Being Mobile

The United States is one of the most mobile countries in the world; we move around a lot. America’s interstate highway system transformed our country. Our economy greatly benefited by the ease with which goods could be moved from one part of this vast country to another. More than just moving goods, we also enjoy the freedom of driving our cars and going places. There is so much to see and being mobile has allowed us to do that.


Being Mobile


Now we are on the verge of a new mobile evolution. The ability to comparison shop, find deals, and make purchases digitally has been around for a while. Doing all that on smaller screen mobile devices (e.g., smartphones and tablets) is taking this further and becoming more mainstream. A report was issued earlier this month that noted that 25% of people who do their banking digitally now do it exclusively on mobile devices. Another report noted that one in five people no longer carry cash, and that 46% of consumers rarely use cash for purchases. That is a significant change from just five years ago.

I wonder how this will impact our banking and purchasing behavior in the next five years. The youngest of the “Millennial Generation” will be seniors in high school this coming school year. So in five years all millennials will be in the workforce, or really close to it. You can bet this tech-savvy generation will continue to influence digital and mobile banking and commerce.

This evolution will not be complete until some of the most serious concerns, chief among them being security, are resolved. Financial institutions and financial technology companies (FinTechs) are diligently working on this every day. Single-click solutions and user ease are making mobile activity more attractive, as long as we have comfort that our information is secure.

Yet one other great challenge exists. We, as consumers, hate fees associated with our transactions. We pay them when we must, but any additional overt fee is a deterrent to making mobile purchases. Fees must be embedded because if we see an add-on fee, we will find another way to make the transaction.

This brings us back to you—public entities, higher education institutions, and not-for-profit organizations. Most recognize it is expensive to absorb fees if the constituents are not assessed a fee. Are there not ways other than using the now common “convenience fee,” which only keeps the clear majority of constituents from making payments electronically? The answer is “Yes,” and we will discuss these in another blog.

Know this: if you want to overcome the inefficiencies associated with accepting cash, checks, and in-person payments, then you need to look at alternatives.

See Us At These Upcoming Events and Conferences:
Ohio GFOA – September
GFOA SC – October
PA GFOA – October

Who’s On First?

Who’s On First? In the world of finance, that can be confusing for a public entity. Whether it is in the raising or the investing of money for operating and/or capital purposes, knowing who can best help and serve the interests of public institutions can be very perplexing.

Who's On First?

I have five simple rules of how to determine who should do what:

1.) Transparency of roles and fees. It needs to be straightforward and easy to see on paper and to repeat in front of the entity’s board.

2.) Separation of who does what. If one firm provides multiple services to your entity, i.e., banking, brokerage, RIA, consulting, etc., you should require a written agreement of confidentiality between the firms’ different department silos.

3.) Keep fee structures simple. You should “quadruple check” all fees. Closely examine how firms charge for the services they provide. If they serve more than one role, separate out “all” fees and negotiate them (especially if multiple fees apply).

4.) One firm should not necessarily be all things to all entities. By separating functions, you may find choosing multiple firms—based on each one’s specialty—will give you the best results.

5.) Most important of all: Make sure the services provided to your entity are tailored to your specific institution. Never accept cookie-cutter approaches or solutions.

At three+one we only perform cash flow and liquidity analyses. We are not a bank, a Financial Advisor,(FA), or Register Investment Advisor (RIA). Our analysis and data are agnostic, pure, and independent.

The national marketplace offers wonderful banks, financial consultants, and RIAs. You may require one or more firms to best serve your needs. Determining who does what requires homework that will raise questions that must be asked. You need answers that are direct, easy to explain to others within your organization, and fees that are transparent and appropriate.

If you apply these five simple tips, you’ll know who can best serve your needs.

Top Ten Trends Changing the Face of Higher Ed

Top Ten Trends Changing the Face of Higher Ed

Within the past month I attended a university board meeting as a Trustee as well as the New York State Community College Business Officers Association meeting. Whether a two-year, four-year, private or public institution, there are some changing trends that are underway that will change the face and financial well-being of a higher Ed institution over the next several years.

The top ten change agents I see developing are as follows:

  1. The demographics of college students are changing. The two largest areas of growth are (a) the first student in a family to attend college and (b) students who are 25 years old and up.

  2. High school students are fewer and declining in number, creating a more competitive marketplace for colleges and universities to attract and retain students.

  3. Health issues are increasing among a greater number of students, requiring the allocation of more resources for their physical and mental health needs.

  4. Alternative methods of teaching will continue to develop with advanced technology. Though online demand will continue to grow, it will not replace the on-campus experience for undergraduates.

  5. Financial considerations will encourage collaboration between institutions and may lead to an increase in mergers.

  6. Four-year institutions will continue to need community colleges as a feeder for its enrollment needs. However, community colleges should coordinate and offer   courses that might not be available at certain times for undergrads at four year institutions to meet necessary requirements.

  7. Institutions will start enticing students at a younger age, even as early as their freshman year of high school.

  8. Given the growth of technology, new types of degrees will need to be developed and offered to meet the growing needs of for-profit and non-profit employers.

  9. Financial strains will lead to some hard choices by college administrators and faculties around the type of degrees or professional development assistance that should be offered.

  10. All departments/schools in college and universities will start to be considered their own “line of business” with a need to justify their bottom line and course offerings.

The environment for higher Ed is challenging, but it is also very exciting.  Personally I believe that one of the largest markets for higher Ed to pursue is the baby boomer sector, those between the ages of 50 to 75.  This group is not looking to retire, but rather is seeking second careers in areas they are passionate about. Earlier on, when they entered the workforce back in the ’70s and ’80s, circumstances did not allow them to do this. They now have the money to spend for on-campus life and online experiences without creating any stress on these institutions for discounts, scholarships, or student loans. In addition, these seniors can serve as great mentors for younger students who require greater support—and can also lead the way for planned giving to their institutions of choice.

Yes, the face of higher Ed is changing, but there are growth opportunities for those institutions that embrace the changing demographics and business-like practices that make a difference.

What Should You Be Budgeting for Interest Income in 2018?

The answer to this question should be a minimum of 1.50%—and that’s a conservative estimate.

The Federal Reserve will continue on their path of raising short-term interest rates. At the end of last year, I predicted two rate increases totaling 50 basis points (.50%), which could be an underestimate. All indicators point to at least one-to-three more rate hikes this year and a further two-to-four rate increases of 25 basis points (.25%) each in 2018. That would boost short-term rates by 1.50% to 2.00%.

Such a rise will have implications on lending as well as what you should plan to budget on your operating and non-operating cash.

What Should You Be Budgeting for Interest Income in 2018?

The days of cash not having value are over. Cash is an asset that can add significant income to your 2018 bottom line.

On each $1 million you hold in cash you should be able to earn at least $15,000 or more over a 12-month period.

So what can you expect in 2018:

1. Some of the large banking institutions (those over $50 billion in assets) might start showing an interest in gathering public deposits. Their rates will still lag behind those of the government and corporate bond markets and will vary on whether or not to pass on the FDIC coverage costs to the entity. Though banks will not be quick in delivering the full rate increases, if you stay in close communication with your bankers they will work on your behalf to increase your deposit rates.

2. At the time this blog was published, June 6th, a one-month Treasury was yielding .88% while a one-year Treasury was hovering at 1.15%. These rates are building in a June rate hike of .25%. If there is at least four .25% rate hikes over the next 18 months, you will see one-month and one-year Treasuries in the range of 1.50% to 2.00%.

3. With proper cash flow and liquidity forecasting, as recommended at last month’s National Government Finance Officers Association (GFOA) Conference in Denver, the ability to capture the value of the Feds can be immediate, provided you are proactive.

4. Your bank’s ECR (Earning Credit Rates) should approach over 1.0% in 2018, meaning fewer dollars will be needed to cover banking fees. As in point 3 above, you need to communicate with your banks and proactively pursue better rates, even if you had a committed rate through a banking RFP.

5. Put a time horizon on your cash and know what the marketplace value is for your cash, including time deposits, state pools, bank CDs, Treasuries, government bonds and—where permitted by investment policy and required legal guidelines—money market funds, high investment grade commercial paper, and corporate bonds.

You have an opportunity to make your cash a significant differential to your 2018 budget.

If you need some guidance going forward, three+one can help. We are the leading independent liquidity analysis firm in the country. We put the interests of public entities and higher Ed institutions first. Call us and we can help you put a time horizon on your funds and a marketplace value that you can apply in developing your 2018 budget.

We’re only a phone call away.

See Us At These Upcoming Events and Conferences:
Ohio GFOA – September
GFOA SC – October
PA GFOA – October