Greenfield, P (2018) The Cambridge Analytica files: the story so far.  The Guardian, online.  Available at https://www.theguardian.com/news/2018/mar/26/the-cambridge-analytica-files-the-story-so-far)

One enhancement with GDPR seems to be the shift in the lawful basis on which you hold and store data, and consent no longer being enough in some circumstances. Consent previously was automatically being opted in and not ticking a box to opt out.  Now, it seems the changes will ensure positive opt in, ie you are automatically opted out unless you opt in.  Consent has to be freely given, specific, and informed.  Consent has to stand out, not be hidden in Terms and Conditions.  It must be clear, understandable, and accessible. The ICO provides an information check list - https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/lawful-basis-for-processing/consent/and the WP29 Guidelines on Consent under Regulation 2016/679 make some interesting reading http://ec.europa.eu/newsroom/article29/item-detail.cfm?item_id=615239

Giving consent freely was particularly interesting in the employee/employer example.  As an employee, can you really ever give consent freely? As an employee you are obliged to provide certain information, you may not be under duress to do so, or have a problem providing it, but with an underlying employment contract, is it freely given?  Consent seems harder to record and establish and may be used less and less as the lawful basis for personal data gathering.  

Other than consent, legitimate cause, to hold personal data, fits well into the new GDPR changes.   It is a broad term but covers legitimate business interest to hold personal data. You have legitimate cause to hold personal data, if you are arranging a contract or transaction and need that data to comply with legal obligations.   As long as this does not adversely impact individual rights, legitimate cause may be used more as a lawful basis for personal data gathering.  A further ICO checklist helps understand if this is sufficient lawful basis for your purposes:  https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/lawful-basis-for-processing/legitimate-interests/

Changing legal documents with this positive ‘opt in’ is necessary it seems, but also looking at your privacy policy.  Confirming the lawful basis on which you are basing the collection of personal data on your website, or via an email notification.  When you update this privacy policy it seems that simply doing this online with a date stamp may not be enough.  It should not be up to your customers to look this up to be aware of any changes.  Pro-actively informing them of these changes appears part of the clearer message of collecting and storing personal data.  In fact, we have received several emails over the past few weeks advising of privacy policy updates and being advised to check these online for further information.

Another topic that sparked debate in the context of GDPR was marketing.  We have all used marketing to generate new business, and we have all been on the receiving end of a marketing campaign. How will this be affected by GDPR? When you next give someone a business card, do you need to sign it, giving consent that they may use your email address and mobile number to speak to you in the future? Or via social media, once someone accepts your invitation to become ‘connected’ or ‘friends’ have they consented by accepting the request in the first place? An LIA (Legitimate Interest Assessment) is a useful tool to decide how you use personal data for marketing, also producing guidance internally for people outlining your marketing tools and how personal data may be collected and use for marketing purposes. Putting a process in place to protect the individuals and their data is paramount.

None of these are new arguments, but they are things that GDPR is definitely provoking thoughtful consideration and conversation on again.  Transparency seems key, tell people who the controllers are, what personal data you are collecting, and why.  What is the legal basis?  Give the customer the right to see their data, the ability to complain and request the destruction of their data with yourselves, but also the ease of porting their data to someone else at their request.  Appoint a Data Protection Officer (DPO) that is accountable for implementing these changes and don’t keep someone’s data longer that you need to.

From an Asset Finance point of view particularly, the difference between Controller and Processor seems to be closer.  As an intermediary and ‘processor’ whereby you are passing personal data on from a customer to a bank/lender, the onus was previously on the Controller.  With GDPR the guidance appears to imply that as a Processor you are equally obliged to adhere to the same strict protocols of informing the customer of what you are doing with their data, and also the timely destruction and option to see it when requested.

It also seems to be a time for money making off the back of the changes. Over the past few weeks, from stationary companies to data cleansers, we’ve been contacted by a multitude of companies proffering their services to make the switch to GDPR pain free and compliant.   Some of which may be useful, especially for larger firms that may need to outsource, but don’t be duped into thinking you need all these additional services.  There are some definite ‘scaremongering’ tactics’ out there that spark concern for more vulnerable firms, who may be worried into spending unnecessary money they do not need to.  Do your own internal checks and get everyone trained and on board, then you can legitimately analyse if you need external help.

Data Protection, is a completely fascinating topic.  It always has been and will continue to grow in people’s consciousness.  With the internet meaning you can access information on anything, anywhere, anytime, it will only become more important and more complex as we grow and develop.


By Patrick Sherrington on 07/03/18 | Category - Asset Finance

At first glance, the only thing in common between the FLA and the EEF, The Manufacturers Organisation, is that they are both trade associations promoting their respective markets and representing the interests of their members. The EEF, with a membership of 20,000, may be more widely recognised by "the establishment”, but the FLA can also command government attention with a membership that finances 35% of capital investment throughout the UK economy.      

Closer examination, however, reveals some interesting similarities between the two organisations.  Both held their 2018 Annual Dinners at Park Lane, London venues on a Tuesday night in February (although one week apart). Jeremy Vine, who was guest speaker at the FLA Dinner a few years ago, was performing at this year’s EEF Dinner (no doubt recycling some of his old gags.)

The Chair’s speech at one of this year’s Dinners included the following: "Last year I also referred to the need for more young people to enter our sector. In the era of……. increasing digitisation, our future workforce will need very different skills…..and it is essential that we present an image as a sector that attracts young people, particularly young women, and highlights the incredible opportunities available.” These comments were in the speech made by EEF Chair Dame Judith Hackitt, but they could equally have been made by FLA Chair Richard Jones.     

The EEF Dinner was preceded by a full day conference, which I attended for the first time. The manufacturing and engineering sector globally is in rude health, supported by growing world markets, and in the UK, the sector is out-performing the overall economy as a result. One of the sector’s key challenges, mentioned by several  conference speakers, was the general theme of a shortage of labour at all levels both developing apprentices and  a lack of highly skilled operatives.         

This is a challenge that in my view has also resonated through the asset finance sector for many years. Kick- started by the demise of formal and informal training programmes, that were previously provided by the major finance houses and lessors, for staff who were new to the market, and cost cutting by their parent banks which now view Asset Finance as a "Product” or "Desk”. Key aspects of the role such as credit, portfolio and relationship management, even pricing, being controlled by either wider group functions or the bank relationship director. This approach taken to the extreme will downgrade that Asset Finance relationship as a delivery mechanism rather than an owner and key relationship partner of the customer. 

As a consequence, I believe that for the major bank-owned lessors who continue to dominate the UK market, this has resulted in a significant lack of experience among front-line marketing staff; Staff who are now selling asset finance products that have been simplified to fit with the bank’s corporate processes, without sufficient flexibility to meet the customers’ needs or indeed improve their own wider skill set without leaving the sector to further their careers in other areas of the bank.      

Is our market delivering what our customers really need? With SMEs who account for 60 % of our market volume, the answer for many of them is that access to any source of asset finance at a reasonable rate is their priority. For mid-cap and large corporates, whose asset finance needs are more complex, the answer is that a " one size fits all " solution is not what they are looking for. Their asset finance needs can only be met by a provider with sufficient breadth and depth of experience to really understand their needs, and the flexibility to deliver a solution that really meets their requirements. This is often in stark contrast to the proposals that are delivered on a take it or leave it basis due to "policy".

Asset finance may have become a "commodity product" for many providers and customers, but industry research indicates that a strong personal relationship with a provider who can really demonstrate expertise in the customer’s business sector is valued by lessees’ just as much as competitive rates. Indeed, delivered correctly an Asset Finance solution will create links with multiple areas within a customer’s business such a Treasury, Finance, Tax, Procurement, Fleet to name a few. Fortunately as yet no-one has built "an app for that!"   

Widgets that are manufactured by 60 year old hydraulic presses and widgets that are produced by the latest additive manufacturing processes can both be called widgets, but there is a world of difference between them.

 

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