Campbell startup plans to help financial professionals manage their clients’ debt liability

BY DAVID SPEAKMAN
Last year, consumer debt in the United States grew to record levels, passing $8 trillion according to the Federal Reserve Board.
One valley company sees a multibillion dollar opportunity as consumers may be unaware of cost and tax benefits on some debt, and increasingly rely on financial advisers for help.
FinancialCircuit Inc., a Campbell-based financial software company, says it has a tool that could help financial professionals help their clients manage their debt liability.
“Typically the financial industry is focused on helping clients with their assets. But everyone understands that actual net worth is your assets minus your liabilities,” says Adrian Nazari, CEO of FinancialCircuit.
He says his company’s new software product, called MoneyFind, which sells for a $70 monthly subscription, will help clients of banks, insurance companies and accountants cut costs in paying back loans.
MoneyFind can help save money by automatically auditing current loans to see if they are getting the best interest rates and tax breaks. It works by taking advantage of eased federal regulations that allow secure, encrypted sharing of financial data to scour 250 lenders to find the best rates for each loan to be refinanced.
FinancialCircuit, which was founded in 1999, has a hard task ahead of it to convince banks to compare loan costs to their competition rather than go it alone with their own software
“Currently, we don’t put competitor pricing on our Web site,” says Bruce Cornelius, a senior vice president at Countrywide Financial Corp., which has Bay Area branches.
FinancialCircuit’s Nazari says traditionally many consumers do not shop around for the best rates on car loans and certified public accountants have had a hard time explaining to clients why smaller loans should be refinanced.
“We’re very strong in the CPA industry. We found in 1999 that many CPAs want to get into the financial planning business; they want more than just to do your taxes,” Nazari says.
One of those CPA firms is Vavrinek, Trine, Day & Co. LLP (VTD), which bills itself as the 77th-largest accounting firm in the United States.
“We get our biggest face-to-face contact with our clients during tax season and a number of them saw MoneyFind on our Web site and commented on it. There are similar products out there, but this is by far the easiest to use,” says VTD senior partner Don Driftmier from his San Bernadino office.
VTD says it has had MoneyFind on its Web site since November for customers to use if they wish.
“For our regular tax clients in the era of refinancing loans, it takes all of two seconds to figure out what your payment would be with a new loan. If you decide you want to do it, you can go all the way to filling out an application online,” Driftmier says. “There are a lot of things people can use the Internet for and this is probably one of the more practical ones.”

By DAVID SPEAKMAN
Banking consultant examines the repercussions of last year’s far-reaching accounting law
As each week goes by, one of the newest federal laws affecting business continues to raise questions.
Born from the accounting scandals of 2001, Congress passed the far-reaching Sarbanes-Oxley Act (SOA) of 2002 in an attempt to regulate public companies and clean up messy accounting practices of the late 1990s.
In the true entrepreneurial spirit of the Silicon Valley, a group of consulting firms have sprung up to help companies address SOA, including BankVision Inc. of San Jose, which was founded this year and already has 45 clients.
BankVision managing director Chris McCulloch talked with Biz Ink reporter David Speakman about issues he faces with companies grappling with the new law.
When SOA was passed, do you think people were fully aware of its implications?
It is difficult to imagine that people understood the complete ramifications and implications of the Sarbanes-Oxley Act when it was signed into law in July 2002. The Act is so broad reaching that I think most corporate managers are still trying to digest its full impact. The topics addressed by SOA range across the corporate spectrum from governance standards to disclosure procedures.
What are some of the most common SOA issues you are seeing with your clients?
Our clients are financial institutions and, in many respects, they had a head start with respect to SOA. Even before SOA, they were operating in a heavily regulated, control-oriented environment, so SOA was not as traumatic as it might have been otherwise. For most financial institutions, compliance with SOA is really about formalizing and documenting many of the control processes and practices that already existed. In fact, our larger clients (banks with assets over $500 million) have been familiar with annually assessing the effectiveness of their internal control structure under Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) since the early 1990s. Proposed Section 404 of SOA regarding management’s assessment of internal controls looks very similar to FDICIA Section 112.
Ironically, in both cases, these regulations were direct responses to the well-published business challenges of their times. For instance, FDICIA was enacted in response to the savings and loan crisis of the 1980s, while SOA was a reaction to the corporate malfeasance and governance failures two decades later.
While financial institutions may have had a head start, compliance with SOA may be a real challenge for small manufacturing and service businesses that have not traditionally operated in heavily regulated environments.
What is the most important thing you tell companies to do because of this new regulation?
Develop a culture within the organization that fosters control awareness. An awareness of controls and risks will allow the organization to optimize the balance between risk and return. Business decisions can then be made with an understanding of the associated risks and thus minimize the type of corporate governance failures that plagued companies like Enron and WorldCom. This doesn’t mean that an organization should move to eliminate risk, because it would control itself out of business. Rather it should position itself to identify, measure and respond to risks that exist, as well as those that develop, as a function of environmental changes.
Once a general control awareness has been infused in the organization, it becomes a process of documenting the most significant risks, key controls and means by which these controls are periodically evaluated and validated by the organization. Risk-management professionals can help facilitate this process.
What are the benefits of risk management in regard to SOA?
The first has been a general increase in awareness regarding the importance of controls and risk-management processes. Another positive aspect of SOA has been the enhanced communication between senior managers and mid-level managers or supervisors regarding the control environment and financial reporting controls of their organization.
Section 302 of the act requires the written affirmation of the principal executive and financial officer (usually the CEO and CFO) that effective disclosure controls and procedures exist each time a periodic report is filed with the [Securities and Exchange Commission]. Well, these senior mangers are now asking very pointed questions about the control and disclosure procedures of the managers that report to them. This has improved communication between senior managers and mid-level managers regarding the controls and risk management processes of their business.
Have you noticed companies not originally targeted by SOA changing business practices because of it?
SOA was originally designed to address corporate governance responsibilities and transparency in financial reporting and disclosure at public companies. Any company that was an SEC reporter was covered by the act.
However, we have seen private companies take a keen interest in the act. Many of these companies have moved to comply with SOA even though they are not technically covered by it. The feeling is that there may come a day in the not-so-distant future when all companies will be covered by SOA or similar standards. These private companies are oftentimes enhancing their risk-management processes and control expectations in this context.
What ramifications of SOA did you find surprising?
That such sweeping change in U.S. securities laws could be precipitated by a few very large, visible companies such as Enron, WorldCom and Arthur Anderson. Unfortunately, the corporate malfeasance and fraud associated with these companies cast a shadow over the entire corporate world and undermined the public trust between companies and their stakeholders.
While we needed improvements in corporate governance and financial reporting transparency, SOA has been a significant burden for many companies that were already acting as responsible corporate citizens.

BY DAVID SPEAKMAN
Sometimes great things spring from humble origins.
Vendi Software Inc., which is operated out of a home office in Belmont, aims to crack the online ticketing market with its Web site, www.vendini.com.
That’s a market Wall Street analysts estimate is worth more than $10 billion annually in U.S. sales and is dominated by Ticketmaster, a unit of e-commerce powerhouse USA Interactive of New York, which had $4 billion in ticket sales last year.
Vendini is happy to live in Ticketmaster’s shadow by focusing on small community-based or independent theaters and performing arts groups, such as the Berkeley Symphony.
So far, Vendini says the strategy is working. Although founder and CEO Mark Tacchi would not release specific numbers, he claims the company is profitable and growing with 400 customers nationwide since it launched in November 2001.
To make money, Vendini takes a small percentage of each electronic transaction, determining charges on a case-by-case basis. Other ticketing companies take similar custom-set charges from ticket sales, but unlike Vendini, they also charge set-up or administration fees even if no tickets are sold by them.
“We’re not elbowing in. There is a huge opportunity there that Ticketmaster won’t touch. There’s this unspoken threshold where the accounts are too small for Ticketmaster to even consider,” Tacchi says.
Ticketmaster says that’s not really the case, but acknowledges smaller clients are not as profitable as big-name acts or larger arenas.
“It’s just basically our concentration has been with the larger venues,” says Ticketmaster spokeswoman Kandace Simpson from her Los Angeles office. “Don’t get me wrong, we do all size venues, but obviously most of our business comes from larger venues and larger clients.”
Ticketmaster aside, Vendini’s biggest challenge could be from companies such as Paciolan Inc. of Irvine, which does ticketing for the San Francisco Ballet as well as Stanford and San Jose State universities.
Paciolan claims it handles 25 percent of all U.S. ticket sales, putting it neck-and-neck with Concord-based Tickets.com for the No. 2 position in ticketing behind Ticketmaster. Tickets.com did not return calls requesting comment.
“Traditionally, we owned the college athletic market, performing arts, museums and attractions,” says Paciolan spokeswoman Laura Christine.
Privately held Paciolan started 23 years ago as a brick-and-mortar company to provide a full-range of box office staffing for nonprofit sports teams and arts programs.
“We do ticketing — not only Internet, but the back office and phone as well as box office. We do the entire infrastructure to sell your own tickets,” Christine says.
After receiving $20 million in third round venture funding in January, Paciolan has a total VC take of $35 million.
Armed with new IBM servers that allow it to process 100,000 ticket orders per hour, Paciolan says it is ready to capture big arenas and major league sports and take on the industry’s Goliath.
“We compete head to head with Ticketmaster now,” Christine says.
That’s a far cry from Vendini, which is happy to stick with the smaller venues and operates with a staff of fewer than 10. The company started with $4,000 and lots of programming muscle from its founder, a programmer himself, who cut his teeth by founding enterprise software company Hipbone Inc. of San Carlos in 1998.
“What I realized with my last company is VCs want things to move a lot faster. But when you’re building a product and a customer base, sometimes this takes time and it’s hard to show month-to-month progress. The whole VC dog-and-pony show is a big time suck,” Tacchi says.
He also says his company is hell-bent on keeping expenses low, opting to operate out of home offices.
“The most important thing for us is to keep operating costs low. With Tickets.com and Ticketmaster, their cost of operations are higher and it’s reflected in their service fees,” Tacchi says.
Vendini says that a successful ticketing company doesn’t require a branded Internet portal.
“This is the best business to be in. Tickets are consumable; they expire after a few days and people come back to buy more. It’s not like we’re selling computers that can last three to five years,” Tacchi says. “Our next step is we’re going to Canada.”

After two years building up City National Bank’s Palo Alto private banking division as senior vice president and manager, prominent Silicon Valley private banker Jeanette Garretty is leaving.
After almost 25 years in banking, Garretty was convinced to cancel a long-planned sabbatical to join Wells Fargo & Co.’s Private Client Services banking unit in Palo Alto with an offer she says she couldn’t refuse. She will serve as a senior relationship manager and private banker.
Previously, Garretty was a technology economist and private banker with Bank of America in Menlo Park.
“She has extensive industry contacts. Let’s just say we had to increase the capacity on our server to accommodate her Rolodex,” says Mark Bigley, regional private banking manager for client services at Wells Fargo.
Garretty says the fact Wells Fargo is locally based was a factor in her move.
“I really like that Wells Fargo is the No. 1 corporate giver in the Bay Area and is a big believer in the community,” Garretty says. “It’s a wonderful time to build strategy in private banking, It’s been a tough economy, but more and more people are looking forward and that’s what I want to help them do.”