ABL Advisor contributing writer Charlie Perer of SG Credit Partners sits with Executive Vice President, Head of Wells Fargo Commercial Capital, in this continuing series of articles in the ABL Advisor presenting personal insights from ABL industry leaders (as appeared in the ABL Advisor on July 17, 2019).
Charlie Perer: Thank you for your time David. To begin, can you please tell us about your background?
David Marks: I have been fortunate to be a part of Wells Fargo for over 30 years, and have held a variety of roles from Head of International, Corporate Banking and Chief Credit Officer for a number of businesses, and other risk management positions. During my time in banking, I have worked in Minneapolis, Hong Kong, Los Angeles, London, and, now, San Francisco. My first commercial finance role was in 1989 when I joined our factoring business.
Perer: Please describe your leadership style; and has it changed over the years as a younger generation has entered asset-based lending? Something tells me the days of bare knuckle field audits are over.
Marks: I place a premium on candor, respect, and teamwork. I think if you asked those I work most closely with what I’m like, they’d say I was direct, fair, a big fan of thoughtful debate, and likely that I have an irreverent, slightly sarcastic sense of humor. I like to cut through clutter quickly in the spirit of doing what’s right for our customers and for the team.
As far as my leadership style evolving over time, my guess is it has remained largely the same. Beyond keeping me humble, my kids have helped ensure that dad stays relevant and knows how to communicate to our younger team members.
As the leader of this team, I love to see us “win” – because winning resulting from taking care of customers is a lot of fun. It means you’re focused on the right things, and the results confirm the approach is working. The last several years have been challenging for Wells Fargo, but I know it has made us a stronger institution for our stakeholders. I just finished reading the book “Tribe: On Homecoming and Belonging,” by Sebastian Junger. He got it right when he talked about the strength that comes from working together in tough situations. We are a much stronger institution today because we are better listeners for our team and our clients.
Perer: Wells Fargo is the leading middle-market lender in the country. Where does asset-based lending fit in this picture within Wells Fargo and how are you shaping it?
Marks: It is a great question, but I would like to reframe what you asked just a bit. When we put the customer at the center of what we do, we ask ourselves how we serve a client through their lifecycle. Asset-based lending is an important part of our business, and it provides us with significant flexibility to care for our clients as they evolve through periods of rapid growth and even periods of stress.
Perer: As a bank, how does Wells Fargo view asset-based lending, and how has your group evolved over time as asset-based lending becomes more aligned with RCBOs (Regional Commercial Banking Offices)?
Marks: Asset-based lending is core to what we do inside Wells Fargo. It’s great to be the number one book runner in asset-based lending, and it’s great to have the largest factoring platform in the U.S. and globally because they give us scale, and is helpful to retaining and attracting talent. But where we are evolving is to more of a “One Wells Fargo” operating environment in which the RCBOs and the Commercial Capital businesses work side-by-side delivering the asset-based lending solutions, integrated along with the client’s other financial services needs.
Perer: What is your middle-market strategy, and do you think the middle market is underserved from an asset-based lending product perspective?
Marks: We have the same vision for all of our customers at Wells Fargo: to help them succeed financially. This is why we are product-agnostic between cash flow revolvers or asset-based loans for us when there is a choice for the client. There is no question the world is not short of asset-based lenders. It is difficult to imagine there is not more than one for every company that has the need. But where the market is significantly underserved is delivering that asset-based loan along with an equipment lease, supply chain options and trade services. What the market doesn’t have are many firms that can deliver multiple forms of financing in tandem. That is a powerful and differentiated offering.
Perer: What led to the realization that Wells Fargo needed to create a middle-market asset-based lending group headed by Kevin Gillespie? How did you go about forming the group once you realized there was a need?
Marks: We have always been in the middle-market asset-based lending space. But we wanted to enhance our focus, connect better with our Commercial Banking partners, and really be prepared for the next cycle when more Wells Fargo clients might need to transition to different forms of financing. Kevin and Mike Marcolina, who leads sales, are talented leaders and are off to a strong start. I am pleased with the enthusiasm I have seen and the new clients we have on-boarded in a short time.
Perer: The group has now been around for a year. What are the lessons learned and would you say the biggest challenge is internally versus externally?
Marks: I think the biggest challenge is sometimes the greatest opportunity. The best outcome for the customer is a seamless transition from a cash flow or unsecured financing to an asset-based loan. It requires internal coordination, strong communication up front, and a different way to think about technology than in the past. What has really changed is how teams collaborate differently and are selfless in working together. It is awesome to see the change.
Perer: Is today’s market environment the most competitive you have ever seen, given that we are at the tail end of an economic cycle?
Marks: If you ask anyone if they thought any year seemed easy at that time…it never does! It always seems like the prior years are easier than the current ones. That said, we are in the longest economic recovery ever, with a benign interest rate environment. What we are all seeing is end of the cycle behavior in the market. Who doesn’t wish they had a crystal ball to know when the cycle changes? I can’t find mine, unfortunately.
Perer: Has the sophistication and fundamental job changed/evolved as nonbank and alternative credit funds have entered the field and looked to partner with asset-based lenders?
Marks: At its foundation is a relationship with a client based on leveraging their company’s available assets. I can’t see that ever changing. Nonbanks, business development companies, and credit funds that provide asset-based loans have a role to play in this market. Many of the leaders of those funds started on our platform, and they are clients and partners of Wells Fargo today. The one thing it makes all of us do is move faster for the client. And that is a good thing.
Perer: Your prior roles seem to have put you on the forefront of technology within banking. How has technology changed the asset-based lending industry, and how does Wells Fargo think about implementing technology to stay ahead of the curve?
Marks: I am excited about how we are using technology and business process mapping in our businesses. Over the next several years, I think we will be using technology as an advantage to add new clients and better-serve our existing ones. We are already using the iPhone for field exams in one of our businesses today; compared with a “brick” the examiner needed to plug in at the hotel after her day was over. In early 2020, another business of ours will be rolling out the ability for customers to use smartphones and tablets to pass credit applications to us that will be auto-decisioned. This will help our clients close more sales and generate assets that we can lend against or purchase. Digitizing the customer experience will change the game.
Perer: Lastly, tell us something you are worried about that the rest of the market has yet to figure out.
Marks: The market is efficient, and I am not a worrier by nature. What I will say is that there is a fight for talent. The institutions that can retain experienced talent that have lived through cycles will be the employers of choice for the next generation, and will also win at diversity and inclusion – making everyone else worry.