Industry Future Council Report Gives Industry Reason to Pause
Posted 03/19/07
No report exemplifies the Foundation’s mission to be the industry’s “eye on the future” more than the Industry Future Council Report. Now in its 26th year, the IFC is hosted for a day and a half by the Foundation each January. The IFC is comprised of 20-25 leading executives from equipment finance companies, industry analysts, rating agencies and service providers, and their discussion during the meeting is captured into a report, aptly titled the Industry Future Council report. Highly anticipated each year, the IFC report addresses issues impacting the equipment finance industry, and their potential effect on the future of the industry.
Last year, the IFC Report debuted a new format, changing its strategy from analyzing the information brought by members and distilling it into a report to using the information gathered to create a set of important questions that industry participants could address within their own companies to help them prepare for the next one to three years. It worked.
So well received was the 2006 IFC Report that Council members repeated the strategy in 2007, identifying trends, issues and potential economic indicators, and then extrapolating questions for use by readers. Excerpts from The Wall Street Journal, identifying trends and making projections about the future of the economy were used as stimulus. By referencing the IFC report from 2002, the IFC members asked “what did we believe then, what actually happened over the last five years, what were the key factors that either confirmed or altered the course we expected to see, and what might be the corresponding factors over the next five years?” The goal: to foster debate and dialogue representing multiple perspectives from around the industry.
Laird Boulden of RBS Asset Finance, Inc. and an IFC member said, “The report is meant to be thought provoking and to help industry members identify where others are coming out on issues and where you might stack up.”
One of the most downloaded reports in the Foundation library, industry members are clearly taking the report’s mission to heart.
In line with industry trends, the IFC began with their first major challenge: defining the “industry.” The unofficial theme for the IFC became “…and Finance” reflecting the apparent, continuing trend away from traditional leasing, and toward a broader focus on financing in the product lines and portfolios of industry constituents. Coupled with the industry association changing its name to the Equipment Leasing and Finance Association (ELFA), the IFC Report identifies that this change has been a long-time coming.
“There is more recognition that leasing [the product] is becoming less of an emphasis and financing is becoming more of an emphasis,” said Boulden. “This is being driven by regulatory and accounting issues in our industry. People are starting to realize that they need to adjust their thoughts on how they market their business. . .and start to tinker with their product mix.” Because of the changing mix between leases and loan-like financings being offered by industry members, the IFC focused on the associated evolution of the traditional “drivers” of the lease product: transfer of tax benefits, off-balance-sheet accounting, residual risk management, and access to alternate funding sources. The IFC discussed the direction and momentum of trends to anticipate their impact on the products, the markets, and the participants in the business of the future.
One attendee observed that the financial services industry as a whole is experiencing “a merging of capital and commerce” as customers look to sellers to provide ongoing services.
“Customers want to be able to select from a menu, and players are having to react,” said another IFC member, adding, “Deals are going to those who can provide these menus, and sometimes, doing so can move [these players] away from the products they would typically prefer to sell.”
Consequently, to serve and retain their customers, members of the equipment leasing and finance industry engage in a range of transactions today, not all of which can be classified as equipment leases or loans, but which still seem to have equipment and assets as their common basis.
Laird Boulden, summed up the IFC report in the following way: “the world is changing, the market is changing, our business is changing and you better be prepared to adjust accordingly.”
The IFC Report also discussed other issues facing the industry including economic trends from increasing liquidity in the market to the diffusion of risk, the “EOB effect,” the growing dependence on fees, product influences from customer demand to regulations, personnel trends, and technology issues.
After each section is a list of questions that business leaders may ask themselves and their teams in order to spark dialogue and begin benchmarking.
“The report touches everyone one way or the other,” summed up Boulden. “But, not everyone will have the same view. The industry’s constituencies are so diverse.”
Regardless of who you are, however, industry leaders all have one thing in common: desire for success. The IFC report is one such tool to move in that direction.
The 2007 Industry Future Council Report, as well as past year’s reports, are available at the foundation Web site: http://www.leasefoundation.org/IFC/2007
Sites of Reference:
http://www.leasefoundation.org/IFC/2007
CONTACT:
Lisa A. Levine, CAE
Equipment Leasing & Finance Foundation
Phone Number: 703-527-8655
Fax Number: 703-465-7488
E-mail: llevine@elfaonline.org
