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September 10, 2020

Commerce with a Conscience: Ethical & Sustainable Banking with Lynn Marie Auzenne

Learn about the pioneers ushering in a new wave of banking that’s sustainably focused and community conscious. That’s exactly the kind of thing financial services trailblazer Lynn Marie Auzenne discusses in our latest edition of Thoughtline. As the CMO of Beneficial State Bank, she’s focused on giving her customers great service and the opportunity to put their money toward causes that matter most to them. 

Full Transcript

Boris Grinshpun: [00:00:00] Good afternoon everybody. Thank you again for joining us on this weekly series of podcasts today, we are lucky enough to have Lynn Marie Auzenne joining us. She’s the CMO at Beneficial State Bank. Lynn Marie, thank you for joining us today. 

Lynn Marie Auzenne: [00:00:25] Thanks for having me. 

Boris Grinshpun: [00:00:31] Lynn Marie, you and I have had the pleasure of working together in the past, but to all of our listeners and viewers today, we should mind giving a little bit of an intro of how you ended up in the financial services industry. 

Lynn Marie Auzenne: [00:00:43] Sure this was, I don’t want to date myself too much, but it was the early nineties.

[00:00:48] And, um, I was in the process of applying to medical school and, um, yeah, my boyfriend at the time was buying his first one. Tom, you’ve gotten a good job. And I was sitting [00:01:00] at the table with him and this mortgage broker and, uh, this guy couldn’t answer half of our questions and he was trying to sell us a mortgage that was.

[00:01:11] Not really competitive in the marketplace. And I realized he was trying to take advantage of our ignorance. And so he pulled out his HP calculator and I pulled out mine and we went to war with each other and I ended up, uh, demonstrating to him that the mortgage I was asking for was a better deal than the one he was recommending.

[00:01:34] And that’s when I thought, you know what, I’m going to do this for the next year and make some money for. Business school or actually for medical school. And what ended up happening is I just never got out of it. I loved it so much. I love seeing people buy their first homes. I love people like seeing what was possible for their lives and getting to know them and their families.

[00:01:56] And I’m still friends with so many of those people that I helped, [00:02:00] you know, purchase their first home. And after a few years of that, I thought, you know what? I shouldn’t go to medical school. I should go to business school. I think I want to stay in finance. And I think I want to continue to empower people using the financial services system.

Boris Grinshpun: [00:02:14] That’s great. That’s awesome. And here you are Chief Marketing Officer at Beneficial State Bank. 

Boris Grinshpun: [00:02:22] Yeah, Lynn Marie, you’ve got an exciting topic to talk about the mission statement of the bank and the unique position you’re in to be leading this charge. Now, a lot of folks, a lot of listeners are probably not familiar with Beneficial State Bank.

[00:02:37] I know that really it’s a banking, or “bank on purpose” is sort of the tagline or the mission statement of the bank. But what does that actually mean? Can you help our viewers sort of understand that better? 

Lynn Marie Auzenne: [00:02:52] Sure. So, uh, we were created on the foundation that banks should serve [00:03:00] people and not the other way around.

[00:03:02] So rather than being primarily focused on generating a profit, we, uh, were founded. And under it, a unique ownership structure, and we’re focused on a triple bottom line, a pure triple bottom line where profit does not exceed our goals of environmental sustainability and social equity. And so that, that permeates, you know, our, our lending practices, our communications, our governance, every aspect of the organization.

Boris Grinshpun: [00:03:34] That’s great. And so as you see that total and absolute sense, right. That the bank is looking out for the people that it does business with. It doesn’t seem like too novel of a concept, but what, like let’s, if we go down a little bit of a deeper level, what makes Beneficial State Bank so different?

[00:03:54] Because that’s obviously a very differentiated statement. If you will, that you’re making about it. 

Lynn Marie Auzenne: [00:04:00] Right. Well, when you think about almost any bank and even almost any credit unions, right? You have shareholders or stakeholders and their primary hope and directive or expectation after investing in you is that they’re going to make a profit.

[00:04:18] They want to see you grow. They want to see her grow and other things are nice. You know, doing great things in the community or planting some trees or maybe resisting the temptation to finance private prisons. That’s wonderful. That’s great that you’re doing that makes me feel good, but I want to maximize the return on my money.

[00:04:41] And if you can’t do that, I’ll take my money out and I’ll put it somewhere else. So, uh, the founders of the bank. Recognized that, you know, that’s Milton Friedman’s adage, right? That, um, corporations exist to serve and maximize profit on behalf of their shareholders. So they said, [00:05:00] well, how do we change that?

[00:05:01] How do we flip it around so that there are no shareholders demanding that we maximize profit? So when they created the bank, they took all of the economic equity and they donated it to a nonprofit foundation that can only be represented and have a board of directors appointed by nonprofits that represent our mission principles around the environment.

[00:05:28] Social equity and community. And so we are 100% owned by nonprofit entities that are aligned with our mission. Their objective is not to maximize profit. Their objective is to deliver the greatest good for the greatest number of people within and across our community. 

Boris Grinshpun: [00:05:48] Got It. But, like, if we think about that you’re owned by nonprofits, but you’re still a for profit institution, right?

Lynn Marie Auzenne: [00:05:56] correct? Yes. That’s a tricky one. And there’s [00:06:00] one for that. Yeah. So our other primary objective is that we don’t want to just prove that we’re better. Then everybody else, we want to prove a new model and then want to share that model with others. And then we want to scale it. And there are a lot of banks and credit unions out there that are not.

[00:06:22] In a position to say, Oh, well, we can just stop maximizing profits. They need a transition. They need to see a path from good to great. And so we’re trying to be that model, improve that model and the foundation that oversees us. It’s also responsible for one of our mission’s principles around radical transparency, so that isn’t just transparency around our numbers and our performance.

[00:06:44] It’s transparency that runs our strategies. It’s transparency around our failures. And our policies and our compensation at every level. And so we want to prove this model and then hand [00:07:00] it out to other banks and credit unions that want to adopt it. But in order to do that, you also still have to. Operate in the real world, right?

[00:07:09] You’ve got to sort of bridge that gap between okay. The profit growth at all costs business and a pure nonprofit. There’s gotta be, it’d be some happy medium in there that still balances profit with social equity and the environment. And so that’s what we’re trying to prove. And that’s what we’re trying to scale.

Boris Grinshpun: [00:07:28] Yeah, it’s interesting. And I know we had an earlier conversation, a little bit about this, and we were saying, okay, well, look at the bank of sport for profits. Um, and it’s, they’re designed to make money, but then at the same time, you’re trying to achieve a radical level of transparency. You know, how do we, how do we do that?

[00:07:45] Or how do you guys do that as a beneficial state bank? Because you know, everybody hates fees. Everybody’s still, doesn’t like this notion of paying. Interests, but those are the people, the vehicles of how financial institutions make, make [00:08:00] money. So what is, what is different or how are you trying to balance that a bit differently if you will, 

Lynn Marie Auzenne: [00:08:07] Right.

[00:08:07] Well, Uh, we do need to charge fees and you need to charge interest on our loans to cover our costs. Because at the end, we are the oldest most traditional form of crowdfunding. So the people that we have a fiduciary responsibility to our depositors, and we need to return. Income and interest to them still just like every credit union and bank needs to.

[00:08:33] So in order to accomplish that, we do need to generate ribbon revenue so that they can earn a reasonable and fair interest rate on their deposits. But since we don’t need to maximize profit looking to grow unchecked, I know, we’ve decided that there’s a limit. We want to optimize our profits. So whenever our profits exceed our threshold, which is around 12% Roe, right now take [00:09:00] that money.

[00:09:00] And it goes up to the foundations that own equity interest in us and gets redistributed to the communities we serve. Got it that way. There’s no incentive for us to maximize profit. In fact, as we see ourselves approaching that upper threshold, that’s our key, our alarm, our opportunity to look at our pricing and see, can we be more generous with our deposit?

[00:09:24] Can we reduce fees somewhere? And that’s our commitment from the get go. Of course, you know, we want to find efficiency, use a scale and scope from the beginning so that we can fulfill that earlier. But, you know, if we accidentally go over that 12%, it’s not a bad thing. Right. That’s still going back to our communities.

Boris Grinshpun: [00:09:44] Got it. You know, you mentioned an interesting thing. I love that little blip that you said we’re the oldest form of crowdfunding. I’m not, I’m not exactly sure. That’ll be a lot of people thinking about financial institutions, uh, being that perhaps they need a marketer like yourself to [00:10:00] help them, uh, better, better shape that narrative.

[00:10:03] Now I do want to pick up on a, on a, on an interesting point that you made, right? When you were talking about other banks and credit unions. And how you’re developing a new model. One may say that this is a competitive model, or is this a collaborative model? Maybe it’s a competitor model, but help me out here.

Lynn Marie Auzenne: [00:10:22] Yeah, that’s a, that’s a great question for us. Um, I would say the short answer is that we don’t want to compete literally. Well, I’ll say specifically with small community banks and credit unions, we do advocate for smaller banks. And look at the consolidation that’s gone on in the banking industry in 94.

[00:10:47] What was it like small to medium banks that were under 10 billion in assets. That was 50% of the banks that were out there. Client banks that are over a hundred billion, that was less than [00:11:00] 20% of the banks. Right. And then I think last year statistics were that 50% shrunk to 16%, 16% has grown to 59%. So you’ve got some very, a handful of mega banks that are really not just controlling the entire industry, but they are wagging the dog.

[00:11:22] Yeah, they are manipulating regulations in their favor, like with the dismantling of glass Steagall, which some would say contributed to our great recession. So when we think about, you know, how do you create accountability for serving the people who are, or should be your primary stakeholders? I think community banks, smaller regional banks and credit unions are already in that space.

[00:11:49] And the last thing we want to do is compete with each other. In fact, maybe that’s our opportunities to collaborate because I think a lot of people, when you look at the behavioral stuff, they [00:12:00] they’re attracted to larger banks because financial services is complicated and it’s scary and intimidating.

[00:12:07] And if you’re here’s this big bank that’s familiar. And a lot of people bank there, so it must be safe. But if community banks and credit unions joined forces and we started delivering the same message and helping people wake up to the possibility that yeah. That, you know, it’s maybe safer. And more in your interest, in the interest of your community to bank small and bank local.

[00:12:32] And maybe if you bank small, you can make a big impact. 

Boris Grinshpun: [00:12:37] Yeah. And perhaps, you know, I don’t know if somebody’s publishing already a playbook of collaboration, but then my next follow up question was really around. Well, how, how will beneficial state banks collaborate with others. Um, local banks or other credit unions.

[00:12:54] I think everybody has that idea. You know, we attend lots of conferences. We host lots of speakers like for [00:13:00] South the talk a lot about collaboration. Yeah. And I know there is whether it’s a Cuno organization or, or other, uh, like CBA type organizations that foster that, but clearly. Clearly the numbers would actually indicate, well, the numbers indicate contraction.

[00:13:16] That’s just very factual. So whatever collaborative story we’re talking about today, isn’t quite working. There’s gotta be a different way, right? 

Lynn Marie Auzenne: [00:13:27] There’s always a different way. And, um, I won’t claim that we know the best way we’re experimenting and it would be great if we could all experiment together. I think that collective wisdom is across.

[00:13:41] Community banks and credit unions. So it’s invaluable, but we belong to a lot of the traditional organizations for banks like Western and American bankers association. But we also have signed onto the Paris climate accord [00:14:00] and, um, the global Alliance for banking on values. And we’re not just a community development, financial institution.

[00:14:09] We’re one of the 7% of CDFIs that is ranked as outstanding. So that is a community. It’s a community of like minded organizations that are already part way down the path. To begin, looking at their governance and their lending and their business structures and saying, how can we make this as fair and productive and benevolent and, um, impactful as possible.

[00:14:36] And we want to collaborate with them because when you have a group of people who are value-aligned investors, they need a bank. When you have a bunch of people who are banking with you, because they, your bank aligns with their values, they’re going to be more. You know, prosperous, and then they’re going to need an investment manager.

[00:14:55] So we need those, small community synergies based on values [00:15:00] alignment. That 

Boris Grinshpun: [00:15:01] makes sense. That makes sense. You know, the only thing that I always also think a little bit about is, you know, this for you as a differentiator, largely just because not many people, fortunately are unfortunately think, uh, from a banking perspective, exactly the way that you think about that today, because you know, one of the things that we already know is that rights are like commodity these days, right?

[00:15:25] I mean, it’s largely a commodity, uh, you know, whether you get your mortgage rate here, there, you know, obviously this was a differentiator, a substantial differentiator for you for like minded people. But I think. Um, we always talk about, you know, also great service and that also means very different things to many different banks and financial institutions.

[00:15:48] What I love to hear is how different is that beneficial statement? What does that actually mean within your organization? 

Lynn Marie Auzenne: [00:15:55] That’s an interesting question, because I’ll say I will admit. You know, when I joined [00:16:00] this bank, we’re a product of a consolidation of others, in some ways, vision, mission, and values aligned banks.

[00:16:08] So we screwed over a billion dollars, not organically over the last 12 years, somewhat organically, but mostly through acquisition and consolidation. And, and it is really hard to deliver world class service, much less competitive products and pricing midst of like a triple merger integration. Right.

[00:16:29] Little challenging. And, um, so, you know, we thought we could hire pricey consultants to help us with our customer centered values models and refine our campaigns. And, um, but if you don’t have the right people equipped with the right tools and empower them with good judgment, when it matters most you’re gonna fall flat every time.

[00:16:52] And so I guess for me, service is not about product or price or. Process or training it’s [00:17:00] about culture at the end of the day. It’s about life. You look at Zappos. If you were unhappy with an experience that person, that CSR or customer service rep, and there another meaning for that acronym we could talk about later, but that CSR is empowered.

[00:17:17] They know that they’re in a servant leadership organization where the leader’s responsibility is to support them so that they can deliver a great experience. You know, the corporate hierarchy is flipped around. And leaders on the bottom and the people who serve the customer on the top. And if you can do that, if you can empower those people to use their best judgment and say, you know what, Boris, isn’t happy with those boots that got delivered two weeks later, here’s a hundred dollar credit.

[00:17:44] We’re so sorry. And that person is not only empowered, but we are happy. They’re honored to make that confession to you. And they have a stake in the effectiveness and long term success of that business. They are committed. [00:18:00] And I think when you shift to that, When you can shift to that model and you naturally get great service, of course, there’s going to be an infrastructure, a technology, a policy, and a leadership element, all of that.

[00:18:13] So not to say that culture compensates or eliminates. The dependency on all of those variables, but I will say like when we entered into, um, the COVID-19, the pandemic period, and then the government came out with, um, their PPP program, the Patriot action program under the carers. We’re licensed SBA lenders, but we weren’t doing a lot of SBA loans because they’re so labor intensive and so complex that a lot of our clients were just like, give us a conventional business loan.

[00:18:49] This is too much work. We can’t navigate the underwriting. But when PPP came out, you know, we went from doing maybe 10 commercial loans a month, about a [00:19:00] hundred to 120 a year to a, I think in the first three weeks of the PPP program. We have so many requests flooding in from clients and non-clients that we did a thousand loans.

[00:19:12] Wow. Three weeks. We did like, I want to say seven or eight years of business in a few weeks. Not that those loans are going to generate a huge profit for us. In fact, the wonderful thing was nobody ever stopped just saying how much money are we going to make? Everyone’s concern. Everybody came together, they dropped everything.

[00:19:32] They were doing our retail bankers, our relationship managers or treasury managers, our auto lending business. Everybody dropped everything they were doing and said, how can we help? And it brought us together as a bank. And we set our primary objective to get a paycheck into the hands of the employees of all of these, these 1000, actually 2000 small businesses that had reached out to us.

[00:19:57] And you know, when you see that happen, [00:20:00] then you know, you have a strong culture and, you know, you’re service oriented. And then, that three week period, we made loyal clients for life. And it’s just an example of that. If you do come together and also we have to implement some technology solutions very rapidly in order to support, you know, increasing our volume by a factor.

Boris Grinshpun: [00:20:23] yeah. Yeah. I mean, it’s an interesting concept that you talk about, which is largely around empowering the age and making sure that they have the right tools. And then that really leads to providing, um, you know, great customer service. I mean, we think a little bit, a little bit of that, you know, we see a lot of similarities between whether it’s the financial services sector or other verticals doing, doing that.

[00:20:45] It’s, it’s kind of interesting why we haven’t been on a, on a much faster ship to, uh, to, to adopt that. Um, I don’t know any insight. Why any thoughts on that, on that particular, a particular type of what’s holding us back, 

Lynn Marie Auzenne: [00:20:57] if you will. Yeah, [00:21:00] I think the same thing that’s holding us back from being trend and tone and having the perfect body, you know, you can know how to do it, eat salads and exercise, but knowing that you need to do these things and actually executing on them is much more complicated.

[00:21:19] And I think that’s, that’s true in organizations and also, um, there’s a lot of fear. In Arkansas. So individually they are so worried about keeping their job and the person competing who wants their job and the person that they’re managing. Who’s trying to undermine them because they want to be promoted or don’t like the way that they’re being managed.

[00:21:41] And then the person that you’re reporting up to judging you and fearing that, you know, if I don’t deliver for that next quarter, then maybe my job is in jeopardy. When we create a kind of instability and fear. It’s sort of Maslow’s hierarchy of needs. You can’t say let’s think about how I build cycle logic [00:22:00] safety for everyone I work with and create this sort of environment where we’re all just focused on the most optimal outcome or.

[00:22:08] No, our communities, it’s really hard to make that leap and not transition and leadership will hire very expensive consultants, which my leadership did in the last couple, very large banks that I was a part of, um, on those consultants starts just to let of money to tell us here’s exactly what you need to do.

[00:22:30] And here’s your little roadmap. Good luck. Let us know how it goes. And, um, it, that really went nowhere. Got it. 

Boris Grinshpun: [00:22:40] How do we know, how do we get past this fear, this fear of being comfortable? How do we move out of the fear based culture so that we can get out of our own way and deliver great service? 

Lynn Marie Auzenne: [00:22:52] Yeah, that’s a good question.

[00:22:55] And I don’t have the purpose, but I have an opinion. [00:23:00] Yeah. And I’m a very impatient person. I’m okay. Always looking for what’s like the path of least resistance. And for me too, to flip a culture or to build a culture, that’s one of empowerment, psychological safety and very service oriented. I think you need three things you need.

[00:23:20] That to be a top down directive, even if it’s a servant leadership model. Yes. You need a model, a visionary leader at the top that is unequivocally unapologetically committed to supporting and empowering their employee base and serving. There are communities like with passion and heart and vulnerability.

[00:23:43] Second, to build the organization around that your incentive programs need to reward and recognize that your analytics need to measure customer satisfaction, engagement, and loyalty. First and foremost, not expenses. And profit and [00:24:00] products and share of wallet. And how many products does somebody have? You know, like we know where that can take you.

[00:24:07] Um, and then third, once you build it, you have to maintain it. A lot of people put a lot of work into building out their values, you know, beautiful values. And then they put it up on the wall cap poster. It’s really useful. Right? Well, you need to operationalize and activate those values on an ongoing basis and they get everyone’s responsibility across the organization to be the stewards.

[00:24:30] Of those missions and those values. And if you can crowdsource them from your employees so that everybody has a sense of ownership over it and those values and just never let your team and your people, your leadership ever get complacent, because the moment you do, you’re going to backslide. Because we are climbing up a slippery Hill when you’re building a strong culture and every time you stop climbing, you slide back.

Boris Grinshpun: [00:24:56] That’s that’s, that’s great insight. I mean, there’s so much [00:25:00] wealth that I think our listeners could take, take, take away from that. And I think that that really, I think where we started this conversation, which was largely around, um, the purpose of the bank has. And sort of those principles in how you can sort of interweave them into great service and ensure that, I mean, I think your comment makes total sense because if those principles are not continuing to be, um, I’ll call it like documented and being talked about and being reinforced, then people slowly as time progress has continued to move away from the, whether that’s, you know, banking on purpose or whether that’s delivering great service.

[00:25:37] I think, I think your message resonates really, really well. Yeah, absolutely. Well we’re at the top of our hour, Lynn Marie, this was a great conversation. I really appreciate you coming on the show and giving this, uh, this level insight to our listeners today. Thank you very much. It sounds like better things yet to come for [00:26:00] beneficial state bank.

[00:26:00] I’m excited to see Spencer play out and hopefully more and more people aligned with this model. Thank you again. 

Lynn Marie Auzenne: [00:26:08] Absolutely.

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