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wants to read anything with 1 0 in its title finally did something right with the blog blogging life has been good here at snarketing 2 0 named 1 blog for financial services marketers by the financial brand in 2013 listed as one of the 25 best marketing blogs by radius in 2014 good stuff very proud of that come the new year however there will be some big changes here in snarketingville starting january 5 2015 snarketing 2 0 will become a column on the financial brand snarketing 2 0 will no longer be a standalone blog at this point you might have one or more questions like who cares what you do with snarketing 2 0 why would you fold your blog into the financial brand and what should i have for lunch i don t know the answer to the last question or the 1st one for that matter i m not sure even my mother cares actually i don t think she knows that i have a blog as for the 2nd question i might have some answers what jeffry pilcher has done with the financial brand in the past few years is nothing short of incredible it isn t just the premier publication for financial services marketers it s becoming the premier publication for financial services period incorporating my blog into the financial brand is an attempt to get in front of a wider audience especially at a time when i have a book coming out and am looking to increase the number of speaking engagements that i do i d be lying if i said i didn t have some reservations i get to do what i want with this blog for better and worse i ve got complete control over how this blog looks which of course is why moving my blog into financial brand is a good move because as you can clearly see i am clueless when it comes to site design and i have to admit to fears of being lost in the sauce at the financial brand on this blog i m the big fish in the pond actually i m the only fish it s my pond at the financial brand i m just another fish in the pond i ll be a piranha however so those other fish better look out as for editorial control or influence i m giving up nothing in the discussions about the move i recall the financial brand asking me to not bad mouth the advertisers i said ok as long as they don t do or say anything stupid i think the response was that seems fair if you subscribe to this blog thank you i m not sure yet how it will work if you ll still get notifications or the posts through email if that s how you get them today i m working with the financial brand to figure out how to make this as seamless as possible thanks for reading see you soon at the financial brand share this tweet email a link to a friend opens in new window email like loading december 15 2014 december 19 2014 ron shevlin the financial brand 29 comments riding the waves of the p2p lending market financial services retail banking congrats to all involved with the lending club ipo this is what it s all about building something from scratch enduring the ups and downs then going public and making a boatload of money i m no wall street analyst so i couldn t tell you if the 8 5 billion valuation that lending club lc hit at the end of its first day of trading is a fair assessment of its current or future value but what i can tell you is that there are people who are deceiving themselves about what lending club is and what its future prospects are the delusions are reflected in articles like cnbc s how lendingclub aims to end banking as we know it which states lendingclub is setting out to transform the banking world to get there it s following a playbook popularized by some of the world s biggest tech companies any true comparison between lendingclub and the world s most valuable tech companies is premature of course i guess any true comparisons between lendingclub and the world s most valuable lending and investment providers aren t comparisons worth making eh my take the conditions which made lending club possible and got it this far are temporal and likely to change in the next few years to lc s detriment first of all can t somebody out there come up with a better term for what lending club is than calling it a peer to peer lender the institutional investors providing funds on the marketplace are anything but peers to the people looking to borrow money on the site there are two conditions that have enabled lending club to exist and prosper get it the first is a pool of investors that would like to get a better return on their available capital than what they can get from other i e existing investment alternatives the second is a pool of borrowers who need funds and are willing to pay a higher rate than they would have to pay elsewhere or more likely that need funds and are unable to get those funds from other i e existing sources the size of these two pools and their willingness to use lending club to meet their needs have been sufficiently large and growing over the past few years to fuel lending club s growth and drive the ipo the questions to answer are 1 why did these pools grow over the past few years 2 will they continue to grow in the future the investor pool grew largely because of two reasons 1 incredibly low interest rates making it hard to find acceptable returns and 2 even in the face of an increasing djia professional money managers are always looking for superior returns to outshine the competition why did the borrower pool grow because the economy sucked and to some extent because some many individuals are mismanaging their financial lives many are or have been unable to pay off existing loans and credit card balances in fact 83 of lending club borrowers report using their lc loans to refinance existing loans or pay off their credit cards reported loan purpose source lending club so what happens going forward it mostly depends on the state of the economy the direction that interest rates go in and the p2p lending market itself if we experience a period of economic prosperity and people are more able to pay off their loans and credit cards lending club may very well see a steep drop in loan volume roughly 62 of lending club s 2014 loan volume came from borrowers with a grade c or lower rating what happens when the economy improves and the gen y population who start off adult life with lower credit scores and grades mature and move into higher creditworthiness classes is there another pool of risky borrowers to fill the void and if interest rates rise could the rates that borrowers must pay on the lc platform might be even too high for them to stomach grades e f and g are already paying interest rates in excess of 20 we re getting close to payday lending territory no will the investor pool grow this is comprised of two components 1 the number of investors and 2 the amount of funds those investors put into the marketplace i can t talk to 2 but it seems likely there are limitations to the number of investors who can or will participate in lc as the marketplace has grown competition to fund the best borrowing opportunities has grown and has even spawned new companies who help investors identify their best opportunities as a result much like the stock market itself professional investors have an edge over individual amateur investors as a result the number of individuals investing in lc will likely remain capped and with a first day valuation of 8 5 billion i m guessing that venture capitalists across silicon valley are firing up their bongs and thinking dude i gotta invest in one of these pee pee lending marketplaces and that means more competition for lending club increased competition will likely result in some erosion of lc s overall share claims that lending club is disruptive or that it will end banking as we know it are so totally ridiculous that it has to make you wonder what the claimants were smoking when they made these claims lending club is a niche player in the lending market a fringe player according to the federal reserve consumer loans issued by the 100 largest banks ranked by assets grew 6 5 between q1 2012 and q3 2014 to nearly 1 18 trillion from the 2015 financial brand marketing survey 43 of respondents indicated that their fi s loan volume increased by more than 10 in 2014 over 2013 levels disruption ending banking as we know it hardly more like creating a niche somewhere between credit card borrowing and payday lending bottom line i can t tell if you 8 5 billion is a fair valuation for lending club what i can tell you is that if and when the economy improves it s going to face some stiff challenges that said i would love to have a ride on the boat share this tweet email a link to a friend opens in new window email like loading december 15 2014 december 17 2014 ron shevlin disruption lending club p2p lending 6 comments does your bank need a chief ethics officer financial services in an article titled to restore trust in banks build ethics into business decisions in american banker the authors wrote if a bank decides to have a formally designated individual i e chief ethics officer with principal ethics responsibility what steps should it consider to make the role effective such an executive could update and promulgate the company s ethics policy and be responsible for training employees about their ethical responsibilities he or she could help to illuminate decisions about what is right or wrong even where there may be a legal argument to justify an institution s proposed products pricing or conduct he or she also could be the senior officer to whom whistleblower complaints would be directed the ethics officer might also be charged with identifying and investigating wrongdoing involving individual conduct to help ensure that the institution s ethical culture is grounded in ethical behavior and not simply an abstract policy in addition he or she could be an advisor on products services and programs evaluating them in the light of fairness to their intended users in many of these potential roles and responsibilities there s a strong whiff of after the fact ness meaning that the involvement of this chief ethics officer would come after some potentially unethical behavior was committed with the exception of the training role a better solution would prevent unethical behavior although if you read my prior post on financial education you might guess that i don t think ethics education would be particularly successful and in fact not only is that implied by the title of the ab article but the authors write one alternative or supplement to appointing a single officer to champion ethics is to require that bank decision processes explicitly incorporate ethics whether the bank should as opposed to whether it can into major decisions on products programs and business initiatives especially given the subjective nature of ethical requirements making ethics decisions part of a process that will incorporate the views of multiple executives may assist in capturing a broader corporate consensus sounds like a good idea but seems impractical the recommendation implies that many decisions that involve an ethical choice can be easily identified and isolated that s way too simplistic an assumption every issue du jour in the business world produces calls for a chief fill in the blank officer we ve seen chief reengineering officers chief knowledge officers chief customer officers chief innovation officers chief security officers chief data officers and the list goes on and on and on these calls rarely address some important questions however how much budget should chief fill in the blank officers get to do what they re supposed to do what are the limits boundaries goals and metrics for these positions are these permanent or temporary roles lots of questions about these chief roles and yet the pundits who write articles advocating for the creation of these positions never seem to have any answers to the questions the authors of the ab article are lawyers and they write in some banks general counsels are considered de facto ethics officers and sometimes even hold the title of chief ethics officer there s a lawyer joke in here somewhere but i m going to let it pass because i know that someday i may need a lawyer to get me out of trouble and the last thing i need is some lawyer saying oh you re the guy who made that nasty lawyer joke in a blog post back in december 2014 another thing that bugs me about the chief ethics officer proposal as well as some of the other recommendations in the article is that there is no root cause analysis regarding the ethics problem how can you know what the solution to a problem is if you haven t defined the causes of the problem so what are the possible root causes of an ethics problem in banking i m going to need your help to come up with some more but i can think of a few possible explanations off the top of my head 1 bankers are inherently corrupt cretins sadly i know there are people out there who believe this to be true i m thinking specifically of two twitter buddies neither of whom i will mention by name we ve been though this before it s not true despite some folks misguided notions 2 banks cultures nourishes unethical behavior the authors of the ab article like many other observers writing on the subject of bank ethics raise the subject of a bank s culture the ethics officer might also be charged with identifying and investigating wrongdoing involving individual conduct to help ensure that the institution s ethical culture is grounded in ethical behavior and not simply an abstract policy this doesn t get at the root cause because there must be something that influences and shaped the culture in the first place like having a workforce comprised on unethical inherently corrupt cretins which isn t the case 3 bankers have incentives to engage in unethical behavior the problem the root cause is one of risk vs rewards the rewards for unethical behavior are greater than the risks of getting caught or at least the perceived risk that one will get caught when the perceived reward is greater than the perceived risk people will engage in behavior to reap that reward if 3 is the root cause and i believe it to be at least more so than 1 or 2 then the fix needs to be something very different than a chief ethics officer running around promulgating policies sanctioning lapses and listening to whistle blowers the fix needs to be an adjustment of the rewards i e compensation and incentives and risks penalties in other words it isn t the legal department that s important to the fix as the authors of the article propose but the hr department unfortunately this is anything but an easy fix changing the rewards compensation structure organization especially an organization like a large bank borders on the impossible being perceived as as unethical is not a desired image for any bank so from my parochial view this becomes a marketing problem because of the public relations and market perception implications so maybe the chief marketing officer and not the general counsel should b...