Digital Transformation – Innovation and Agility for Growth

Customers now expect all forms of remote access and services, and firms are recognizing that these are now the staple of their customer experience, not the exception. Internal innovation and agility are a must too, as the shift in culture within firms also takes place. In this Oyster Stew podcast, experts Jeff Wilk, David Altschul and Ed Wegener provide an in-depth conversation about why digital transformation is so important. 

Transcript

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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 Wegener, and Director, Dave Altschul, both veterans in the industry with different backgrounds We put together an information-packed few minutes, focusing in on the many different aspects of digital transformation. You may recall that we kicked off our podcast series on digital 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 one of these four distinct areas. So, let’s get started today with a more in-depth conversation about why digital transformation is so important.

Let’s face it – digitization, e-commerce mobile access, artificial intelligence, virtual reality, I can go on, but it’s all here to stay. If there was ever any doubt about whether or not consumers would adopt or embrace technology, the past two years of COVID necessities has put that argument to rest. Recent estimates are showing that after increasing by more than 26% in 2021, investments in a firm’s digital transformation efforts will increase by more than another 50% by 2023. And the reasons are clear. Obviously, customers have now come to expect all forms of remote access and services, and these forms of customer experiences, which used to be called differentiators, have simply now become table stakes.  Internal innovation and agility are a must too, with the shift in culture taking place within firms today, due in large part to what’s being called the great resignation, where a far younger demographic that grew up with today’s technology is entering the workforce and demanding the use of the same. And then there’s the entire universe of data driven benefits that digital transformation brings to increased analysis, collaboration, marketing, predictive analysis, and more.  I’ve only scratched the surface in our discussion on why digital transformation is so important. So, to dive deeper into today’s discussion, let me turn to Ed Wegener first.  Ed, please share your thoughts on why digital transformation is so important today.

Ed Wegener:  Thanks, Jeff. My background is largely in the regulatory and compliance area. And so I’ll speak from that perspective.  For firms from a regulatory and compliance perspective, things are becoming so much more complex than they’ve been in the past. The ability of firms to manage and mitigate their regulatory risks are becoming increasingly difficult to do on a manual basis and automating processes and effectively using data are increasingly important. Regulators’ expectations are increasing as well. They are becoming much more sophisticated in terms of how they use data to assess risk at firms and how they conduct their examinations and investigations. And they expect firms to be able to produce records and data to them electronically. They’re also expecting that firms are able to monitor activity on a regular and ongoing basis.  My sense says that they’re skeptical of firms that rely heavily on manual processes, so shifting to a more data driven and digital process, I think, from a regulatory and compliance standpoint is going to be required if it’s not considered required already. And that’s just the regulators, as you mentioned, as demographics shift, both customers and advisors are going to expect firms to provide the tools so that they can interact the way they want, which these days is digitally. So, I think both from the expectations of customers, the expectations of advisors and the expectations of regulators, firms are going to have to make that shift to be more digital, to be more data driven, and to use that data effectively to assess risk. You know, one of the things that FINRA has done over the last several years is to really change their examination programs to be much more risk based.  And order to do that, they’ve created very sophisticated risk assessment processes that use data that they have to identify where they should be spending their time, including things like the frequency and the scope of their examination. They’re using data and data analytics to assess the risk of firms, and it only makes sense for firms to be able to do the same thing. So, in order to keep up with the regulatory environment, it’s going to be important for firms to shift their operations to be more data driven and to use that data effectively.

Jeffrey Wilk:  Ed, that’s a really great perspective. It’s easy to see from that why digital transformation is so critically important to every firm’s future and just how broad of a topic it is that needs to be planned for.  Dave, let me ask you for perhaps the top three or four reasons that you’ve seen, which help describe why digital transformation is so important.

Dave Altschul:  Thank you, Jeff. Why is a great question to start with. Let’s begin with an overview of the current market forces driving digitalization. We’ve probably heard this a lot during the first year of the pandemic, that digital transformation leapfrogged about five years, just out of pure necessity to adapt to the current environment. I would say that’s partially true, reason being that much of the technology that has been adopted have been single point solutions, very important solutions, but still basically a band aid. All industries had to quickly learn how to exist in the remote work environment with no options. This resulted in the rapid adoption of these technology point solutions.  Demographics are having a huge impact on the financial services industry.  Behaviors have been rapidly changing from within the industry, as well as the investing public.  The way your investors want to interact with your firm are very varied still moving in the direction of digitalization and utilization of current technology. We’re in the midst of what’ some have called the great wealth transfer from the baby boomers into, and through generation Z.  Interactions and expectations with more recent generations tend to be more digital than tangible. We are now also seeing more millennials take on more prominent roles within the industry and with that, comes the technology infrastructure advancements that this generation actually demands.  As the industry is experiencing increasing margin compression, operational efficiencies become a tremendous help in not only relieving margin pressures, but enhancing service levels, timing and accuracy, analytics, and lower resource requirements, allowing a firm to reallocate resources, to areas that will grow the bottom line.

With that being said, it would be beneficial to conduct what we here at Oyster Consulting call a Current Digital Assessment otherwise known as a CDA.  CDA could be a deep dive into the firm from covering the front office, middle office, back office, as well as the end client.  At a high level, it should look at the firm’s existing technology – current wants and needs, future wants and needs. And we don’t want to discount or forget the firm’s culture.  After collecting all the information from the CDA, it now puts your firm in a good position to work on the jigsaw puzzle.

Lastly, regulatory risk mitigation is something that I believe we should all hold near and dear to our hearts as the regulatory oversight has become increasingly greater. We are in an era where the tools available to meet these obligations are widely available and have the capability to customize, to meet very specific needs.

Jeffrey Wilk:  Thanks, Dave, that’s fantastic information and you and Ed covered an awful lot there. It’s easy to see from that how the reasons for the firm having a digital strategy is so important, and the ability to be able to execute on the strategy to realize the value of their investment is equally so.  You both really make it easy to see why the formation of a digital transformation strategy is not something to ignore, or you can really put off for another year. In the couple of minutes, we have left today on the topic of why digital transformation matters and what it means for the firm. I’d like each of you to give our audience a closing thought on the topic. Dave, maybe you first and then Ed, bring it home.

Dave Altschul:  Sounds good. Thank you, Jeff, again.  There are many reasons to investigate and invest in your firm’s digital transformation. One takeaway that I would like to leave you all with is that digital transformation is not a static process. It’s dynamic, it’s an evolving process. It is a process that will require a firm to stay on top of, to continue its success. Lastly, it’s healthy to also be open to a reset or at least to explore one.

Ed Wegener:  You know, Dave and Jeff, I think that’s all spot on. I think the shift to a digital environment is inevitable if a firm’s going to be able to meet the needs of its clients and its advisors.  The important thing is to do so thoughtfully, which includes considering and addressing all of the impacts that the digital shift will have, including the impact to the regulatory and compliance responsibilities. It’s important to include legal and compliance in the process and to get expert help where necessary.

Jeffrey Wilk:  Ed and Dave. Thank you very much. This was another great conversation today on our podcast, digging deeper into digital transformation. An initiative with this level of importance needs to be properly planned for navigated through carefully and openly discussed across an organization to ensure that all aspects of change are accounted for, and that there will be complimentary plans in place to address them. Our next topic in this series will focus on how to engage and start on that digital transformation journey. We thank everybody for listening today, and we’ll look forward to you tuning in for more.

About The Authors

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.

David Altschul is a seasoned COO and senior Corporate Executive with over 25 years of Financial Services industry experience developing solutions for operational efficiency through organization-wide digital transformation.

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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