In 2016, toward the latter half of the year, the board of directors at WSFS Financial in Wilmington, Del., sent CEO Mark Turner out of the office on a three-month fact-finding mission.
Between August and October, Turner traveled more than 44,000 miles, visiting with other financial institutions, tech and fintech firms, traditional retailers, and even medical device companies, all with an eye toward gathering ideas that could help make the $6.8 billion-asset WSFS a better bank.
“The agenda was to go visit other companies on a leading-practices tour,” he said. The mission, as he described it, was “specifically to find other companies that were doing not just best practices, but on the leading edge of doing things in technology, fintech, organizational design, leadership development, and enhancing culture.”
While it is unusual for a bank CEO to take a months-long road trip, the mission was, in many ways, consistent with Turner’s belief that companies need to continuously embrace innovation.
Recently, WSFS partnered with the online lender SoFi to offer a new cash management account. Two years ago it teamed with the mobile banking startup Zenbanx in offering a multicurrency bank account for world travelers. (SoFi bought Zenbanx earlier this year and later shut it down.) And it was an early investor in the online bank EverBank, though it cashed out that investment before EverBank went public.
Since the late 1990s, WSFS has also run a niche business focused on servicing and providing cash for nonbank ATMs. That unit, branded CashCollect, is a significant source of fee income, which increased 18%, or $4.9 million, in the third quarter compared with a year earlier.
Those fee-based businesses are vital to the bank’s efforts of attaining a 1.30% return on assets, a goal laid out in its current three-year strategic plan and one that Turner said WSFS should reach soon. In the third quarter, WSFS reported an ROA of 1.20%, compared with 0.82% in the third quarter of 2016.
The challenge is keeping the momentum going in the face of stiff competition not just from rival banks, but from upstarts out to disrupt traditional banking.
Before embarking on his journey, Turner sent out more than 100 letters of inquiry to companies he was interested in visiting. He hoped to receive maybe 10 or 15 positive responses, but ultimately ended up visiting with, or telephone conferencing with, 49 companies.
In an interview with American Banker, Turner shared some of what he learned on his mission and how it is helping to shape WSFS’s future. He also weighed in on tax reform, regulatory relief and other public-policy matters and what these changes coming out of Washington could mean for community banks like his. Here is an edited transcript of the interview.
What did you take away from your CEO sabbatical?
MARK TURNER: We can’t do everything, so I came up with a methodology that I borrowed from Northern Trust, changed it a little bit for us and put in four categories.
The first is “do not.” It’s either not worth it or someone else is doing it. I’d put blockchain in that category. Blockchain will change financial services significantly in the coming years but there are much, much bigger companies that are investing a lot in this and at some point it will become commercialized and standardized. At that point, we can plug into it.
The second category was “do now” — things that we want to start or accomplish in the next 12 months. To give you an example: We created a customer experience department and a position of chief customer experience officer, reporting directly to the president to make sure that we were gathering ideas and implementing ideas to improve our customer experience.
Debit card reissuance was one. Our process of reissuing debit cards was kind of ad hoc and clunky so we implemented systems to make them more seamless and friendly to the customer.
The next category was “do next.” These were things we want to start now but accomplish over a one- to two-year period. One thing I put in there was what we call developing a cohesive omnichannel delivery structure. Our customers want us to deliver to them in so many different ways these days. How do we make sure those all look and feel like WSFS and that the data we gather from each channel is connected to the other channels?
The last category was “do beyond” — things that will take more than two years for full implementation. For us, those are things … like artificial intelligence, which we think has a very big and bright future, but at this point it’s too early for us to dive into.
You were out of the office for over three months. How did your team back at WSFS handle things while you were away?
A second motivation [of this trip] was a contained test of our succession management and business continuity plan. At any time an executive could be hit by a bus or win the lottery and the rest of the organization would have to figure out what to do. This was a good test of that. We made plans so that other executives would step up to new roles and that the organization would have to lead and manage without me there.
The organizations that looked to me like they had something special were not idea-dependent or person-dependent. They had very strong teams that would help them deal with the evolving or changing realities of the space.
Quote'At any time an executive could be hit by a bus or win the lottery and the rest of the organization would have to figure out what to do.'
That was also brought home to me when I saw how well my team stepped up in the three-plus months I was gone. They didn’t miss a beat. In fact, they evaluated, negotiated and closed acquisitions in the period of time I was gone. It was clear to me that I had a strong team, and while I’m sure my leadership was needed, if something happened to me, the organization would be in good hands.
Did you have any communication with your team while you were away?
I wrote a blog back to the organization while I was gone. And in that blog was what I did that week: who I visited, who I met with, what I learned and the big takeaways from that week. That forced me to document as I was going.
One of the unintended positives was that I had several associates come up to me after the tour to say they really appreciated it. It’s hard for executives to get to be known as people by the rest of the organization and writing a blog about my travels and travails and vulnerabilities was helpful for me to connect to the organization and for the organization to connect to me as a leader.
How do you think about tech adoption and investment as it relates to shifting consumer behaviors?
For the last several years, and for the next couple years, one of the biggest if not the biggest strategic question we face as an organization is … how quickly are our customers adapting to new technologies and their desire to move to digital platforms, or their desire to have all platforms available to them, and how does that change where we invest?
We’ve seen fewer transactions in the branches and more transactions digitally. We see that trend continuing. What’s hard to tell is when customers will be much more comfortable having not just their transactions, but their more relationship-oriented functions done digitally as opposed to face to face, so that means opening an account or problem solving and whether they’re willing to do that in person or willing to take that to a digital or non-face-to-face channel. What we struggle with every year is, of a fixed amount of investment we can make, to meet our return hurdles, how much goes to face-to-face channels and how much goes to digital channels?
Even in our physical channels, we have to make different configurations and decisions. A new branch that we open now looks much, much different than a branch we would have opened five years ago. It’s smaller, it’s in a more high-profile location so people can get to it quicker, and it serves as a billboard for the organization.
Where does cybersecurity come into all of this, and how do you think about that issue as a community bank?
People often ask me as a CEO what keeps me up at night. I would have to say at this point, nothing keeps me up at night and I could not say that five or six or seven years ago. Credit is pretty good and capital is pretty good, and liquidity is good, all these things are very good, and the economy is doing well.
But the one thing it feels like nobody has a complete understanding of is the risks associated with cybersecurity. There are so many people out there trying to hack, including nation-states. I think every bank’s concern is, they pour a ton of money, talent, effort into this but still they’re somehow going to get hit.
The emphasis has switched from not an “if,” but a “when.” So let’s make sure that when we get hit at some point in the future, one, we can look back and say we did everything we could so it doesn’t look like we were sloppy, and two, that we recover well. That will be a defining issue, making sure you handle something like that well.
We’ve seen a few announcements already from some of the bigger banks about what they’re going to do with their tax savings under this new tax legislation. Have you given any thought to how WSFS might use those savings?
Yes, we have. Like everybody else, we just went through our year-end process. And when you go through that process, there are a number of things that wind up on the cutting-room floor, projects or adds to staff, that maybe survived a couple passes of the budget, but didn’t survive the final because you had requirements or returns that you need to [achieve] as a company owned by others.
I would think that over time some of those things that wound up on the cutting-room floor, in terms of hiring people, new systems or new locations or new technologies, will make the cut.
We’ve heard a lot already from the big banks about regulatory relief, but what about community bankers? Do you guys care about raising the SIFI threshold, for instance?
I know there’s another piece of legislation that would put it in the hands of regulators to determine what’s a [systemically important financial institution], but clearly we and most of our community and small regional peers would not be directly affected by that.
Quote'We’re going to have to live with, for the immediate future, $10 billion still being a line in the sand.'
There are things in the bipartisan legislation around qualified mortgages and stress testing and things of that nature which would benefit us, so we are pleased with those, but specifically, SIFI is not one of those things that would directly impact us.
I will say, indirectly, it clearly tonally acknowledges that there’s probably been too much regulation that’s been imposed on smaller institutions and I think that that tone of being more balanced and more measured will indirectly positively affect institutions, even of our size.
Do you get the sense that there’s maybe a hope or expectation that lawmakers will now think about raising that $10 billion asset threshold for Durbin, Dodd-Frank, etc.?
I was hopeful actually that they’d handle that this time and I’m disappointed that they did not handle that this time. I thought that that was something that had bipartisan support.
We’re going to have to live with, for the immediate future, $10 billion still being a line in the sand. Having said that, I think more and more banks our size are much more ready to approach that line and to cross it in a more deliberate, more planned, more seamless way. Not that it won’t have an impact, but I think those of us who are approaching it now will be much more ready for it than those who were approaching it five years ago.