Finding Opportunity In Chaos

Mark Steffe was ready to take the leap. After serving in leadership roles at TIAA (previously TIAA-CREF) and UBS Financial Services (formerly PaineWebber), he finally got to run his own show when he was promoted to president and CEO of First Command Financial Services Inc.

That was the good news.

The bad news was he took the reins on January 1, 2020. On March 13 of that year, he sent the Fort Worth-based company’s staff to work remotely because of fast-spreading COVID-19.

“That one day called our entire business model into question,” Steffe says.

Founded in 1958 as the United Services Planning Association, First Command supplies financial planning and coaching to 293,000 military families through 173 offices worldwide, most situated near military installations.

As COVID-19 took hold, one of the company’s biggest issues was that its advisers, who provide the planning and coaching, worked primarily face-to-face with clients they were helping with investments, insurance, and banking. (The company offers those products and services through subsidiaries such as First Command Bank.)

One of the primary ways Steffe and company addressed this problem was through technology, something that today has helped position the business to grow in a post-pandemic world.

With uncertainty now hanging over US and global economies, Steffe’s team is finding new revenue sources in areas where First Command already does business.

During the pandemic and beyond, Steffe displayed the hallmark of military leadership: guiding people through their darkest hour. Yet he is the first CEO in the company’s history who did not serve in the armed forces. Like many of his generation, he learned about leading group efforts through avenues such as playing sports.

Steffe grew up in Colona, Illinois, a community of 5,000 near the larger Quad Cities metro area that straddles the Illinois-Iowa border. The son of a mechanic and a secretary, he played football and basketball in high school and was recruited by several smaller Division III colleges.

Since a career as a professional athlete seemed unlikely, Steffe opted for the University of Illinois at Urbana-Champaign where he earned a bachelor’s degree in finance, with honors, in 1991. He holds Series 7, 8, 23, 63, and 65 securities registrations and completed the Harvard University Advanced Management Program in 2015.

Prior to joining First Command in 2010, Steffe spent much of his financial services career in wealth management. His clients included high-net-worth individuals, who Forbes defines as “people or households who own liquid assets valued between $1 million and $5 million,” and ultra-high-net-worth people, who the magazine classifies as owning more than $30 million in liquid assets.

“I used to joke when I was first coming in (that) in my prior career, for instance at UBS, it was a lot of fun and rewarding helping wealthy people become wealthier,” Steffe says. “But we weren’t changing lives. They were already wealthy when we began working with them.”

Going to a company that serves military families “was a dramatic switch,” he says.

Military Families’ Money Issues

First Command was founded by Lt. Col. Carroll Payne, a B-29 aircraft commander who saw 24 crew members die in World War II. Payne, who had to inform their next of kin, learned that the men’s families often suffered financially from the losses of their loved ones.

After the war, when Payne was stationed at Eglin Air Force Base in the Florida Panhandle, he watched as military retirees, their pensions damaged by high inflation, ate and drank on credit at the officer’s club.

Payne launched United Services Planning Association in 1958 to help military families adopt habits that breed financial security, such as saving money consistently, buying life insurance, and investing prudently. The company renamed itself First Command in 2001.

While the company’s efforts have produced many success stories, money problems still plague service personnel and their families today, just as in Carroll Payne’s time. A number of service members, particularly junior enlisted personnel, have less-than-ideal credit scores, Steffe says. They can wind up with escalating credit card debt, which gets worse when one makes only the minimum monthly payments on it.

“I once had a former military person say to me that outside every Army post is an Army town,” Steffe says. “He meant that there are used car dealerships, check-cashing places, tattoo parlors, you name it. It’s just one money trap after another.”

Mission Drives Decisions

Helping military families improve their finances is more than words on a piece of paper for First Command, Steffe says. It informs almost everything about the business.

“When your clients are your central focus and top priority, it makes a lot of other decisions a whole lot easier,” he says.

First Command’s approach starts with its workforce.

“Whether you’re in the field as an adviser or in the home office as an employee, our people are completely bought in to that mission,” Steffe says. “We’ve seen this through employee engagement surveys and in discussions we have with employees and advisers.”

Texas CEO Magazine caught up with Steffe to discuss topics such as the impact his sports career made on him, why he believes organizations should not make money-related goals their top priorities, and how First Command turned COVID-19’s lemons into lemonade.

What did you learn from playing basketball and football in high school?

What matters is how the team works together and if you win the game. It doesn’t matter who had the most points or who gets the most credit.

In different times when I was younger or older on the team, sometimes you’re the leader, sometimes you’re not. Being able to not only be an effective leader, but also being able to be effectively led, are two critical components. Can you be someone others would want on your team and know that you’re going to play your part?

You have coached various youth sports. What did it teach you about managing adults?

I have three children from my first marriage and two stepsons from my second marriage. Coincidentally, I was able to coach all the kids throughout their Little League careers even before my current wife and I got married. I coached softball, baseball, Little League football, and both boys’ and girls’ basketball at different times.

I still carry this forward in business, even from something as simple as youth sports: It’s not enough to tell people what to do. I could tell them, “Drive the basketball this way,” or “Run the play this way.” We were clear to the kids why we were doing something a certain way. They understood the reasoning behind it, and it helped them think, not just memorize and react.

When the oldest of the five kids, my son Jack, was playing youth baseball, he was a pretty decent pitcher. But inevitably in any game, there might be a period where he’s having a tough time finding the strike zone. Inevitably there is a parent or group of parents who, in order to be helpful, would start screaming, “Hey Jack, throw strikes.” If he’s not throwing strikes, it’s not because he doesn’t have a desire to do it. It’s because his mechanics are off. What he needs is the coach in the dugout to call timeout, walk out, and help him adjust his mechanics.

That’s a critical lesson for leaders in any organization. If you have people who aren’t performing to their fullest, don’t just tell them to do better; roll up your sleeves and work with them to help them understand how to do better.

Over roughly the first 18 years of your career, you worked at large companies like UBS. Why did you leave that world for First Command?

I’d worked mostly on the wealth management side with high-net-worth and ultra-high-net-worth clients, where financial planning and insurance weren’t a huge focus. The investment piece was the majority focus. At First Command, there was more of a focus on what we would call the three elements of a financial plan: the investment piece, the insurance piece, and the banking piece, in addition to estate planning work that tends to come along as well.

With service members and their families, and I don’t mean this to be taken lightly, we can change not just their financial lives, but also change their lives—period. If we can help them exhibit the right financial behaviors over 10, 20, 30 years, we can get them into a position that they probably never thought they’d be in, in terms of having the right amount of insurance, a healthy savings account, and an investment portfolio.

Why has First Command lasted nearly 65 years?

Two things.

The first is the legacy of our founder, Carroll Payne. Chip Payne, Carroll’s son, is still on our board of directors today and has been for about 40 years. I’ve said to Chip several times that I would like to think if Carroll were alive today and he looked at the way we serve the military, he would feel proud that his legacy is alive and well.

The second thing is our focus on this niche market. Eighty percent of our advisers are former military or military spouses, and a large percentage of our home office employees are too. We understand the needs that military families have around basic financial planning, investments, and insurance knowledge. Most of us get that at some point in our lives, but many military families don’t.

We understand the unique challenges that military families face with deployments and permanent changes of station (PCS), meaning they move every two to three years. It’s understanding those challenges, and all the benefits, which are complex, and being able to factor those things into a financial plan that helps us set these military families up for success.

When that inevitable move or PCS comes along, we transfer that plan to a local adviser at the new duty station so that in-person coaching and accountability can stay as high as possible.

Why do you believe growing revenue and profit should not be a company’s primary goals?

We can’t survive if we don’t drive revenue higher and if we’re not profitable. A lot of companies make that the input, like, “How do you drive revenue?” To us, that’s more of an outcome.

Our belief is the better job we do taking care of military families, and the more military families we can take care of, that will drive revenue higher and make us more profitable. We are careful never to reverse those two things.

What are lessons for other companies from when you helped steer First Command through the pandemic?

We worked hard as a leadership team to balance two critical elements.

One is dealing with the here and now of the crisis you’re in. If you think back since March 2020, every several months, or at least once a year, we’ve come across another crisis. We had to keep people engaged. We had to help people understand where we were, what our next steps were, why we were taking those next steps, and bring our field force (of advisers) and home office employees along with us. We wanted to be predictable. If people said, “I knew that was the decision you were going to make,” we took that as a compliment.

The other thing we had to balance was to never take our eyes off the ball of our strategic plan or our three- or five-year plan. That’s been a constant balance for us to continue to advance the ball forward so we’re not putting ourselves behind our one-, three-, five-year business plan. We’re making progress on that as well.

You need a team of people who are talented in their roles and willing to speak up, voice their opinions, and get comfortable with what we call constructive conflict—to put an issue on the table and do our best to effectively debate it, never let that debate become personal, and do our best to lead to the best decisions and outcomes we possibly could.

The mission of First Command has helped draw talented people to the company, especially to our leadership team. It was through that partnership that we’ve done a good job of both leading through the crises and moving our five-year plan forward. I can’t say there are no decisions we would do over again if we had the chance, but there are very few of those.

What lasting changes did the pandemic bring
to First Command?

The lasting changes were around the acceleration of technology.

We accelerated our straight-through processing efforts (which means doing transactions in an automated way without manual work). We accelerated our DocuSign e-Signature capabilities. We embraced the technology.

What we’ve been able to do throughout the organization, whether it’s training programs, client interactions, or team leadership meetings, is find a good balance between those things that should be done in person and those that should be done remotely.

How are you getting the company through the storm afflicting financial services?

What we’ve done is what initially most companies do when times get tough: We take expenses and remove as much as we can without harming the business or its future. We’ve implemented what our chief financial officer calls a “hiring gauntlet,” which is not a hiring freeze. Every new position and every backfill of a position has to come through the executive team so we can keep a close eye on what headcount we have, where we’re growing headcount, and where we need to grow headcount—but do it in a precise way to ensure we’re containing those costs as much as
we can.

Beyond cost-cutting and looking at headcount, we said, “Where are additional revenue opportunities?” In good times, we run as hard and as fast as we can. We’re trying to serve more families, grow the revenue, and drive more profitability. In tough times, you almost get the luxury of saying, “Where are opportunities within the businesses that we have that we’re not fully capitalizing?”

Through the team’s help, we’ve identified 10 or 12 different opportunities to do that. As part of this, we have found additional revenue opportunities in businesses we’re already in. The bank is ripe with opportunities.

During COVID, we became a Paycheck Protection Program lender and did several million dollars’ worth of loans to small-business owners to help them. We had to be approved by the US Small Business Administration to become a lender, and we’re identifying other opportunities in the SBA world where we can better serve, or more thoroughly serve, our clients.

Do you have any plans to sell First Command or take it public?

No, we don’t. We are happy to be an employee-owned company (through an employee stock ownership plan). That provides us with flexibility that you don’t necessarily get as a publicly traded company. It allows us to be patient.

It’s been particularly valuable through these last three years, especially when things have gotten volatile. It gave us the luxury of managing through the here-and-now crisis, but also staying focused on the longer-term strategic plan, the three-year plan, the five-year plan. We did not have to drive ourselves to this quarter’s earnings.

I do not know that we would have had the exact same opportunity if we were a publicly traded company.