WEBINAR: Paycheck Protection Program and the Value of a Community Bank Partner

Mike:

Hi, everybody. Welcome to another webinar by Sky View Partners. We're going to be talking about the paycheck protection program, the value of a community bank partner for that program. My name is Mike Lankford, and I'm going to be hosting the webinar today, and we really appreciate you taking the time out of your day to spend some time with us. We think it's really timely, obviously, but also incredibly important for you and your business and for the businesses of many of your clients and the people in your community. So we wanted to make sure that we shared this information with you so that you can use it for yourself and make sure it gets to everybody who needs it. Joining me today to take us through the paycheck protection program and a little bit about why those community banks are so integral in the program for you and your business is Scott Wetzel, the CEO of Sky View Partners. So great to have you again, Scott, thank you for joining us.,

Scott:

Mike. Thanks for having me. I appreciate it very much.

Mike:

Great. So let's go ahead and dive right into it. I think the first thing we should do is introduce everybody to Sky View Partners. I know some of the people joining us are aware and familiar with it, but why don't you take this a little bit through what Sky View Partners does and why we do it?

Scott:

Very briefly, Mike, again, Sky View Partners are a correspondent lender focus exclusively on the RAA and independent investment advisor community offering financing solutions for succession, external acquisition, refinance merger. Our organization can help.

Mike:

That's great. That's fantastic. And it's really nice to have an organization that focuses exclusively on those types of things. Exclusively on RAA's and independent financial advisory community. So relatively quickly here, let's explain to people who may not be aware of the differences between a community bank and some of the banks they may be familiar with. So what is a community bank?

Scott:

Well, I wanted to touch on this briefly because we see about 80% of the applicants that come through Sky View are currently banking with a national bank partner. And what they're missing is the opportunity to bank with a community bank that's providing a customer experience that's more analogous to what the investment advisor providing to their clients. It's a very personalized, high-service approach to your business rather than working with the large national bank that would be analogous to working with a Vanguard or Schwab Direct or something like that.

Mike:

Right. Yeah, that makes a lot of sense. So, we talked a little bit about this at one point in time before you and I, but I thought that was a really interesting concept of why partnering with a community bank is so important for RAA's and independent financial advisors?

Scott:

Well, a lot of reasons, but most prominently, they're truly a partner for you in your practice in terms of M&A growth. They can provide everything that really a big bank can in terms of banking solutions that comes with depository accounts. And they're truly a partner with you and in your growth. And most importantly, they're not competing with you for your clients in wealth management. All the banks in SkyView's network of community banks do not have wealth management departments, nor are they interested in the business of competing with you for your clients.

Mike:

When you first shared that with me, it was really impactful for me because I had never thought about it that way. I've banked at a big bank and so forth in my business, and I've never thought about the notion that, "Hey, that bank may actually compete with you. And if you're an independent advisor, or you're an RAA firm, chances are a large bank has a wealth management practice arm of it. And at some point in time you will lose a client to that large bank." But most of the community banks don't have those wealth management arms, do they?

Scott:

Yeah, it's certainly possible. And we've heard many horror stories about RAA's referring mortgage business, or other business to Wells Fargo, don't want to pick on any big bank, but the large banks and then the large bank coming back and saying, "Oh, Hey, by the way, we could knock off the points on your mortgage if you're willing to move your wealth management business to us as well." That's really not the intent of the community bank model, is surely to partner with small businesses to help their growth.

Mike:

Yeah and I really love the notion here of that personalized service, that white glove service. It's kind of like what every advisor strives to provide to their clients as well. So that really resonates, I'm sure to a lot of people.

Scott:

Yeah, it's been interesting since inception, how many advisors circle back to us and say, "Hey, the bank partner has been really great. I actually have a person that's assigned to me and I have their cell phone number and I can text them. I can call them. I get the answers. I can get solutions very quickly, rather than just going to a 1800 queue.

Mike:

Yeah. That makes a huge difference. That's why most of your clients choose you if you're an advisor, right? Versus going with a large financial institution direct, it's like they're coming to because they like you. And they know you, like you, trust you, as the saying goes. So the same thing as here. So let's talk a little bit more about that financing for M&A because I think that's a big deal. It's probably on a lot of advisors and RAA shop's minds right now, that thought process of like, "Hey, what we're going through right now, there may be some opportunity for me to acquire another business or merge with another business."

Scott:

Well, we certainly envision a very robust market for M&A activity coming out of the pandemic. We, saw similar activity, post 2008, where many advisors were or anyone else [inaudible 00:06:00] average age of an advisor was much younger back in 09. And they are today. And we've already seen accelerated demand from applicants, from sellers, coming to market finally and seeking at least a partial sale of their practice to move on to the next stage of their career and their life. So it's important that advisors find a partner, a community bank partner that's actually in the business of funding, a wealth management industry M&A. And if you look across the country, there are very, very limited number of banks willing to fund a wealth management M&A transaction, and most are only willing to do so in an SBA structure.

So it's really important to go to your current community bank, whoever you're banking with and see if they do fund M&A for wealth management. And the answer is yes, from a relationship manager still might not be the case. The crucial question is, have they built a credit policy around M&A for wealth management? If they're not taking the time to do so, they're not going to anytime soon and they're certainly not going to for one loan. So that's a key differentiator between a Sky View network bank and a couple other banks in the country like Live Oak bank that actually are in the business of funding wealth management models.

Mike:

I thought that's really important, right? Is that you mentioned, having that credit policy that allows them as an organization because that's a regulated industry. So talk a little bit about that credit policy and what it really means for a lender.

Scott:

Well, the credit policy at each bank drives a credit decisions around each vertical and a credit policy needs to be established and approved by the board of the bank to actually fund anything in wealth management. At Sky View, we're aware of the different nuances, the different credit policies, the different banks we work with, they help each applicant find the best home for their request, knowing that each one of our banks want to see something different, and it might even be geographic that we can help get the transaction fund.

Mike:

Yeah, that's fantastic. It's really smart opportunity there. So touch a little bit on business banking services. So what are those? Of course, they're a business bank, they're lending to businesses and they're providing business banking accounts, but when you think about business banking services, what does that mean to you? And what should that mean to do the advisor or the RAA?

Scott:

I think the important message here is the community banks have the commensurate level of technology and services available for your operating account or any other checking savings accounts you might have with one added really nice benefit, and that's actually service. And people you can rely on, people you can trust, people that are professionals that will actually return your phone calls and help you with your account and get the problem solved.

Mike:

Yeah, so it's like that same level of technology or the online banking, all of the things you're used to, but there's an actual human being there, like some real people to interact with. It's great.

Scott:

And we work with RAA's across the country that may not have an interest in financing anything today, but we'll get to the PPP loans, but are interested in a bank partner. And we certainly encourage establishing relationship with the community bank today, rather than waiting until you have an acquisition. It's important to develop a relationship. Bankers are different than anyone else, that you develop a relationship with them prior to extending your hand for financing at some later point. And also banks are always concerned about fraud. So what's the best way to substantiate that your organization exists and is operating? Placing your operating account with the bank and letting them see that activity over the course of months or years.

Mike:

That really make sense, if you think about it, if you're going to lend somebody money, you want to know them. You want to know that, not only are they credit worthy, but you want to understand their business. You want to have some familiarity with the person as an individual as well. So it really does make sense, get a relationship before you start looking for a loan.

Scott:

Absolutely.

Mike:

So we talked a little bit about this, the concept of a partnership before. But I think that no competitive nature to the business and what they bring to the table and seeing you as a business partner is really important. So let's start diving into that a little bit deeper, especially since we're teeing up the paycheck protection program.

Scott:

Well, I can say the importance of having a community bank partner has probably never been more pronounced than it is today. Number one, and again, you don't have them competing with you for your business, but number two, as we've seen the execution of the funding of processing of the paycheck protection program, it's common for banks to go to their current customers first, obviously, to fund the request.

So to the extent that the RAA's had existing relationships, those requests have been submitted, are getting processed and are getting funded currently. And that's why, again, we just want to encourage advisors to establish that relationship now. And the timing is excellent to reach out and get PPP funding today and establish that relationship and that working relationship in terms of the operating account with the bank.

Mike:

And that makes a lot of sense if you think about it. If you have a relationship with a bank, you're going to be in line a little faster than somebody who is brand new, but also because community banks are smaller in nature and more high touch in nature, there's probably less demand. They're probably going to be to service you a little bit better than maybe a big box would be able to do.

Scott:

I've not heard of anyone successfully receiving a call back from a couple of the big banks on PPP requests to date. And you think they're just triaging 800 number calls. I don't know how they can possibly do it. Whereas a community bank certainly knows the current customer base and certainly can see the documentation they need to process PPP. If you have your payroll being paid out from your community bank, they have the documentation, really most of what they need already to go ahead and fund that application. And also the documentation they're going to need to actually forgive the PPP loan at a later point.

Mike:

Yeah. I hadn't thought about that. They actually have the records there, they've seen the activity. So they actually can help you move it a little quicker.

Scott:

Absolutely.

Mike:

So now we'll get into kind of maybe the details of it, like access to this PPP funding. I know many, many people are thinking about it. I'm sure everybody's kind of starting to think about getting in line or pulling together some of their materials required to do it, but there is a element of like, "Okay, where do I go? What do I do?" So it looks like you have a little bit more information for us here.

Scott:

Well, as for the PPP, it's not any different than our conventional loan program. We have different banks throughout the country that are willing to fund requests from RAA's and independence for PPP assistance. But candidly, they're all looking for something a little bit different. So to the extent that you've not been able to receive funding from the bank you're currently with, we do have a portal bill at skyview.com that we can help source and also collect source documentation for one of our banks, and then determine which one of our banks would have the highest probability of funding your request and sourcing those through our network of banks throughout the country.

Mike:

That's awesome. So, not to beat a dead horse here, but there are a lot of differences. And anytime you're evaluating how you're going to do business with somebody or what kind of solution you're going to use. It's good to kind of do that, a little pros and cons list or feature set list. So let's kind of walk down some of the most important comparisons there when we're thinking about large bank versus a network bank in the Sky View network.

Scott:

I would just say on this slide, from a macro standpoint, you're not giving anything up. You're not losing any technology, you are probably losing bank branch accents. But if that is something that is very important to you, walking into a bank and depositing checks and not being able to do it remotely, we can certainly try and source you to the appropriate bank, but most of our banks are V-banks and they're eliminating the number of branches they have out there to reduce costs.

So the only thing you're really giving up is a physical location, but most of our clients have said like, "Hey, if I never have to walk into a bank branch again, that's fantastic." And I certainly agree, and they were able to do remote deposit, everything else from better technology programs because the community banks really don't want to promote as much lobby business because they want to take care of it online, it's very efficient, very skilled. And to that extent, there really is no drawback from moving to a national to a community bank, especially today when big banks are not funding your PPP requests and our network of community banks are standing ready to fund.

Mike:

Yeah, technology is a great equalizer there. It's really brought everybody down to the same level in terms of what they can offer you in terms of actual banking product and solutions, and adding that human element of, as you see here, a lot of the things that are available have a human element behind them. So it's really kind of tilting the edge and the favorite, as long as you don't want to, like you said, if having a branch right next to your house is not something that's of urgent importance.

Scott:

Absolutely. And that's really the only differentiator. And in some cases we do have banks that have branches in different communities and also prefer depositors and borrowers from those communities. But again, it's just the nuances of each bank that we work with.

Mike:

Yeah. Yeah. That's great. So I guess the big question is, why now? Why is retaining a community bank partner so important right now? I know a lot of RAA's and independent advisors are sitting around and they're thinking about their business maybe in new ways right now. They're concerned for their clients, their concerned for their business. They're thinking about the future, particularly in the immediate future about what this might mean for the next couple of years. So why during this time, should they be thinking about going with the community bank?

Scott:

I guess there's never been a time that the there's more urgency to make that change. And we've been saying since from inception, it's important to go establish that relationship. Get the relationship started before you find any other seller. Today, if you don't have access to PPP funding, it certainly creates a lot of urgency to go out and establish a relationship today, get the operating accounts moved over to that bank and get in a position to receive PPP funding. But then second, it will be well-positioned coming out of this pandemic to have a bank partner that is actually willing to fund your M&A strategy coming out of this.

Mike:

Yeah, I think that's, to me, so important, kind of like getting ready to pounce if you will. Think about a phrase that might stick with somebody is that, as we start to come out of this wave, there's going to be a lot of opportunity available from an M&A perspective or from an expansion perspective, frankly. And so having access to financing and be ready to go is going to be really, really important.

Scott:

Obviously anytime there's this disruption, there's opportunity. And what's different about today than 2008, 2009 is we had disruption, but then we had no liquidity for the M&A activity within the independence and RAA space. Today, we have substantial disruption, but the difference today is we have substantial liquidity. And if anything, our banks have increased their commitment to the RAA and the independent community since the end of the first quarter. Because the biggest question for me that banks always ask is, "Well, that's fine and great and they perform well, but how are they going to do it through a downmarket?" And the first quarter being the worst first quarter in market history and our portfolio performed exceptionally well.

So it is absolutely the time to go out and establish that relationship today, get funded and be ready.

Mike:

That's great. So you have some resources available online at Sky View that that people can go to and kind of peruse as well to get them get more informed, not only about PPP, but also about the community network, the Sky View community network of banks.

Scott:

Correct. And I'd say, really the first step in terms of the PPP process, go to skyview.com and click on the PPP icons, they're on every page I believe. It'll take you to a portal, help you fill out the application. And then it will send you a link to a virtual data room in which you'd download the requisite documents. At that point, we'll do an introductory call and determine which one of our banks might be best suited to fulfill the PPP loan as well as your future M&A strategy. And then source a introduction call with the adviser and a bank with one of the community banks throughout the country.

Mike:

Wonderful. That's great. Well, this is very helpful, Scott. I know that I always appreciate it anytime you and I get a chance to spend some time together. I learn a little bit more every single time, hopefully people who were tuning in learn a little bit as well. Again, thank you very much for your time. If you're a viewer, make sure you swing on by skyview.com. Thanks, Scott.

Scott:

All right. Thanks Mike.