• “Like” Us!

    Fraternals on Facebook
  • Follow me!

  • Twitter Updates

    Error: Twitter did not respond. Please wait a few minutes and refresh this page.

  • Join 823 other followers

  • Archives

  • Refreshed & Revived

  • Categories

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.


A simple idea, elegantly executed…

Last week’s post discussed the importance of measuring the impact of your society’s “social good” and offered a methodology for doing so developed by Cynthia Tidwell and her team at Royal Neighbors of America (RNA). I’ve received several inquiries from fraternal leaders about the RNA formula and have connected them to the folks at that society who are more than willing to discuss how they apply it to their outreach efforts.

But before you measure what you do, you actually have to do it. That means getting members aware of and engaged in the grassroots volunteer networks that do the good works and set us apart from all other financial service providers.

Kevin Marti of Gleaner Life Association shared with me his society’s latest tool in that effort — an invitation to join an Arbor that is sent to every new member. It’s one of those “simply brilliant” ideas; ones that seem so obvious we wonder why we didn’t think of them ourselves. According to Kevin, the society has already noticed an uptick in new member interest in community service activities, and he and his community service staff are confident that this will translate into more and better volunteerism projects.

What’s your society doing to make members – new and old – aware of the “fraternal difference” and engaged in community service event? Share those great ideas with your peers by posting a comment here or send a private email to me at jannotti@fraternalalliance.org and I’ll spread the word through a future post.

Assessing the Impact of Your Community Service…

I’m certain that every Alliance member society has a laundry list of quantifiable metrics to assess the performance of the financial components of their operations.  This would include items such as sales results, premium written, contributions to surplus, claims payments, investment return, expense ratios, and dozens of others.  The fact is, you couldn’t effectively manage your operations – and demonstrate to your members that you are a capable steward of the society’s assets – without such metrics.

But do you place the same emphasis on your society’s community service activities?  My hunch is that the response from most societies would be “not really.”  And that’s a little disturbing because it is the community service aspect of our operations that:

  1. distinguishes us from our commercial colleagues;
  2. makes us appealing to the next generation of members;
  3. justifies the preservation of our long-standing tax-exempt status.

One of the Alliance’s most effective advocacy tools is the study done by University of Maryland economist Phil Swagel that measures the impact of fraternals’ community service activities on the members and on the communities in which those members live and work.  And while the Swagel Study provides an excellent overview of the cumulative impact that fraternals have on the financial and social fabric of the nation, it does not provide societies a specific methodology to assess the effect of their outreach initiatives.

Without that type of metric, it’s almost impossible to evaluate the real impact of your society’s community service efforts – and, from there, determine how to improve upon them.  All of this is critically important to the future of individual societies and the fraternal system.  Why?  Refer to 1), 2), and 3) above.  If those three reasons don’t resonate with you, you might want to think about switching careers.

Of course, almost every society reports on the number of dollars it contributes to causes and organizations that reflect the members share values, as well as the number of volunteer hours contributed by its members.  But one society – Royal Neighbors of America – has taken that several steps further and developed a formula that accounts for those two factors plus the “Fraternal Factor” (the number of volunteer hours multiplied by the “social capital” factor developed by Professor Swagel) AND the member savings and benefits generated through the society’s benefit programs.  Here’s a copy of the RNA formula.

According to Royal Neighbors CEO Cynthia Tidwell, “The methodology gives us a way to quantify our impact each year to see if our social good is growing along with our business.  We could debate what we measure, but for us, it is important to be consistent year-over-year to see if we are moving the dial.”

I don’t know if it’s feasible to apply this formula consistently across the fraternal system – but I sure think it’s worth a try.  I think it would provide an excellent complement to the Swagel and demonstrate the true difference that fraternals are making across North America.

So what do you think?  Leave a comment here or send a private response to me at jannotti@fraternalalliance.org.

The fraternal “wow” factor…

I spent last Thursday in Washington, D.C., meeting with the tax counsels of Senate Finance Committee and House Ways and Means Committee members. This was my third trip to Capitol Hill in the last month.

Our objective is to meet with every member of both congressional tax writing committees before the debate on tax reform begins in earnest. And based on news reports coming out late last week, that debate could begin as early as this week.

The sole purpose of these meetings is to make sure that policymakers and tax counsel know who fraternals are and what we do. So, that when tax-exempt organizations are discussed, they’ll know that repealing or amending the fraternal exemption would undermine our ability to provide billions of dollars in direct financial support and grassroots community service work every year, while generating a miniscule amount of revenue for the Treasury. The bottom line is that fraternals punch well above their weight when it comes to securing the financial futures of their members and improving the communities in which their members live and work. In fact, the 100+ year-old exemption that allows us to fulfill our unique mission should be not just preserved and protected, but promoted.

Last week’s meetings were particularly gratifying because we met with lawmakers’ staff from states with a relatively small fraternal footprint – Washington, Utah, Nevada. Yet, despite the fact that there are no fraternals domiciled in those states, the universal reaction from staffers to the one-page handouts on the value and impact of fraternals’ community service activities in those states was “WOW!”

We like “WOW!” It means that before our meeting these offices had no idea what a fraternal was, but that after we left they not only knew us, they had a newfound respect for our contributions to their communities. “WOW!” helps us accomplish our mission of preserving, protecting, and promoting the fraternal value proposition to people that will likely be discussing whether our tax exemption is still providing dividends to taxpayers. “Wow!” means that the answer to that question is a resounding “YES!”

Want to help me – and your society – deliver the best possible messages to lawmakers? Send me examples of the “Wow Factors” that your organization is leading. Let me know how your products are securing the financial futures of your members, how that financial security is fostering greater member engagement in community service, and how that volunteerism is enhancing the quality of life in the communities you serve.

Post your stories here or send them to me in an email.

A “Must Read” on the DOL Fiduciary Rule…

One of the most compelling and well-received presentations at the Alliance’s Executive Summit held in Chicago earlier this month was one we added to the program at the last minute.  Brad Campbell of the DrinkerBiddle law firm (an Alliance associate member) delivered an insightful 30-minute address on the Department of Labor’s controversial Fiduciary Rule – most of which had been officially been placed on a 60-day delay only the day before.  Brad then took another 30-minutes of questions (which could have easily been extended to 60-minutes) about the rule’s applicability to fraternal organizations and their field representatives.

Brad and his colleague, Joshua Waldbeser, followed up that presentation by preparing this Client Alert about what fraternals need to know – and do – to get ready for the potential implementation of the rule on June 9.  This is a “must read” for every society executive and field manager.  Despite what you may have heard, the Fiduciary Rule does apply to fraternals and it is likely that significant provisions of the original rule – specifically the “Best Interest Contract Exemption” – will be enacted later this year.  That means you’ll be required to comply with those provisions, and that you should begin to prepare for that requirement right now.

The DrinkerBiddle Client Alert is an excellent way to begin that process.  Want more information?  Joshua Waldbeser will be a featured speaker at the Alliance’s Spring Symposium next month and registrants will have the chance to hear the latest news on the rule’s implementation and ask him questions about fraternal compliance with the measure.  That alone may be worth the price of admission. Click here to register.


Members’ comments on the Alliance’s Executive Summit…

The Alliance held its Executive Summit – the annual gathering of member society CEOs and their selected top executive  – in Chicago last week.  This year, we revised the format for the meeting based on member feedback. We made it an “invitation-only” event and included more member-to-member networking and roundtable sessions, facilitated more conversation between members and featured speakers, and limited the number of sponsorships.

Fifty-six executives, including 32 CEOS, from 39 of the Alliance’s 63 member societies participated in the event. Attendees represented a broad cross section of the membership, with large-, medium-, and small-sized societies represented. And based on the meeting evaluations, it looks like we hit on a winning formula.

Here are a few comments we’d like to share with you…

  • Networking opportunities. (Attendees valued these opportunities the most.)
  • Keynote speakers addressing industry transformation needs. (Specifically mentioned most often.)
  • Great choice of speakers and topics.
  • Invitation-only format allows you to really engage with people.
  • Roundtable discussion was excellent – do more of those!
  • The roundtables allowed you to discuss strategic topics with colleagues from similar-sized societies.
  • Fabulous music!
  • Speaker topics were relevant and diverse.
  • Good mix of time in sessions and time to network.
  • Highly informative – “C” suite level topics and speakers.
  • Really enjoyed the keynote speakers, but the roundtables were the most helpful feature of the meeting.
  • The Alliance does a great job of maximizing the short amount of time we are together. Even the post-classroom time at this meeting provides an opportunity to learn.

Thanks for attending and sharing your thoughts with us. That’s how we make future meetings better for everyone.

CEOs – Don’t forget to mark your calendar for next year’s Executive Summit – April 23-25, 2018, in Washington, DC. We will be conducting a “Day on the Hill” event in conjunction with this meeting, and so will want to have the CEOs and Board Chairs from as many member societies as possible there to deliver the fraternal message to Members of Congress.

Bald is Beautiful!

Here’s a photo proving that I did it – shaved my head bald in front of dozens of fraternal executives gathered for the Alliance’s Executive Summit in Chicago.

With Lino Amaral of Luso-American Financial, my brother from another mother.

My 2017 fundraising goal was $5,000 and thanks to the generosity of friends, family, and fraternalists, I generated more than $6,000 in contributions – all of which go to one of the worthiest causes I can think of: the St. Baldrick’s Foundation to fund children’s cancer research.

If you want to learn more about the St. Baldrick’s Foundation – what a terrific organization for your local chapters to rally around! – check out their web site.

And if you’re inspired by my chrome dome you can make a contribution while you’re there. It’s never to late to help cure children’s cancer.

Thank you all for your support!  Let’s do it again next year!

Branding initiative takes flight…

Driven by the support of 40 member societies, the first-of-its-kind fraternal branding initiative was approved by the Alliance’s Board of Directors last week. Maddock-Douglas, the branding consultant retained by the Alliance to complete this project, will begin work on the first of the three components of the program will begin this week. The final work products will be delivered to Alliance members by the end of the year.

To refresh your memory, the branding initiative began in 2015 when the Alliance funded initial research and creative design work that demonstrated:

  1. The vast majority of consumers had virtually no awareness of fraternals and their role in the financial services and community services arenas;
  2. With only a small amount of information, consumers – from millennials to boomers – were intrigued, impressed, and interested enough in the fraternal model to consider purchasing financial services products from a society; and
  3. Fraterals shared enough common characteristics to make it possible to create one set of materials that each society could use to create a relevant brand for its organization.

Armed with that information, Maddock-Douglas developed a three-part branding initiative that was presented to member society CEOs at the 2016 Executive Summit and to a broad cross-section of members at the 2016 Annual Meeting. The three segments of the program are:

  • Brand Strategy is the guide that provides instructions to best convey the fraternal benefit society message to the public. It will cover all aspects of messaging that must be considered for the greatest impact, including specific words, phrases, and tone of the message, and will be based on new research that will demonstrate which message configurations resonate most and why.
  • Campaign Creative is applying the language and messaging from above to create communications that can be used for real advertisements. That means adding visuals and creating copy to deliver the intended message within an overall idea that is used consistently across all communications. It will be applied in a variety of forms including print ads, radio script, web banners, and social media.

Type of communication vehicle to be created.

  • Target Market Identification is about describing and finding the people that are the most likely to respond favorably to the fraternal message. Knowing who those people are is critical for the development of an efficient marketing program. The target will be described in terms of the attitudes and behaviors that contribute to their positive response, with any common demographics between them identified.

Based on the support expressed for the program by member societies, in December 2016, the Alliance Board of Directors agreed to move forward with the program if it was fully funded by the membership. The Board stipulated that no Alliance dues dollars or surplus funds – which are used primarily to provide the state and federal advocacy services members value most – be used for this project.

Forty Alliance member societies backed up their commitment with a check for $9,500 and on March 20 the Board approved the project.

This project demonstrates the power of collective action by fraternals. Only a handful of Alliance members could have afforded the nearly $400,000 price tag of this branding initiative. But by pooling resources and sharing the cost, even the Alliance’s smallest societies can afford to purchase this incredibly valuable marketing data. Makes you wonder what else member societies could accomplish if the joined forces to tackle tough problems like compliance, reinsurance, IT platforms, and product development. Hmmm…

Nonetheless, it is important to realize that accessing the branding initiative materials and actually being able to use them are two different things. As one member told me, “it doesn’t do much good to paint the house if the foundation is crumbling.”

Amen. The branding initiative is not a panacea. It won’t magically increase sales, enhance your community service activities, or give your society the brand recognition of Coke. If you don’t have the financial resources, the governance structure, and the management skills to put this information to use, then it’s just another electronic file taking up space on your hard drive.

But if you do have the ability and desire to put these tools to use – or to join hands with other societies and use them collectively (there’s that word again…) well, the sky’s the limit.

So, hats off to those 40 societies who invested in this program. They’ll reap the rewards of that investment later this year – and, hopefully, for many more years to come.

And for those of you who did not initially participate, there is still time to send us your check for $9,500 and ensure that your society doesn’t get left behind.

More on technology and the future of your society…

I received a fair number of responses to a recent post on technology issues (“Climbing the Ladder, drinking the Lemonade, and looking for a safe Haven…”).  A few brave souls posted their comments on the web site, others emailed them to me privately, and still others shared their thoughts through third parties (“Please let Joe know that I think he’s crazy”).

Fair enough.

But I received one response from an associate member of the Alliance, Intellect SEEC (not surprisingly, a technology firm) that I’d like to share with you. This post is not an “infomercial” or an “advertorial.” This blog is, was, and always well be endorsement-free. But when smart people make intelligent observations about an issue on which I am not an expert, I tend to want to pass those comments on to my readers.

The ideas laid out in this response made sense to me – a person whose understanding of technology is dangerously shallow – and seemed applicable to virtually any size society in any stage of evaluating its technology needs. So I’m sharing it with you on that basis. Take it for what’s it worth and use it as you see fit, no matter what your current system’s capabilities or what consultant or vendor your society happens to be working with.