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    In a whirl…

    When I was born back in the dark ages, my dad – who was very excited to have a son after four daughters – went into the recovery room, kissed my mom, grabbed the doctor and…headed to the track!  When he arrived, the woman at the betting window said, “Mr. Annotti, you look like you’re in a whirl.”  He explained the reason for his exuberance, looked down at the program, and noticed that there was a horse in the next race named “In a Whirl.”  Of course it was a longshot, of course he bet the house, and of course it came home a winner.

    While not quite as exciting – or profitable – I had several of those “in a whirl” experiences last week.  Here’s a quick recap:

    Monday, June 19 – Traveled to Springfield where Alliance Advocacy and Policy Director Melanie Hinds and I led a delegation of representatives from seven of the Alliance’s ten Illinois-domiciled societies in a meeting with newly-appointed Illinois Insurance Director Jennifer Hammer and a cross-section of Illinois DOI officials.  The purpose of the meeting was to introduce the Director to the sizeable fraternal community in the state, establish the Alliance as a player in the advocacy and policy arena, and discuss regulatory issues important to both fraternal life insurers and the Illinois DOI.  We accomplished that and then some.  It’s no secret that the relationship between the Department and fraternals was more than a little contentious in the recent past.  But thanks to cooperative and collaborative work between the Alliance and the DOI on state legislation that enhanced fraternal solvency and governance regulation, we’ve managed to transform the relationship into one of mutual trust and respect.  And it appears that momentum will continue under the leadership of Director Hammer.  Outreach to state regulators – particularly in those states with a significant number of domiciled fraternals – has been an important (and sometimes overlooked) component of the Alliance’s advocacy agenda.  And with new regulators likely to be appointed in two other key fraternal states – Pennsylvania and Texas – we’ll continue our proactive efforts to communicate with regulators and shape the outcome of debates on regulation that impacts Alliance members.

    Tuesday, June 20 – Wednesday, June 21 – Spent two days on Capitol Hill with the Jenn Fogel of Capitol Counsel, the Alliance’s retained federal advocacy firm, meeting with the tax counsel from six members of the Senate Finance Committee and five members of the House Ways and Means Committee.  The purpose of these visits was to make sure that the lawmakers who will be primarily responsible for writing the tax reform legislation (that will almost certainly be introduced later this year) know who fraternals are and what fraternals do before the debate on the overhaul of tax code begins in earnest.  We were also hoping to pick up a few more co-sponsors for the fraternal resolutions (SCR 7 and HCR 10) introduced in the House and Senate earlier this year.  The feedback we received from Members of Congress on both sides of the aisle was exceptionally positive: 1) you’re doing the right thing by getting your message out to the tax writing committees early in the process; 2) there is no specific threat to the fraternal exemption right now; but 3) everything is on the table.  The Alliance’s objective is to keep the fraternal exemption off the tax reform menu.  We’re doing that by focusing the lobbying efforts by staff and our advocacy firm on key congressional committees.  As the debate moves forward we may need to broaden our outreach to include larger numbers of contacts from fraternal executives, field representatives, local chapter leaders, and rank-and-file members.  So my message to you is this: Watch for updates on the tax reform issue from the Alliance on a regular basis and BE PREPARED TO MOBILIZE YOUR MEMBERSHIP AT MOMENT’S NOTICE!

    Friday, June 23 – Saturday, June 24 – Traveled to Atlanta to attend the Foresters Financial Convention and Leadership Development Conference and to speak to the society’s Board of Directors.  Foresters CEO Tony Garcia was adamant about his support for the fraternal model, stating in his opening comments that “Foresters has been a fraternal for 140 years and will be a fraternal for the next 150 years.”  Society leaders provided members with an overview of the organization’s strong financial results and Foresters plan for continued growth over the next 10 years.  The Board was very interested in the overall health of the fraternal sector, the opportunities for mergers and shared services within the fraternal community, and the operational and political challenges facing fraternals and the life insurance industry.  Finally, the educational programs provided to Local Chapter leaders were like none I’ve ever seen at an Alliance member convention.  Foresters will send its most engaged members home with hands-on tools and information they can put to use to do more good in their own communities.  Very impressive…

    Whew!  That qualifies for an “in a whirl week.”

    Next week I’ll be taking a few days off from work and this blog.  So please enjoy Independence Day celebrations and look for my next post on July 10.

    Spring Symposium Hits the Mark…

    Guest Blog – Joe is traveling quite a bit this week so here with a guest blog is Andrea Litewski, Alliance Director of Education.

    Last month, the Alliance held its first ever Spring Symposium, a reimagining of our traditional Mid-Year Section Meetings. Over the course of a day and a half, the Symposium had thirty sessions in five different tracks – Business Operations, Communications and Community Engagement, Compliance, Investment, and Actuaries – and close to 200 attendees participated in our inaugural event.

    Because I am a “Millennial,” I am always looking for feedback.  One of the first things I do after one of our events is read the attendee evaluations. I am always so interested to hear directly from our attendees about what they loved and what we can improve. We dreamed up this new event based both on member feedback and on the roles of our attendees, many of whose day to day responsibilities don’t fall into narrow job descriptions. We wanted to create a more flexible educational event, one that reflects our attendees’ job functions, and offer the opportunity for increased networking across disciplines.

    And based on the comments we received, I’d say we hit the mark – take a look:

    What attendees found most valuable:

    Networking. Almost half of our responses mentioned networking in their answer to what was most valuable about the Symposium.

    Crossing Tracks. This was the number two top answer.

    Diversity of Topics and Sessions. Attendees greatly enjoyed the variety of topics and sessions, so much so that it was difficult for them to choose which sessions to attend.

    Among the excellent feedback from attendees were some very valuable ideas for improvement for next year’s Spring Symposium, including ways to create a joint session so all the attendees can come together and offering repeat sessions.  We are so grateful to you for sharing your thoughts!

    Some additional comments from attendees:

    “Liked the idea of having all groups together. Gave us an opportunity to attend other sessions other than frat/comm.”

    “Wonderful! Looking forward to next year!”

    “This is a valuable conference.”

    “Excellent consolidation of the section meetings. Great job.”

    “Female leadership was eye-opening! Would have liked more one-on-one with fellow women fraternalists”

    “Fraternal/financial session and data visualization were amazing! I learned so much that I can take back and implement!”

    Thank you so much for attending the 2017 Spring Symposium and for sharing your thoughts and ideas. Don’t forget to mark your calendar for next year’s Spring Symposium, May 22-24, 2018, back at the Loews Chicago O’Hare in Rosemont, IL.

    Board of Directors opens a new chapter for the Alliance…

    After nearly a year of work, the Alliance Board of Directors has announced plans to overhaul the organizational structure of the association in order to focus greater resources on advocacy initiatives and utilize technological advances to more cost effectively deliver education, information, and networking services to members. Here is a link to the Board Bulletin that was sent to members yesterday.

    The transition to the new organizational model will take place over the next 18 months, with full implementation scheduled for January 1, 2019. A key component of the reorganization is a much larger investment in advocacy activities at both the state and federal level. Members overwhelming cite political advocacy as the primary benefit of Alliance membership and the new structure will reflect the value of these efforts to members. The Board also approved the relocation of the Alliance offices to Washington, D.C.

    In addition, the Alliance will achieve the operational efficiencies needed to expand its advocacy activities by downsizing staff, reducing the number of meetings and conferences, partnering with other groups to provide educational programs, and using technology to provide members with information on everything from regulatory compliance to governance best practices.

    Over the summer, the Alliance will be conducting webinars to provide details on the reorganization and the impact that the new operating model will have on members. Additional information on these webinars will be sent to members soon. More information on the Board’s decision will also be provided at the Alliance’s Annual Meeting, September 6-8, 2017, in Chandler, Arizona.

    Got questions or comments on the Board’s action? Please contact Board members directly using the contact information in the Board Bulletin, send a private email to me at jannotti@fraternalalliance.org, or post a public comment here.


    Summer Reading List…

    A few books to pack before heading to the beach, lake, mountains, or your backyard patio:

    As most of you know, I’m not a huge fiction fan, but I really enjoyed these three…

    Lincoln in the Bardo by George Saunders – Wildly creative; deeply touching; the most inventive ghost story I’ve read in a long while.

    Rules of Civility by Amor Towles – Wonderful story in an F. Scott Fitzgerald setting.  No one has greater command of the English language than Towles.

    I Am Pilgrim by Terry Hayes – A completely implausible spy novel page-turner, but entertaining nonetheless.

    Non-Fiction and Biographies

    The General vs. the President by H.W. Brands – Harry “the buck stops here” Truman squares off with Douglas “I shall return” MacArthur over Korea, China, Russia, and nuclear war.  My kind of stuff!

    Richard Nixon: The Life by John Farrell – I’ve been fascinated with Nixon since my dad grabbed me by the neck as the President announced his resignation in August 1974, sat me down in front of the television, and said “You’re watching history being made.”  And this profile of one of the most intriguing political figures of the 20th century does not disappoint.

    Born to Run by Bruce Springsteen – Insightful look at the life of “The Boss” (so named for good reason) from Freehold, NJ to superstardom, including a hard look at his battle with depression along the way.  Enjoyable.

    Testimony by Robbie Robertson – Autobiography of one of my favorite songwriters and musicians.  Incredible story which gives credence to the lyric, “This living off of the road is getting pretty old.”  From the Hawks to Dylan to the Last Waltz, it was quite a journey.

    In Case You Missed It (I know I did)

    In a Sunburned Country by Bill Bryson – Written sometime in the 1990s, this hysterical travel guide through Australia is perfect beach reading.  My next vacation is to Alice Spring and Ayers Rock!

    Right in the Old Gazoo…

    I’ve always admired Alan Simpson, the former GOP senator from Wyoming, whose book – “Right in the Old Gazoo” – is one of my all-time favorite political memoirs.

    I’m not saying I always agreed with Simpson’s policy positions, but I always appreciated the fact that I knew where he stood and, more importantly, why he stood there. While he had strong opinions – and wasn’t afraid to share them – he was willing to listen to other views and wise enough to know when it made sense to compromise and when it didn’t. That’s an increasingly rare characteristic among legislators today.

    When it comes to politicians – and people, in general – I don’t like mysteries.   That’s why I’ve always liked and respected (though not always agreed with) Allen Bailey. Many of you know him as the CEO of a top-notch actuarial consulting firm that counts quite a few fraternals among his clients. And, like Senator Simpson, he’s a rather astute observer of the business practices of the fraternal community and he’s always more than willing to share his views on those practices in an effort to help improve them and enhance the professionalism and profitability of the fraternal sector.

    His latest unedited and unvarnished insights can be found HERE. Let me warn you, these are not for the faint of heart. You may see some familiar fraternal flaws in here that will make you uncomfortable – like a punch in the old gazoo. But you can’t remove the burrs from your saddle unless you can feel them and find them. And Allen does a good job of creating a map to their exact location.

    Let me know what you think of Allen’s piece by posting a comment here or sending me an email at jannotti@fraternalalliance.org. You can also send an email directly to Allen at abailey@allenbailey.com.


    And so it begins…

    The great tax reform debate of 2017 got underway last week with a House Ways and Means Committee hearing entitled, “How Tax Reform Will Grow Our Economy and Create Jobs.” This was the first of what we expect to be a series of tax reform-related hearings expected to be held by the panel this year. And the discussions will not likely be restricted to the House of Representatives, as it is almost certain that the Senate Finance Committee will also conduct hearings on tax reform this year.

    On the bright side, it appeared that Committee Members found some common ground on the general need for tax reform and the importance of improving the economy. However, while Republicans focused largely on the economic benefits of tax rate cuts, full expensing, and other policies included in the House GOP Blueprint, Democrats expressed concerns that the Republican tax reform plans could add to the debt and would disproportionately benefit the wealthy while shortchanging the middle class. It will take a serious outbreak of leadership on both sides of the aisle to overcome the partisan warfare that seems to produce nothing but political stalemates.

    Capitol Counsel, the Alliance’s lobbying firm, was on hand for the hearing and provided this report:

    The hearing featured a single panel of five witnesses. John J. Stephens (Senior Executive Vice President and Chief Financial Officer, AT&T Inc.) testified that “[i]f we’re serious about robust growth, then we must get serious about jump-starting private sector investment.” He stated that “the best way to do that is to fix our broken, last-century corporate tax code,” arguing that “[a]chieving competitive corporate tax rates is likely the most effective catalyst available to our public policy makers to increase capital investment and create jobs.” He also expressed support for full expensing and argued that “[i]f the Committee plans to eliminate interest deductibility, I would encourage you to utilize reasonable transition rules that do not penalize past choices companies made under a vastly different tax system.”

    Zachary J. Mottl (Chief Alignment Officer, Atlas Tool Works, Inc.) testified that tax reform “is the best and fastest way to grow the US economy and create more jobs in America,” particularly among small manufacturers. He argued that “our economy and our citizens need and deserve permanent, comprehensive tax reform that also improves America’s trade competitiveness,” expressing support for the border adjustment regime included as part of the House GOP Blueprint. He also emphasized the “importance of simplifying the tax code and reducing the overall tax rate.”

    David N. Farr (Chairman and Chief Executive Officer, Emerson Electric Co.) testified that “[c]omprehensive, permanent business tax reform that reduces the corporate tax rate to 15 percent, provides lower rates for pass-through entities, moves to a modern territorial international tax system, maintains a strong R&D incentive, and includes a robust capital cost-recovery system will go a long way to attract this investment and economic growth and our country’s competitiveness.”

    Douglas L. Peterson (President and Chief Executive Officer, S&P Global) testified that tax reform should include policies “that reflect the growth and development of our dynamic economy in order to keep up with the quickly evolving competitive global market.” He argued that “[t]hree primary elements are critical to help ensure that U.S. companies can better compete in the global marketplace,” namely, “[a] lower corporate income tax rate,” “a [c]ompetitive [i]nternational [t]ax [s]ystem,” and “a [m]odernized [t]ax [c]ode for America’s [e]volved [e]conomy.”

    Steven Rattner (Chairman, Willett Advisors LLC), the Democrats’ invited witness, testified that tax reform “should meet several important tests: 1) It should be deficit neutral, given projections for rising fiscal gaps[;] 2) It should be fair and certainly not diminish the progressivity of our system[;] 3) It should be growth and investment enhancing[; and] 4) It should improve our international competitive position.” He argued that “[o]n that basis, the proposal by President Trump falls short in several important respects.”

    During the question-and-answer portion of the hearing, the discussion explored a variety of discrete issues and broader themes. In general, Republicans spoke favorably about tax rate reductions, full expensing, and a shift to a territorial international tax system, drawing out comments supportive of those policies from most of the witnesses. Republican Members also focused on the economic benefits of doing tax reform on a permanent, rather than temporary basis, arguing that permanence would promote certainty among employers, leading to greater economic growth, additional business investment, more jobs, and higher wages. Democrats focused largely on the need to ensure that tax reform would benefit the middle class and working Americans, rather than just the wealthy, and warned against tax plans that would add to the debt. Many Democrats also expressed support for increased investments in infrastructure, whether as part of tax reform or through other means.

    Chairman Brady’s opening statement is available here.

    Ranking Member Neal’s opening statement is available here.

    Witness testimony is available here.

    The hearing pamphlet prepared by the staff of the Joint Committee on Taxation is available here

    It goes without saying that the Alliance and its members have some serious skin in the tax reform debate game. Fraternals’ century-old tax exemption allows us to fulfill our unique financial and community service missions. The Alliance’s advocacy team has been working hard so far this year to make sure that members of the House Ways and Means Committee and Senate Finance Committee understand the incredible – and irreplaceable – contributions fraternals make to securing their members financial futures and improving the communities in which those members live and work.

    We’ll be calling on you to help our professional advocates deliver that message later this year when a formal tax measure is introduced. In the meantime, we’ll do our best to keep you aware of what’s going on in Washington, and to keep you prepared to take action when needed.


    Outsourcing innovation…

    Last week, I attended a conference of trade association executives that focused on how “digital transformation” is fundamentally changing the way we provide services – advocacy, education, information – to our members. The crowd was composed of a mix of trade group leaders and included the head of corporate trade associations (like the Alliance) and professional societies (such as health care professionals, attorneys and actuaries). But the challenges we faced were eerily similar: flat or declining dues revenue; increasing advocacy and overhead expenses; and wildly diverse memberships that rely on their associations to help them deal with more complex business problems and regulatory issues than they’ve ever faced before.

    It was fascinating – and frightening.

    I came away from the conference with pages of notes on ideas that may be worth trying. I haven’t shared them with my staff yet, and I’m quite certain that some of these concepts will provoke eye rolls, while others will spark excitement. It’s almost impossible to distinguish genius from folly when an idea is conceived. So, we’re going to try out a few of these and not be afraid of the folly as we search for the genius.

    One factoid that really hit home with me was this statistic from a recent survey of corporate CEOs:

    • 66% of CEOs think the next three years will be more important to the future of their business than the previous 50 years.
    • 65% of CEOs believe that they will use “disruptive technology” to transform the way they do business.
    • 65% say they will form alliances with non-traditional partners, including competitors, in the next three years.

    Wow… I’m wondering what the results of a similar survey of fraternal CEOs would say? I’ve heard many Alliance member leaders acknowledge all of these issues. But I’ve also heard that the obstacles they face – over-conservative governance; absence of younger, innovative management; lack of capital – may make it impossible for them to tackle these challenges.

    Shortly after the conference ended, I received a copy of an article by Mike Maddock, the CEO of Maddock-Douglas, a branding and marketing firm with whom the Alliance is working. The headline: “How to Outsource Your Crazy.”

    I thought the piece was terrific, especially when I realized that those obstacles to innovation aren’t limited to the fraternal sector. Check out these three nuggets:

    “We are afraid here. We are super conservative and have a ‘can’t-do’ culture. People are terrified of taking risks. It’s built into our DNA. Big ideas flip people out. That has squelched creativity. Even our ad agency said we are cowards.”

    — Head of innovation, Fortune 100 financial services firm

    “No one ever gets fired for playing it safe, but many have been fired for taking risks. We are incented to not take risks.”

    — Innovation manager, construction products company

    “We’re focused on short-term results and have been limited to looking in spaces that we’re currently in. We recruit MBAs, which is a narrow subset of the population that is innately risk averse. We’re not getting the scrappiness and creativity.”

    — Director of innovation, consumer packaged goods company

    Sound familiar?

    How are you handling innovation in your society? Are you doing it with an in-house group of risk-averse folks who’ve been there for years? Or are you outsourcing your crazy?

    Read Mike’s article and share your thoughts with the fraternal community by posting a comment here or sending me a private email at jannotti@fraternalalliance.org.