Podcast: Speaking of Quality: Wealth Management Insights with Hank Smith
Season 3 Episode 7 Title: Leadership and Legacy: Upholding America’s Founding Civic Values Today

Episode Transcript:

00:05 Maxine Cuffe
You’re listening to Speaking of Quality: Wealth Management Insights with Hank Smith, a podcast by the Haverford Trust Company. On Speaking of Quality, Hank chats with authors, influencers and wealth management experts to bring a sense of clarity and calm to the complexity and stress of personal finance. And now, here’s your host, Hank Smith.

00:26 Hank Smith 
Hello, and welcome to another episode of Speaking of Quality: Wealth Management Insights. I’m your host, Hank Smith, Director and Head of Investment Strategy at The Haverford Trust Company. On this podcast, we explore topics ranging from quality investment, retirement resilience, stock market trends, estate planning, small business ownership, behavioral psychology, and more.

On today’s episode, I’m interviewing Jeff McFadden, CEO of the award-winning Union League of Philadelphia, a 501(c)(7) social club. Jeff joined the Union League in 1998 when he was just 29 years old. Sorry, Jeff, to give away your current age. The club has seen tremendous growth under his leadership and has been awarded the Top City Club in six out of the last twelve years.

Jeff, thanks for joining me today.

1:22 Jeff McFadden
Thanks, Hank. I appreciate you having me.

1:24 Hank Smith
Many of our listeners in the Philadelphia area are very familiar with the Union League and I guess that quite a few of them are members, but for those who are not and are not from this area, can you give us a little bit of history on the Union League?

1:38 Jeff McFadden
The Union League is a remarkable institution. It was founded in 1862 with three main purposes. That was to support President Abraham Lincoln, keep this young country together – there was some thought that if the country split apart into the Confederate States and the United States that the French, Spanish, or English would’ve conquered both in the prevailing years – and finally, the Union League had the great ambition of ending slavery.

It was a group of Philadelphians who believed strongly in this young democracy that was, at that time, barely 80 years old. It was brave of them to start the Union League because Philadelphia, believe it or not, was a southern-sympathizing leaning town. It had a big connection to the cotton industry through the textile industry along both the Schuylkill River and Delaware River. The elite wealthy of Philadelphia were really tied to the cotton trade. Whether their hearts or heads were in one place, their pocketbook and economics were in another. The men and women who supported the Union League in 1862 were incredibly brave souls to start the Union League.

2:58 Hank Smith
Now there are other union leagues in big cities around the country. Are they related to the Union League of Philadelphia in any way?

3:05 Jeff McFadden
Great question, they certainly are related. We were the first union league, so we’re considered the grandfather of all union leagues. At the end of the Civil War, there were 226 union leagues across major cities in the north, places like Erie, Pennsylvania, Brooklyn, New York, Boston, Massachusetts. There were so many union leagues made up of citizens who supported the ideas of the Union League of Philadelphia. Today, there’s only three still standing, so to speak. There’s the New York Union League on Park Avenue, and then inside the Chicago Loop is the Union League of Chicago.

3:46 Hank Smith
Many might not know this, but the Union League of Philadelphia has quite a significant art collection. Would you care to talk a little bit about that and the fact that even though you are a private club, you do open up to the public on certain days to show your collection?

4:05 Jeff McFadden
We had incredible donations to this beautiful building, it’s about 300,000 square feet, a sort of Victorian- to mid-century-type building. It has 18/24-foot vaulted ceilings that are perfect for folks’ artwork. One of the neat things that happened after the Civil War – and the Union League continued as a social club, gathering minds for social, business, and other pleasures – was that we had an incredible sharing culture, and most folks gave their books, which were prized possessions in the mid to late 1800s, and they shared them with other members, and they did that with the artwork as well.

We received significant pieces of art from very prominent families in Philadelphia, and they did it because they wanted to share their artwork instead of having it in their home or in an office building or in a factory or something like that. They said, “No, let’s bring it to Center City, Philadelphia. Let’s put it on display, let our friends see it, let the public see it, so to speak, and let’s share it with everyone.” So that’s where our art collection started. Now, when the Art Museum in Philadelphia came about right around 1913 as well, you can see our collection period dried up. So, you were able to give the artwork to the Art Museum, which was started by a gentleman by the name of John McFadden, no relation to myself, though I tried to find a link at some point.

The Union League has a neat collection. If you get a chance, we are open to the public on Tuesdays and Thursdays from 3:00 to 5:00 pm. Then we’re open on Lincoln’s birthday, and we will do over 2,000 curated visits on Lincoln’s birthday alone. It’s the Saturday right around Lincoln’s birthday, so it’s coming up in February. It’s a great way for the citizens of Philadelphia and anybody else to come in and see the great architecture, great artwork, and just what the Union League is all about.  

6:17 Hank Smith
Jeff, you have been thrown two nasty curve balls in the past four and a half years with respect to COVID-19, which shut your organization down for a period of time, and now inflation. Tell me how you’ve led the Union League through these very challenging periods?

6:37 Jeff McFadden
Interesting time periods, there’s no doubt about it. I’m half Irish and half Polish, Hank, so, I say, “Weak mind, strong back.” So, when you fight adversity, you keep your head down and you keep working – that’s the point. It’s like your advice, you stay in the market no matter what’s happening, stay invested, quality never goes out of fashion. COVID-19 was a real curve ball because hospitality got hit quite aggressively. I can’t serve meals in your home, right? It’s just about impossible to do that.   

The Union League had a long-term strategy of moving into being a regional lifestyle club, from being a one-function, one-location club into this multifaceted lifestyle strategy platform. It was a challenge; there’s no doubt about it.  Our members kept every employee on the books, which was incredible. We all went down to half pay, but we all got paid, which was fantastic. We saw the cream of the crop rise to the top with our staff, and it really helped us filter out the best of the best. We just zigged and zagged, we went to deliver food to people’s homes, we went virtual, everyone learned how to use Zoom—including our 80-year-old members—and we stayed connected. We have a saying; the Union League is “College for the rest of your life.” So, if you think back about your great years, what a lot of people associate with when they went to university, they socialized, they learned, they worked out at athletics, and it was a real renaissance period of their lives. And so, we just turned and leaned on those sorts of things besides being in place in-person.

Now, inflation is another issue that has been more difficult recently to handle, especially from a private club world where we do have some people that look for value in their dues and what they spend. When you look at hospitality, we basically run on fuel and food prices, right? That’s a country club business. For example, fertilizers, pesticides, you name it, and then food, we’re seeing double-digit inflation growth in the hospitality industry. I don’t have to tell anybody, including Joe Scarborough of MSNBC, who the other day was shocked to find out butter was $7 a pound. It’s real, food inflation is real. Of course, it’s a service intensive industry, hospitality. So, wage inflation is a big part of it, and 54% of every dollar we take in goes to labor. When you have wage inflation like we’ve seen since COVID, it’s difficult.  

We used to be able to get schoolteachers, first year, second year, third year out-of-college students to pick up shifts, such as working a wedding, bartending, just helping out for some extra money, maybe two, three shifts a month or even every other week or so. We can’t find that today. It’s very difficult to find that secondary market for labor because they’re getting paid well with the wage inflation. So, the wage growth in other industries has affected my part-time and seasonal work, which is a lot of times what nobody talks about.

10:34 Hank Smith
Yeah, that’s fascinating. I know you don’t like to talk about yourself, but you have engineered, over the past 26 years, tremendous growth in this organization called the Union League. Tell us how you attract talent and not only attract talent but retain talent. That doesn’t happen by chance. 

11:01 Jeff McFadden
I have a saying, “You’re either green and growing or you’re ripe and rotten,” and there really is nothing in between those two states of being. We’re fortunate enough that we have been growing over the last two decades, so when we recruit people from Penn State, Cornell, Houston, Las Vegas, any of the hospitality programs that are top in the country, because we have been growing, we’ve been able to keep them and keep promoting them. So, our growth strategy has really helped our employee retention strategy, and that’s something we’re proud of. 

We needed to have a growth strategy because of how expensive hospitality has become. If you think about it, about a hundred years ago or120 years ago – the golden age of private clubs – there was very little regulation. You could dredge harbors and build a yacht club. You could work the land, build a golf club. Immigration labor was relatively reasonable because of the Irish, German and other groups coming into this country. So, the proliferation of private clubs from about 1890 through 1920, believe it or not, about 80–85% of the clubs existing today were founded in those three decades. You have to have a strategy now to raise dues because the cost of running a club has become so expensive. It seems like a very simple strategy like staying invested in the market, but in 1920, you could have an incredible, quality operation in a private club that was maintained by reasonable expenses. Today, they’re so expensive to run that you need to raise the dues to cover the base expenses. But then to give value to the consumer, in this case our members and guests, I have to drive additional amenities to justify the underlying cost of the base membership. So, it’s a little bit of a vicious cycle, but it has worked out well.

Our growth has led to retention, and then our growth through amenities has led to more members than ever wanting to join the Union League. The Union League was probably the most successful club for its first hundred years. Then it fell on hard times, and now we’re the most successful club in the country for the last 15 years. It’s just because we’re doing what we’re doing, and it works out. As I tell my son and daughter – work hard, think, strategize, have a plan, and good things will happen to you.

13:57 Hank Smith
Great advice. This season of Speaking of Quality, I’ve the fortune of speaking with many prominent leaders in the Philadelphia area, which now includes you. The Union League has persevered for nearly two centuries in Philadelphia. It’s seen the city in all sorts of different economic states. In your 26 years managing the club, you’ve had to navigate through a lot of changing business landscapes in the city. Can you tell our listeners what you’re seeing currently? Have things bounced back since the initial phase of the pandemic?

14:39 Jeff McFadden
Since the recession of ‘08–‘09, you saw cities and downtown environments—what I call urban business communities—peak out about 2017, ‘18, ‘19, right before the pandemic there was a little bit of flatlining in the urban market, and today, 2024, we will end with about 82–83% of our volume from 2018–2019. Now, I’m very bullish on urban environments. I would never bet against cities. There is an age divide on people going into the city. With those under 40, it’s booming. We have over 3,500 new units under construction right now in Center City, Philadelphia. We have 44,000 more residents in Philadelphia under the age of 50 than were here on March 15th, 2020, at the start of COVID. That’s an incredible growth pattern.

Unfortunately, those over 50 – for some truth and some perception – are scared to come into the city. They just feel it’s unsafe, it’s unclean, and they’ve basically taken it out of their lives. They just say, “Why am I going to go into Manhattan? Why am I going to go into downtown Washington D.C. or Philadelphia because I just don’t want to be hassled. I have a perception that it’s unsafe and it’s not clean and so forth.” But long-term, I see the resiliency of cities. When you look at the suburban market, what are they building? They’re building town centers. Every suburban developer is building walkable streetscapes, whether it’s the King of Prussia or Westchester, New York, they’re trying to emulate downtown in suburbia. So, if you think globally, and you wonder: why are they doing that? Well, because people love urban, they want it to go together. I just read some data recently, which is fascinating to me, is that those coming out of university are living in downtown environments and they want to work from home, yet their office or a branch office of their company is within five blocks of where they live. They still prefer to work at home in their apartment because they love the nightlife, they love the social side of living in a big city. So, it’s ironic, they’ll live four blocks from their work, and they’ll never go into work, but they’re right there.

17:26 Hank Smith
So, I want to share an anecdote that supports the statistics you’ve just laid out. When I graduated from college in 1984 and came to work in the city, then the vast majority of college and university graduates from this region left the region. Today, the majority are staying after they graduate, and you can feel that buzz on the streets. I could be at a business dinner at the Union League in the middle of January on a Tuesday night, and there is traffic at 9:30 p.m. because of all the street traffic, people walking from restaurants to bars. There is definitely a buzz today that wasn’t there 40 years ago. It portends a really good future for Philadelphia in my view.

18:32 Jeff McFadden
I couldn’t agree more. There’s no doubt about it. I turned 58 in January, so I’m slowly becoming my father and my grandfather. It’s hard sometimes to look at data and make decisions because we all have our bias of what we like and how we want to perceive our social circles, our restaurants that we go to, you name it, just the way we run our lives, and you really have to look at what the next generation is going to do. Our strategic plan is called “Building Your Granddaughter’s Club,” and it’s a simple sentence, but it has a lot of connotations. We have to be thinking two-three generations from now. The league has been here since 1862. A lot of leaders are my age or a little bit older and you start thinking of your bias. And if we’re scared to come into the city, but the city is vibrant, then we have to make sure we’re leading the institution that we all lead – whether it’s a financial institution, hospitality, you name it – with data. You’re right that the urban environments are booming.

19:46 Hank Smith
I want to shift to one of my favorite subjects that comes up frequently in our podcasts, and that is philanthropy. The Union League has long been dedicated to philanthropy and has always had a charitable arm with the Legacy Foundation. Recently, the Legacy Foundation has merged with the Freedom Foundation at Valley Forge to form Founding Forward, a nonprofit charity that fosters immersive civic education experiences for students, teachers, and citizens. Can you tell us about Founding Forward and its mission?

20:24 Jeff McFadden
It is a wonderful organization. It was started by President Dwight D. Eisenhower, E.F. Hutton, and Dick Wells. It started in 1949, right after World War II. The three gentlemen believed that civic education was going to pot in the late ‘40s-early ‘50s, after World War II. They were worried about communism and people not paying attention to the Constitution, the Preamble, the Declaration of Independence, and all the tenants that our founding fathers worked so hard on. So, it’s an incredible 75-acre campus in Valley Forge located right next to Washington’s headquarters. It’s comprised of a 40-acre learning center, dormitories, educational buildings, a chapel, and then 35 acres dedicated to the Medal of Honor recipients. It’s really hallowed ground where we give our respects and thanks to everyone that served our country and received the Medal of Honor.  

The Union League has been a civic organization from the get-go, right? Its fundamentals were to save the Union, hence the Union League, a league of citizens coming together to save the Union. We have always been a community-based, civic-minded organization since our founding. We have always given scholarships to students going to university. We have taught civics education forever. We do something called Good Citizenship Day where we partner with 50 youth agencies in Philadelphia and we bring their leaders together and juniors and sophomores in high school to teach them a full day of civics and what it means to be a leader and dive deep into constitutional issues. We talk about what the framers of our Constitution and the writers of the Declaration of Independence struggled with, what they thought, what was their strategy, right? Too many times, these kids think too quickly, they don’t do a deep dive into what makes this country great.  

Now, what I’m trying to do and what the Union League’s leadership is trying to do is say, “Can we build a national organization that our members and the public will support through charitable gifts on civics education?” I’m trying to dovetail the Union League and Founding Forward together. So, when you think of Founding Forward, you think of the Union League; when you think of the Union League, you think of Founding Forward. The next generation of members –  and future generations across the country – are going to be very strong in their civics thought process. Unfortunately, we’re not teaching civics in grade school, high school, and universities today. So, I am going to lead the Union League to be much more purpose-driven around the Constitution and the Declaration of Independence, so that we stay principally centered as an institution.   

You see some great philanthropists today say “Pay it forward.” At 58, I’m trying to think what we can give to the next generation. We’ve raised over $40 million already for Founding Forward. We’re going to roll it out in all the major cities across the United States. The Valley Forge campus is going to be the capstone for juniors to come together. We’ll have over 5,000 students there on a weekly basis doing a deep, immersive dive into civics, leadership principles, and ethics and character, and you name it. Their phones will be put away, which is great. The campus itself will be built with fire pits and a Citizens Bank wiffle ballpark, and we will rely on teachers from the University of Pennsylvania, Princeton University, Rutgers University and Gettysburg College to come teach and lead these kids.  

It’s an exciting time at Founding Forward and we are also doing the same program for teachers. Our Liberty Hill campus in Lafayette Hill, which we purchased from Chubb Insurance Company, who is moving their headquarters from Manhattan to Philadelphia – so, you talk about the boom of Philadelphia, and we’re seeing a major insurer coming here, which is terrific. In the summer, we will do nine weeks of teacher’s programs where teachers from all over the country come for one week and get additional certified continual education credits in civics. And it’s remarkable because when we teach one teacher, that teacher then educates 25,000 students over the course of their lifetime. So, thank you for bringing up Founding Forward. It’s terrific. 

25:32 Hank Smith
Oh, absolutely. What a unique organization, a private club that does public service. I can think of nothing more important today than teaching civics because it’s been out of our schools’ curriculum for decades and it really needs to be a permanent part of the curriculum, as it’s a lot of the fabric of this country. Congratulations on your accomplishments and your aspirational goals, which I think are just terrific. 

26:06 Jeff McFadden
Thanks, Hank. We’re not a perfect country, but it’s the best country that I have ever learned about or been a part of, so, hopefully, we can save it.

26:17 Hank Smith
Our listeners have heard me say this on numerous podcasts. I truly believe philanthropy is the secret sauce of what makes this country the greatest country in world history because there is no other country in the western world in developed economies that does philanthropy like we do. It isn’t just the big names, the Rockefellers, the Fords, the Gates, the Buffets. It is middle America and even lower-middle America giving through their church, giving through civic organizations, community foundations. Then of course, look at what our country does whenever there’s a disaster anywhere in the world, we’re there with volunteers and money. So, just keep up the great work.  

27:09 Jeff McFadden
Well said, thanks Hank.    

27:10 Hank Smith
Jeff, thank you so much for joining us on Speaking of Quality, this has been a great conversation. I really enjoyed the history lesson you shared on the Union League, its legacy and how you’re working to endow future generations of Philadelphians with a passion for civic engagement and activism. I might add, not just Philadelphians, you’re reaching out across the country. Well done.  

Thank you for listening to this episode of Speaking of Quality: Wealth Management Insights. Our next episode will be released shortly. In the meantime, please send suggestions or questions for me or the Haverford Trust team to marketing@haverfordquality.com. And don’t forget to subscribe, rate, review, and share this podcast. Until next time, I’m Hank Smith. Stay bullish.

27:59 Maxine Cuffe
Thanks for listening to this episode of Speaking of Quality, Wealth Management Insights with Hank Smith. To hear future episodes of Speaking of Quality, please subscribe on Apple podcasts, Spotify, or wherever you listen to podcasts. To learn more about the Haverford Trust Company, please visit www.haverfordquality.com.  

This podcast is provided as general commentary and market overview and should not be relied upon as research, a forecast or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt an investment strategy. Any opinions expressed are as of the date this podcast was recorded and may change at any time, and are the opinions of that commentator, not Haverford’s. Any opinion or information provided are believed by Haverford to be reliable at the time of this podcast recording but are not necessarily all-inclusive or guaranteed for accuracy. Before making any financial decisions, please consult with an investment professional.