The opinions expressed in this article are those of the author and not necessarily of the American Land Title Association®. Portions of the text have been extrapolated from the book, "TechnoTitle 2020: FutureFocus on the Settlement Service Industry" (copyright ? 1998 by Karen E. Koogler).
Unless you’ve been visiting a foreign country or hiding under a barrel, you’ve probably noticed that the title insurance industry - - make that the entire settlement service industry - - is in a state of flux. McSettlements of yesterday are rapidly giving way to just-for-you mass-customized buffets, where consumers can select from a vast array of settlement service choices, partaking of only those they need, want, desire and are willing to pay for.
For a "multi-cultural" industry (real estate, lending, title, settlement/escrow) which has been likened to a sleeping dinosaur by outsiders, much of the changes occurring within the industry have been met with a resentful and resistant roar. "It’s technology’s fault," goes the common cry. "If it weren’t for technology, things would be the same." Not so. As everyone’s attention is turned in the direction of what some refer to as the technological revolution - - with industry professionals concentrating on gigabytes and electronic commerce - - there has been another massive change underfoot. The generational evolution. That’s right. Not only have processes changed. People, too, have changed. The collective customer of industry professionals today is no longer of the Mature/Senior variety. The dominant purchasing power for the 21st century are Baby Boomers, in the process of purchasing second homes, vacation homes and, for a lucky few, retirement homes; followed closely by Gen-X’ers.
The last statement is an important one in two respects. First, the reference to the generational shift in purchasing power. Until now, the settlement service industry has been serving the same customers for more than three decades, complacent in their understanding of what made such customers "tick." Second, the reference to the collective customer. In the past, most sub-settlement industries (title, settlement/escrow, appraisal, survey) have served transaction middlemen (real estate salespeople, lenders, builders) rather than those who actually pay for their services and products. Consumers. Fortunately, there is promise that future purchasing decisions will be made not by middlemen seeking to line their pockets with illegal referral fees, but by consumers themselves. This can be attributed to two main factors: (1) the demand by Boomers and X’ers for information which will place them in control of their own purchasing decisions; and (2) the advent of technology which provides the vehicle by which industry professionals can (and will) provide such information.
We need only look to the past commoditization of industry services and products - - coupled with the main traits of the Mature/Senior generation - - to see how transaction middlemen first came into power. When price, service and product became nearly indistinguishable from provider to provider, such providers looked for a tie-breaker - - something or someone to tilt marketshare in their favor. After competing on price, where "it" couldn’t be done any cheaper; then on service, where "it" couldn’t be done any faster; then on product, where "it" was virtually the same contract or loan package or title policy or appraisal or survey or pest inspection as that of the nearest competitor - - it’s no wonder settlement service providers were looking for something or someone to help them stand out from the crowd. That something was controlled business and someone were transaction middlemen who were in the enviable position of being first to meet-and-greet consumers. Middlemen who - - thanks to the dominant traits of the prior generation (high conformity, high trust, and respectful of authority and expert advice) - - were easily able to easily lead consumers in the direction of the highest bidder. Give me a trip and I’ll give you my next deal. Give me a computer and I’ll send the next loan your way. Give me free printing and I’ll promise you all future business. "What’s in it for me," quickly replaced "what is best for the consumer" in the thought-process of far too many industry professionals.
Enter Boomers and X’ers whose dominant traits include high non-conformity, low or no level of trust and low or no respect for authority and expert advice. These are not people to be taken lightly. They are the current dominant purchasing power in America (make that the world) and will remain so for the next two to three decades. These people - - our collective customers - - want what they want, when and how and where they want it, at a price they are willing to pay. They do not want hype. They are tired of empty promises. They are sick of slick sales pitches. And they can spot a phony a mile off. Their message to Corporate America is clear. They are not a generation to be trifled with or cast aside in favor of business-as-usual. McSettlements of the one-size-fits-all variety are not for them. They demand our respect - - of their time and intelligence and their right to choose. They, like their predecessors are looking for faster-better-cheaper and they are not averse to packaged services; however, they are averse to controlled business of old. They are willing to consider packaged services provided through affiliated business arrangements (strategic alliances) whereby the savings derived from the relationship are passed through to them, as consumers.
There is a subtle, but marked, difference, between controlled business and affiliated business relationships. Yesterday, Mature/Seniors allowed themselves to be told what service providers to use and which products to purchase, making the transactional relationship heavily one-sided, in favor of the person making the referral. Today (and tomorrow), Boomers/X’ers demand freedom of choice and will likely choose, not between individual service providers and products but, rather, among various packaged services offered through affiliated providers - - and the deciding factor will likely be based upon the ability of providers to serve the relationship which will be weighed heavily in favor of consumers.
Kickbacks: Trouble Ahead
In the recent past, the National Association of Realtors has attempted to convince HUD that consumers want Realtors to take charge of the transaction while the lending community has tried to convince HUD that consumers want lenders in charge - - hence the interest in the ill-advised lender pay provision under current consideration. Should it pass, lenders would be exempted from RESPA Section 8, thereby allowing them to beat down the prices of other industry professionals; pocket part of the profit re same, rather than passing it on to consumers; and enable them to require use without providing disclosure. Anyone with a modicum of common sense can see that such exemption will quickly stretch beyond "legalized kickbacks" into illegal kickbacks of gargantuan proportions, the like of which the settlement service industry has never before seen. Perhaps HUD should have considered the 1997 Gallup Poll on Honesty and Ethics in business practices, where consumers ranked Realtors, lenders and other industry professionals embarrassingly low on the ethical totem pole. Or perhaps HUD should have asked themselves the question, "Have lenders done right by consumers in the past?" To which the answer is a resounding "No." We need only look to the following to substantiate the answer: (1) lender-hoarded excess escrow deposits which proved as beneficial to lenders as they did detrimental to consumers; (2) the sweetheart deal between lenders and mortgage brokers where lenders paid higher commissions and bonuses to mortgage brokers who were willing to sell consumers higher-cost loans than what they could otherwise qualify for; (3) and the fact (which any closing agent or escrow officer can attest to) that lenders have consistently not done their job in explaining loan terms and disclosing related costs to consumers at the inception of the loan, preferring instead to say as little as possible and allow the chips to fall where they may - - at the closing table.
Frankly, consumers are more than a little annoyed with Corporate America, government inaction and business-as-usual. They are tired of being sold second rate services at inflated prices. They are sickened by the bevy of slick sales pitches and empty promises. They are looking for answers. They are looking to build life-long relationships with service providers they can trust. Relationships such as those they have built with family doctors, dentists, financial advisors and attorneys. Relationships they can count on with people they can trust. To paraphrase the 1992 presidential election . . . "it’s the relationship, stupid."
Government can continue to look the other way as controlled business providers and middlemen continue to sell consumers short in favor of lining their own pockets. Or government can get out of the way and let the ethical majority of the settlement service industry take over and weed out the bad seed that long ago took root and nearly destroyed the confidence consumers once had in the honesty and ethics of industry professionals. The relationship with consumers (the collective customer) is not dead. It is, however, nearly mortally wounded. And it will take much effort on the part of all settlement service providers to resuscitate it and rebuild the level of trust once enjoyed by the industry.
Which brings us to the FutureFocus of the settlement service industry, where the following predictions will come to pass. Count on it. Plan for it.
?Consumers as kings whereby freedom of choice and the right to choose are respected.
?Packaged services at reasonable prices, with savings passed on to consumers.
?Establishment of an industry identity (brand) by the title insurance industry, based upon consumer advocacy. Eventual inclusion of other industry professionals (real estate, lending, etc.) who choose to take the ethical highroad in the transaction by honoring the relationship between the settlement service industry and consumers, as collective customers.
?Harnessing the power of technology and the establishment of consumer-friendly on-line malls and neighborhood kiosks for electronic shopping of homes, loans, and related settlement services and products.
?Strategic alliances between settlement service providers based upon like minds and like values where "consumer satisfaction" is the overarching goal in the development of faster-better-cheaper services and products.
?Elimination of RESPA regulations and government involvement in industry practices, in favor of industry-wide self-regulation with the establishment of bipartisan ethics and enforcement boards, promising swift and decisive action against the unethical minority.
?Industry evolution from one-size-fits-all McSettlements to just-for-you mass-customized services and products.
?Pay-per-service fee structures placing financial control of the transaction in the hands of consumers who will order only those services and products for which they are willing to pay.
?Collaboration between small businesses (collaborating with competitors in the AM and competing with them in the PM) to enable "micros" to compete with "megas" on a level playing field. Collaboration in the sharing of resources - - financial, human and physical - - as well as in support of consumers through the establishment and dissemination of "Know Your Rights" quantifiable and qualifiable industry information designed to serve the relationship and protect consumers.
?Electronic commerce to evolve beyond its current form of glorified e-mail.
?Mergers and acquisitions resulting in a handful of big players in all areas of the settlement service industry - - real estate, finance and title insurance. Simultaneous expansion of smaller niche markets served by companies dedicated to personal service. Virtual elimination of mid-sized businesses (similar to the extinction of middle management). Such mid-sized companies will either merge to form mega organizations or will break apart into smaller niche entities.
?Proliferation of more informal business structures - - i.e., joint ventures in lieu of formal partnerships; strategic alliances between stand-alone entities in lieu of mergers and acquisitions.
?Telecommuting, video-conferencing and other electronic support systems which will place industry professionals in front of consumers in new and innovative ways.
?Services and products based upon consumers’ needs, wants, desires and expectations. When, where and how they want "it" and at a price they are willing to pay.
Finally, thanks to the generational evolution applying not only to consumers, but to society as a whole, we will see great strides made within the workplace - - as Boomers and X’ers, followed by Echo’s, bring their dominant generational traits of non-conformity and no (or low) level of trust and respect for authority to bear on workplace issues. Organizations will flatten, hierarchies will crumble, position power will give way to people power and leaders will learn to serve their constituents with credibility. Mission, vision, values, goals and strategic direction will no longer be relegated to book learning and theory, but will become part of the fabric of organizations which recognize the value of the relationship. People will become as important as processes and workers will be viewed as assets rather than liabilities. Principles (integrity, honesty, fairness, equity, compassion) will become as important as profits - - perhaps more so, as companies discover that when you pay attention to people and principles, processes and profits are natural byproducts.
Your success (or lack of it) with respect to Customer Service for the 21st Century will be dependent upon your willingness and ability to foster strong relationships with your constituents - - from consumers of your products and services to coworkers, collaboration partners, and other customers. Serve the relationship well (do right by people) and the relationship will serve you well in return. It’s that simple.
A nationally prominent speaker, the author heads The Koogler Group, based in Largo, FL. She also has written, TechnoTitle 20/20: Future Focus of the Settlement Service Industry, and a series of job skills training textbooks including Closing Concepts, Title Basics and Liability 101. She will present two continuing education courses during the ALTA® Technology Forum & Expo to be held February 7-9, 1999, Orlando, FL: Customer Service for the 21st Century and Fraud, Forgery and Embezzlement.
In order to receive CE credit for these courses in Orlando, attendees must sign in for every hour of the session concerned. At this writing, insurance departments in the following states have approved credits for the sessions as follows (the first number shown is for the fraud session, the second for the customer service session):
Florida (5-5), Indiana (4-4), Kansas (4-4), Nebraska (4-4), New Jersey (5-5), Oklahoma (4-2), Texas (4-4), Utah (4-4), Virginia (4-4), Wyoming (4-4).
During the upcoming ALTA® Forum/Expo, she will introduce her latest book, Walking in Integrity: Fostering Relationships and Leading Change in the Marketplace and Workplace (and That Place You Call Home). Additional information on her books, courses, consulting and seminars is available by telephone (727-391-6848) or fax (727-393-0324).