In this 33 minute episode of The Alta Group Podcast, Jon Fales talks to the ELFA President and CEO Ralph Petta about the annual convention and such new association members as Fintechs and their influence on the industry. Ralph also addresses challenges ahead—mostly in Washington– with tax reform on the near horizon, and the difficulty in determining its direction with so much polarization, even within political parties.

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Podcast Transcript

Jon: Hi, and welcome to The Alta Group podcast. I’m your host Jon Fales, and today I’ll be speaking with a good friend of mine Ralph Petra, president of the Equipment Leasing and Finance Association. Ralph will be talking about the upcoming ELFA convention which will be October 22nd through the 24th in Orlando. He’ll also discuss several other topics of interest in the equipment financing industry. Ralph, hi, this is Jon Fales. How are you doing?

Ralph: I’m fine, how are you, Jon?

Jon: I am doing great, thank you. We’ve got a pretty weather here in Tennessee today, nice pretty sunny day.

Ralph: Ah, great we do too.

Jon: You guys just moved into a new office, right?

Ralph: We did, yeah. And I’m talking to you from our brand new offices on I Street in Washington DC. Everybody seems to be pretty happy. The only problem is where Amy and I are sitting in my office I have virtually no furniture. So we’re kind of sitting here with like college, you know, milk crates and on the ends of tables and stuff, but help is on the way.

Jon: I just have got a really strong mental image of that. I went on Google Maps and looked at the at the location. You guys are like a pitching wedge from the White House, aren’t you?

Ralph: Yes we are, but you hit your pitching wedge a lot farther than I do, so it’s probably an eight iron for me. But it is right around the corner. I mean it’s literally around the corner from up on the White House. we were close when we’re on K Street, but we’re even closer now not that that makes a whole lot of difference. But we’re close to the White House, we’re a little closer to Capitol Hill so it really helps with our public policy advocacy work to be this close to all the goings on here.

Jon: Yeah, that’s great just a beautiful location. And, by the way, I’ll take your street eight iron over my bending pitching wedge any day of the week. So we were gonna talk about a handful of things today. I guess top of mind for most of the folks in the industry right now is the convention that’s coming up. Can you tell us a little bit about what we have in store this year?

Ralph: Yeah, we’re gonna have a terrific convention Jon. And, by the way, I’m happy to collaborate with our good friends with the Alta group, so this is a good opportunity for us to be able to cooperate with you folks and share some information that we have. So I’m very happy to do this. The convention should be terrific. And we’re gonna be in a wonderful location. We have keynote speakers that are gonna talk about technology. Jon Alice, his is a technologist, he’s gonna talk about the connection between assets and data assets and technology.

We’re gonna have Keller Rinaudo, who’s gonna talk about his role as a young, he’s probably a millennial around the edge of being on the older end of being a millennial and this cool company that he founded called Zip Line. Which is all about delivering medical supplies to hard-to-reach locations using drone technology. So it’s absolutely it’s fascinating I saw him at a previous event, not ours, but another organization’s and I couldn’t wait to get him to agree to come and do this at our conference in Orlando. I think the attendees are gonna love it.

And we have Rob Wescott and I think everyone knows who Rob is. Dr. Wescott is somebody who creates a lot of information, develops economic analyses and knows a lot about the overall economy as well as our industry. So he’s gonna be presenting his latest analysis on the economy and where it’s going, it particularly as it relates to the equipment finance business. So it’s gonna be a terrific convention. The theme, “Building the next generation business,” you know, has multiple meanings I guess you could…it’s a play on words the building the next generation business, building the next business generation.

It’s about people, it’s about technology and it’s gonna focus on both of those things as well as policy. So the people part is needing to build the workforce for the future and the technology part is gonna focus on challenging traditional business models and changing customer needs. And of course, the policy is not anything new to this group. We’ve been involved in what’s going on in Washington with federal policymakers as well as state policymakers for a number of years. So we’ll be talking about how public policy is and will continue to shape the industry. So it’ll be a terrific event.

And our numbers right now are very very strong. We probably when all is said and done we’ll probably have close to 1,100 people at the convention. So I think people see the value of getting together to do this. So we’re very looking forward to the convention.

Jon: That’s wonderful, that’s super attendance especially at this point, we’ve got just a little over a month to go I guess. You know, Ralph I was looking at…I was reading through the bios of the keynote speakers. Keller Rinaudo especially looks really interesting. He did some stuff before he got into the drones, didn’t he? He did some microbiological stuff, re-built computers out of DNA.

Ralph: Yeah. Yeah, yeah he did that. He was a software engineer, and he was involved in DNA in operating human cells as molecular doctors and that’s probably way over my pay grade. But that’s, yeah that’s what he did. And he was also the…one of the coolest things, he was a rock climber. So he can talk a little bit about that his stint as a professional rock climber and if that’s not interesting enough, he graduated from Harvard University. So I don’t know what’s more fun, Harvard University grad or a professional rock climber, but we got a twofer with Rinaudo, it would be great.

Jon: I wonder if climbing over all those rocks is what gave me the idea to deliver medicine with a drone.

Ralph: Yeah could be. It could be. And he tells a great story. You know, when I saw him previously at another event, organizations event, one of the questions was what his parents thought about his career. You know, the guy is 30 years older or 31 or something by now and, you know, professional rock climber who graduated Harvard University and then obtains multiple rounds of funding for this Zip Line business that he is now. And he’s raising money from investors to do this, and, of course, the questions are, what do your parents think of all the stuff that you’ve done at your tender age?

So he has a lot of interesting insight into all of that. So there’s a little bit of technology, a little bit of human interest and personal story. And I think attendees are gonna really get a lot out of this presentation, I know I did.

Jon: Oh man, I can’t wait that’s really gonna be a fun one. Besides the keynote speakers, are there any things in particular that you’re looking forward to this time through?

Ralph: Yeah. We have a number of terrific breakout sessions, Jon. We always have great breakout sessions at our annual convention, and this one upcoming is no exception. Again, we have multiple breakouts on technology, innovation and technology and how innovation is transforming the business. We’re gonna look at artificial intelligence, blockchain, some discussions of Fintech. We’re gonna have breakout sessions on the people aspect of what it is our member companies are involved in, recruiting, retention, corporate culture, leadership, organizational change, that kind of thing.

And, of course, the public policy initiatives on what’s going on here in Washington, in the States and how they impact our business. So we’re gonna have terrific breakout sessions. And the other thing I would mention which is really I think for us a big deal, and that’s the fundraising aspect and the charitable aspect of the fundraising that we’re doing and the charitable events that attendees will be able to take advantage of. Give the kids the World Vision…oh, sorry, Give Kids the World Village, Feeding Children Everywhere and the Jim McGrane Charity Bike Ride.

So those three things are gonna be ongoing at the convention and we’re gonna be raising a bunch of money for really wonderful causes that are gonna enable kids that might not have healthy meals to be able to have that delivered to them. As well as the traditional bike ride that we do and raise funds for a wonderful charity in the name of former member and terrific board of director, Jim McGrane, who passed away a couple years ago. So we’re looking forward to that and those are something that I know the staff is really excited and looking forward to becoming involved in, and we hope the attendees will as well.

Jon: Yeah, I’m sure the attendees will. We’ve gone from very little on the charity side not all that long ago to pretty big involvement and doing some real meaningful things with the various activities that you mentioned.

Ralph: Yeah, that’s right. It never used to be as front and center as it is these days with our annual convention, and I think the [inaudible 00:10:39] has decided that this is really a worthwhile cause and this is something that we need to promote more of, and we’re really happy and excited to be involved in these things.

Jon: Yep and I know that the members are happy that the association is spearheading all those efforts as well. And speaking of the association, let’s talk about the association for a few minutes. I know you’ll be addressing the state of the association in your address at the convention, but can you give us a little preview, how’s the association doing? How’s membership levels and so forth?

Ralph: Membership is very strong, Jon. We have a terrific membership year going. Typically, the association retains about 90% of its membership and this year is no exception. So I think it speaks to the fact that we have a pretty good story to tell and we have a terrific value proposition that it seems is causing equipment leasing and finance companies to sign up year in and year out. So I think that’s a good thing and we look forward to that being the case going forward next year as well.

Jon: Yeah, I remember the…gosh, this is probably three, four, five years ago now. But we had a concern about a declining membership base, and I remember the association put a team in place to really try to turn that around and it’s proven to be successful, hasn’t it?

Ralph: Yeah, it really has. And, you know, in addition to the traditional players I guess in the industry, we’re attracting some Fintech companies. We’ve had a major initiative several years ago in which we’re looking to attract community banks. So we’re trying to get more and more community banks that have assets to deploy to get them more educated about the equipment finance business. If they don’t have an equipment finance division or a branch or some sort of a product within the community bank, we’re able to have them talk to people that can provide them a little bit of information about how they might get started.

And what the value is of establishing and maintaining an equipment finance capability. So it’s really paid off. And, of course, all that means that the association stays financially sound and that enables us to develop and to continue offering terrific programs and member and needs-based programs. So that’s why that’s important. I mean membership in and of itself is a nice thing, but the whole idea is that it gives us a revenue base to be able to do very very important worthwhile things for the membership. And that’s really the whole idea.

Jon: Yeah. I mean that’s always been the strength of the ELFA. And it’s interesting, Ralph, I mean we’ve had a chance to reach out and work with a few other associations over the years. And I just I haven’t found any that come close to the attention to detail that the ELFA has and you’ve got a diverse membership. I mean the giant banks, the small independents, everybody in between the service providers like us, and it manages to provide education training, knowledge of the industry, currency and so forth that I just…we found very rare in other associations.

Jon: Are you just saying that because you’re talking to me?

Ralph: Yeah. Yeah. No, I mean we really did. I won’t tell you the association, but a few years ago we reached out to a very large international association that we hoped would be beneficial to us and to them in promoting financing in their particular industry. And the association was very large and, you know, terrific for what they did but they really catered to the very biggest of members. If you were a service provider or a smaller member, it was difficult to get heard and attention and that’s never been the case at ELFA.

Ralph: Well, you know, if I might just interject one thing about that, Jon, a lot of that has to do with the fact that we have an unbelievable team here at the association. You know, I’ve been with the organization for a number of years as you know and the team that we have here, the staff members that we have here are as strong, or stronger, than at any time I can recall in my career here at the association. Amy [inaudible 00:15:36] is sitting with me here. Amy is our vice president communication marketing and branding.

She’s responsible for communicating our message internally extraordinarily, brand awareness messaging. And just not to puff up Amy but she is a rock star and we have a bunch of people on the staff here that are really very talented people and that participate in developing programs and are very attuned and interested in knowing what it is members want. We did a member impact study earlier this year, and it was very important for us to try to put our finger on the pulse of the typical member if there is such a thing. What is that that the member is looking for?

What is it that that keeps that member company up at night? Is there a gap between what it is that we offer and what it is that the company needs? And the team is all about how to deliver value and maximizing the member ROI.

Jon: Well, as a happy member I would say that you guys have done what you set out to do. That’s all been good. But let’s…I mean everything can’t be rosy and happiness all the time. What would you say are some of the challenges the association faces as we head into 2018 here in a few months?

Ralph: Well, the thing that comes to mind I guess, Jon, is, you know, what the heck is going to happen here in Washington DC? You know, we have a couple of advocacy issues that are very near and dear to our heart in which we’re spending a lot of time and resources. One, of course, is tax reform and the Congress is now getting around to releasing its tax reform proposal and it will probably take up the rest of this year. And depending on who you talk to, it might even spill into next year and beyond. And so, we’re very concerned about what that might mean to our business going forward.

Our main concern with any tax reform proposal is to maintain the deductibility of interest expense and whether elimination or limitation of interest expense gets inserted in any of the House or the Senate bill and what that looks like going forward. So we’re gonna be very very careful to monitor anything in that regard. And we just don’t know. There’s such a polarization in both the House and the Senate that it’s hard to really try to figure out and understand in what direction the leadership is going because even within the Republican Party and in the House and the Senate, there’s a lot of dissension.

So it’s not necessarily the Republicans arguing against the Democrats and vice versa, it’s in for a party polarization that’s creating a lot of uncertainty as to where this whole effort to reform the tax code is going. And, you know, Dodd-Frank is another issue. Regulation and how it impacts our companies and financial services companies. So those are a couple of challenges that we see on the horizon. And, you know, we’ve always been concerned about those kinds of things. But I think in the near term we’re gonna be faced with some of these hard decisions and we’re gonna be monitoring and analyzing them very carefully.

Jon: You know, Ralph, I was watching on one of the cable news networks this morning and they had Ginni Rometty who runs IBM, and Jamie Diamond who runs some big bank being interviewed. And they were both commenting about how many times they’ve been in Washington this year. I know Jamie Diamond said this is his 22nd trip this year. Have you seen similar involvement from industry executives to come in and lobby and talk to their Congressmen on the issues you were talking about?

Ralph: We try to bring our industry leadership in at least once a year. And, of course, we do that with our Capital Connections program we held in May. And we had a very very strong turnout in which leaders of our organizations, our respective organizations met with members of Congress, their staff. And, you know, it’s not so much even trying to speak to one particular issue or another, although, we did. We talked about interest deductibility and Dodd-Frank in the CFPB regulation that’s pending. But the more important thing is to educate them on what it is that we do.

What is it that is important and what does the equipment leasing and finance industry contribute to the economy? I mean those are the kinds of things that unless members of Congress have an understanding of how it is that member companies operate. And what they contribute to the economy and to small and large businesses throughout the nation, all the rest of the stuff would be kind of window dressing. That’s the fundamental. The fundamentals are just ensuring that the members of Congress and staff have some understanding and in some cases, folks who’ve been around here for a while have a better understanding and others about what it is that the equipment finance industry is all about.

So it’s all about education and making sure that we have relationships with those folks on the Hill. When an issue arises or when we need to have a conversation with someone. You can’t just walk up to the hill and try to have a meeting with a member of the House and Ways…the Ways and Means Committee or the Senate Finance Committee if they don’t know who you are and you haven’t already established that relationship. So that relationship building is critical as well as the education about what we do.

Jon: I know it is and I think most of the people that have been to capital connections before understand and appreciate that. First-timers normally get some indoctrination and I remember when I went several years ago, it was eye-opening. The government’s really run by a bunch of 25-year-old Harvard Government students and the importance of reelection in the minds of most of our congresspeople. Related to all this, Ralph, I mean I know we continue to get good crowds at Capital Connections I also know that the association has got a super staff some focused on Federal some on state and local.

Is there any ongoing activity that the staff keeps members and other people involved throughout the year other than just through Capitol Connections getting out and, you know, maintaining congressman contact and things of that nature?

Ralph: Yeah we do, Jon. We put special focus and emphasis on encouraging in-District meetings. So these are where the members of Congress go back home for the work period, and we try to facilitate the meeting of the members of Congress with one of our members in their district. So we have someone on staff here and a couple of folks on the federal government side that will facilitate that meeting, set up the meeting and help execute on putting the parties together.

So you have a member Congress that goes back home to…for his or her work period, and will establish a relationship with one of our member companies and spend a couple hours at that member company. And we’re doing more and more of that. At one time some years ago it was all focused here in Washington. We are putting a special effort in doing that kind of outreach in the members’ district. And it really is very very beneficial both ways. The member gets something out of it.

Here she’s talking to a constituent in his or her state or district and the ELFA member establishes a relationship with his or her congressperson and that has mutual beneficial advantages as well. So it really it’s a good way to do that. And, of course, we haven’t even talked about our state government relations program. We have a very very active state government relations program. It’s hard to believe that we have one person to cover all 50 states and I don’t know how he does it. And, you know, we can’t target all 50 states.

I mean we focus on specifically those important and critical commercial law states where there are there are issues that impact our industry that are being proposed or some regulation in states that in which a lot of members are operating in placing equipment. So the one person we have on staff really focuses on the on the states that really matter and that have issues that mean something to us and our member companies. So it’s a big deal, hard to do but this far I think we’re doing a pretty good job.

And the important thing about that is he leverages member companies in those states. So he’s not just a one-person operation out there trying to make things happen. Scott solicits the members in those particular districts or the state to help him explain the issues, to agree to meet with a member of the state legislator in the state capital, attend a hearing, write a briefing paper. So again, it’s the value of membership and it’s how we leverage members to really make our one-person state government operation a lot bigger than it is.

Jon: Yeah. He just does an amazing job. By the way, he’s asked for a copy of this podcast when it comes time for his annual review, Ralph, just thought I’d mention that.

Ralph: Don’t give it to him.

Jon: Hey, let me just ask you one more thing. We’ve covered a lot of ground here. One of the things I wanted to ask you about what you mentioned briefly earlier was Fintech. As I think you know, I get a chance to go to China every year. I know you’ve made several trips there. And I’m just astounded at the growth of the FinTech industry there. Right now it’s mostly a B2C market. But B2B is starting and growing. From an association standpoint, what has your experience been with Fintechs, and what the future impact might be on our industry?

Ralph: Well, that’s a very interesting conversation, Jon. In fact, we’ll have a couple of sessions at our annual convention focusing on the role of Fintechs in the equipment finance business. The foundation, in fact, is finalizing a study that follows up on a previous initial study on the whole Fintech industry and what it means to us. But, you know, I think the best way to answer that is there are some folks for whom the Fintech offers competition, and there are probably more and these are probably more of the enlightened members I like to think that see them as an advantage and not as a competitive challenge.

But as an opportunity where once, you know, depending on who you talk to, Fintechs were the new shiny object and people didn’t know what to make of these companies. More and more I think the traditional leasing and finance companies are looking to partner with Fintechs. They’re looking to leverage the technology platform that Fintechs are using to think about how they can improve the delivery and execution of the equipment finance product. Speed efficiency, customer…improving the customer experience. You know all those things are valuable no matter who you are.

Whether you are a Fintech or you’re a traditional leasing and finance company. And I think, again, the more enlightened a person would look at what these technology companies are doing in a way that says, “You know I might be able to leverage this and improve my business. So I think the only…the wildcard at this point as you know, you know. We really haven’t been through a credit cycle for a while. We haven’t been through a downturn in the economy for a while.

And I guess if there is that uncertainty that you can point to, it might be that if we do go through a downturn, it’s not quite clear what some of these Fintechs might come out on the other end. So that is yet to be determined and we’ll see. But I don’t think they’re going anywhere. I mean they’re here to stay so I think people need to take a look at how they can use and improve their operations as these Fintechs are using technology and the efficiencies that technology brings to increase and improve their processes. So it’s a good thing overall I think.

Jon: Yeah, I totally agree with you. One of the things that I really like about some of these companies is they think just way, way outside the box. I mean and going back to China as an example, for years, one of the complaints about equipment lessors or the equipment lessors had was the availability of credit information or the lack thereof. And then the banks started collecting it, and making it available but only to bank leasing companies. And when the Fintechs looked at the space they said, “Well, nuts. We can go out and we don’t need that.

We can get cell phone billing history for companies and people.” And that’s one of the key things they used to do credit evaluations. I mean it is just fascinating. So some neat thinking there so. Well, sir, we’ve talked about a lot of stuff here. Any closing thoughts from you? Anything we didn’t cover that you’d like to discuss?

Ralph: No, I don’t think so, Jon. You know, the industry is solid. There’s good growth, it’s slow and stable growth and the association is reflecting I think this growing industry and, you know, as member companies as they go, so goes the association. And as long as, you know, the industry continues to thrive, I think the association is gonna be right there trying to provide whatever help we can give to member companies as they as they try to improve their performance and stay and become successful. So there’s really not much else that I have that I can add to that and I’m looking forward to seeing everybody at the annual convention coming up in the next month.

Jon: Yup, us too. Us too. It sounds like it’s gonna be a good crowd and a really good program once again. Ralph, I thank you for your time. I appreciate catching up and I look forward to seeing you in beautiful Orlando.

Ralph: Yes, same here, Jon, and practice that pitching wedge.

Jon: I will. Thanks a lot.

Ralph: Okay. You take care.

Jon: For more information on the ELFA convention, please visit the ELFA website, Our podcasts are available on Apple podcasts, Google Play, Stitcher, Tuned In and from our website, If you’d like periodic updates of interest on the equipment financing industry, please join The Alta Groups LinkedIn page and follow us on Twitter @thealtogroupllc. Thanks for listening.