Digital Transformation – Control the Change

By Jeff Wilk and Ed Wegener

Egg hatching with a subjective purpose.

Today’s technology and rate of change creates new challenges for firms of all sizes. They must keep up with the developments, navigate a constant environment of change, and do it all with a clearly articulated digital transformation plan.  In this podcast episode, Oyster experts provide an in-depth conversation about what is meant by digital transformation.


Transcript provided by Tomi transcription services

Jeffrey Wilk: Hello, and thanks for joining us today to listen to another podcast in our series on digital transformation. I’m Jeff Wilk, Director of Strategic Planning and Execution here at Oyster Consulting.  And I’m excited to have with me today, two leaders in their fields, also from Oyster Consulting: Managing Director, Ed Wegner, and Director David Altschul, both veterans in this industry with very different backgrounds. We put together an information-packed few minutes, focusing on the many different aspects of digital transformation. You may recall that we kicked off the podcast series on transformation by simply introducing the basics. We talked about what it is, why it is so important, how to engage and remain engaged with your strategy and who the key benefactors are of current day digital experiences. Our complete podcast series takes a deeper dive into each of these four distinct areas. So, let’s get started today with a more in-depth conversation about what is meant by digital transformation.

Now this may shock some people, but digital transformation is not new. It’s actually been around for a long time.  Yet, like in many other areas, the industry keeps tracking and tacking on new words or phrases to some very basis business philosophies – automation, robotics, digital X, robots, ecosystem tech stack. That’s lots of terminology to help package and generate new excitement and interest for what’s really critical, longstanding successful business practices of leveraging modern day technology to increase efficiencies, raise consumer satisfaction and drive revenues and profitability in the end. But while the underlying goals of digital transformation remain largely steeped in traditional business strategies, today’s technology and the incredibly rapid speed of change creates new challenges for firms of all sizes in keeping up with the developments, navigating through a seemingly constant environment of change, and doing it all with a clearly articulated and mapped out digital transformation plan that encompasses all sides of the business. Let’s get started with today’s discussion and to do that, let me turn to Dave Altschul first. So, Dave, why don’t you give us a brief background on yourself and then please share your thoughts on what digital transformation means.

Dave Altschul:   Well, thank you, Jeff. And firstly, let me say, I’m excited to be here with you and Ed to talk about out this very important topic, digital transformation. So, a little bit about myself. I’ve spent over 30 years of my life in the financial services industry. Like Jeff mentioned earlier, I’ve been directly involved with digital transformation since the mid-1990s. I helped Dreyfus build a brand new broker-dealer that was a paperless office along with a digital workflow. I was asked later to move across country to help manage another Dreyfus broker-dealer that was acquired. It was one of the industry’s first online, self-directed dealers. So, throughout the rest of my career, digital and/or technology has always been present as well as embraced.  Alright, enough about me.  Let me get started about the topic here today.

What is digital transformation? Let me give you a broad definition. A common definition of digital transformation is the adoption of digital technology to transform services or businesses through replacing non-digital or manual processes with digital processes or replacing all the digital technology with newer digital technology. Finding the right partners to invest in and integrate into your business is not necessarily a cookie cutter process. As many of you know, each business is different than the next one thing we should always remember is that the best-in-class technology quite often does not equal the best solution for your firm. As we know in our industry, there are generally no two firms that are alike.

Thus, each firm’s needs may be very different than the next. It’s very important when you’re looking at your technology roadmap, that you’re finding the best platforms that will work most cohesively together, and that will allow your business to scale and evolve. It’s just amazing how much data flows through your firm on a daily basis. It’s colossal amount. There’s a lot that can be learned by mining the data instead of just farming over it. Artificial intelligence can play a big role in your mining expeditions. You can catch better qualified leads from your CRM, as well as predictive actions and habits of your client base. Over recent years, AI powered chat boxes have become increasingly more helpful prior to tasking humans with the more complicated needs and tasks.  In a similar realm, but not quite artificial intelligence, is the utilization of robotic process automation or otherwise known as RPA.   RPA has been increasingly becoming part of that every day processing. The cost of RPA has become more and more affordable as the technology becomes more and more capable. This is one of those areas that will allow you to redeploy your firm’s assets in the areas that will grow your business.

Jeffrey Wilk:  That’s a great description, Dave.  It’s easy to see how critically important this is to every firm’s future and how broad of a topic it is that needs to be planned for.  But it also raises critical questions about what these kind of changes can mean in other areas of the business. What downstream challenges has digital transformation created elsewhere within a firm.  Ed, let me turn to you and ask you.  But first give us a brief background on yourself and then perhaps if you could talk about maybe the top three or four areas that you’ve seen, which constantly need to be addressed as digital transformation is planned for and implemented within our firm.

Ed Wegener:  Sure, Jeff, thanks. I really appreciate the opportunity to be on the podcast today.  And in terms of my background, I am a Managing Director with the Governance, Risk and Compliance practice here at Oyster. I’ve been with Oyster for just about a year and a half now.  Prior to that, I was with FINRA for 22 years. So I spent the bulk of my career as a regulator. Most recently I was the Midwest regional director for FINRA and was responsible for the examination and risk monitoring programs out of the Midwest region. My take on this really comes from the lens of somebody who’s been involved in regulatory and compliance issues. And when you think about the shift to a digital environment, it impacts so many different areas. As we talked about earlier, many of those areas have important regulatory and compliance implications.  Shifting to a digital platform and making a digital transformation can affect how books and records are maintained.  How firms communicate both internally and with their clients.  The overall customer experience and how customers interact with the firm and the impacts on how the firm operates its workflows and the need for testing and monitoring.

These are all important things that firms need to consider as they go down this path.  Legal and compliance, definitely, isn’t going to be the driver for your digital transformation, but they’re going to be important partners as you go down that road. And so, it’s important to include them throughout the transformation.  In terms of the impact on books and records, that’s critical because the SEC has specific requirements for how firms maintain the records when they do so electronically. And it’s important to understand the impact digitizing records and going from a paper based to a paperless system that that will have on those requirements.  One of the things firms should do is to make sure that they inventory all the records, whether manual, hard copy or electronic and understand how they’re maintained and, how they need to comply with the SEC’s requirements.

Take a look at SEC rule 17a-4(f) and ensure that the firm’s keeping records in the manner that’s required by the SEC and involving legal and compliance in this transformation will be critical.

Another critical piece of this is just the way firms and advisors communicate with customers. It continues to change rapidly, and as demographic shifts and clients and advisors start to expect to be able to communicate through multiple different digital platforms, it’s important for firms to understand how they’re going to supervise and maintain those communications. And that can be very tricky, especially just given the rapid pace of change and the new communication tools that come out.  FINRA and the SEC, continue to issue new guidance on how to supervise and store electronic communications. As firms, go down this path, they need to look at how they’re communicating internally and with clients and make sure that they’re complying with the guidance that comes out from the regulators.

And it’s not just communications. Digital transformation impacts many of the ways that customers interact with the firm.  Including how accounts are opened, how transactions are executed, the impact on how firms assess things like suitability, how disclosures are communicated to clients and importantly, how customer information is secured and kept safe.

These are important regulatory considerations that you need to consider before you do the transformation, as it is planned, and as it’s implemented. And then importantly, before the digital transformation is implemented, it’s important that there be testing to make sure that things are working as they’re expected. Then that testing happens regularly after the processes are implemented to make sure that they continue to work as they’re expected.  One important thing, the SEC recently issued a request for comment on firm’s use of digital engagement practices. The Commission acknowledged the benefits that digital engagement has including increasing access to the securities markets for retail investors.  But they also stated that they want to really understand and mitigate the risk to investors in the market as firms continue to become more and more digital.  It will be interesting to see what kind of information they get as part of this request for comment, and to see how that impacts their rulemaking as a result. But overall, I think firms just need to be thoughtful in terms of the transformation and the impact that it has on their regulatory and compliance, and making sure that they include legal and compliance throughout this process to make sure that they’re managing and mitigating those risks throughout.

Jeff Wilk: Thanks, Ed.  It’s amazing how critical some of those elements are, and the fact that many individuals probably don’t even take them into account at the early state ages of thinking about a digital transformation strategy.  An initiative with this level of importance needs to be properly planned for navigated through carefully, openly discussed across an organization to ensure that all aspects of the change are accounted for, and that there will be complimentary plans in place to address them, and in what sequence, as you just described.  In the couple of minutes, we have left today on the topic of what digital transformation is and what it means for a firm, I’d like each of you to give our audience a closing thought on the topic.  Dave, perhaps you go first and then Ed.

Dave Altschul:   Sure, Jeff I’d like to close with digital transformation can mean a lot of different things to a lot of different people. It can mean a method of unifying data from multiple silos. It can be part of a green initiative due to paper reduction. It can create great efficiencies, reduce unnecessary redundancies, lower NIGO rates and so on. But one thing to remember – digital transformation is not a one and done event. It’s an ever-evolving process for growth.

Ed Wegener:  No, you know, in terms of my perspective, my sense is that the transformation to digital for every firm, I think, is going to be inevitable as demographic shift and advisors and customers are going to want to interact with their firms through digital platforms. And so, I think if you haven’t done it now, it’s coming. The important thing is to be thoughtful about the transformation and to understand the implications that it has on the entire firm, including legal and compliance, and to assess and address the regulatory and compliance issues that come up as a result. It’s important that you involve legal and compliance at the beginning of the process and throughout, so that they can help manage and mitigate any of the regulatory risks that you’re going to face in this transformation.

Jeffrey Wilk:  Well, thank you, Ed, and Dave. this was a great conversation today, as we dug deeper into digital transformation.  Our next topic in this series will focus on why digital transformation is not just important, but critical, to every firm’s future success yet can take on entirely different scopes within each organization. We appreciate everybody taking the time today to listen and we’ll look forward to you tuning in for more.

About The Podcast Speakers
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Jeffrey Wilk

Jeff Wilk started his career as an Advisor and has a strong track record of executive success in strategic planning and execution, business assessment, transformation and growth. Jeff was directly accountable for several mergers/acquisitions, product and digital platform transformations, patent-pending products, and operating model RFPs and overhauls, including delivering the industry’s first “Robo” platform.

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Ed Wegener

Ed Wegener is an innovative compliance, risk management and supervisory controls expert with deep understanding of Federal Securities Laws and the rules of self-regulatory organizations, as well as technology optimization and risk mitigation. Prior to joining Oyster, Ed held several posts in FINRA, most recently as  Senior VP and Midwest Regional Director.

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