Financial Advisors

The Real-World Imperative Behind Digital Transformation

We have all heard about how adopting a completely paperless office strategy – a full digital transformation of your business - will provide benefits like more convenient day-to-day operations, enhanced security, cost reduction, easy audits, reduced administrative needs, faster client onboarding and transaction processing. But what we have learned through this recent pandemic business environment is that the true bottom line of digital transformation is really about business survival and the ability of grabbing major opportunities at the speed of relentless change. You just cannot move paper and disparate data fast enough to analyze and implement a competitive strategy.

Traditional business models are being threatened with obsolescence while digital transformation is allowing firms to build the future. This digital Darwinism has been propelled by the need to respond to the social and economic disruptions of the past year and develop new sources of value creation. Being a digital firm is a survival imperative and the only way to win in a world of accelerating disruption.

To better understand and explore this new business dynamic and how to best utilize digital FinTech solutions, we decided to talk to Institute member Michael Pinsker, founder and president of Docupace Technologies, a financial technology company that has created a cloud-based, digital operations platform with data-driven client onboarding, unified workflow and document management automation capabilities. Our goal in this interview is to better understand how implementing a digital transformation for your firm can enable strategic advantage and competitive positioning.

Hortz: Can you give us a lay of the land of where the financial services industry currently stands as to becoming digital and strategically being able to use all its data?

Pinsker: Today, when we look around the industry, many financial services firms are diving into digitization projects very aggressively. They are shedding paper and embracing an omnichannel digital experience, an experience where the input, management and analysis of data has gone to the front of the priority line by management. Some of the examples that we are seeing are in the areas of account opening, advisor transitions and ongoing communications.

This pronounced shift is because many wealth management firms have been challenged like never before in the past 12 months due to the pandemic’s disruptive operating environment. Back-office operations came under the microscope during this time exposing many processes that still involved substantial amounts of manual paper handling. The interactions that used to be face to face now must happen virtually adding complexity in communication and core business practices. This has also acted as a meaningful accelerant to the digital transformation where firms and their advisors must embrace new systems and processes for data management.     

Firms are working quickly now to have end-to-end digital processing for the vast majority of their operational workflows. It includes not only traditional workflows that drive the forms processing, but complete data management experiences from cradle to grave. It starts with data that an advisor needs to capture from an Investor, and then having this data and documents reviewed by the back office for the supervision, processing and transmitting the data all the way to clearing houses, custodians and directly to product manufacturers. 

The industry had to transform and adapt very quickly and what we are seeing is a change in priority and commitment for many firms as it relates to digital transformation. Some firms that have been on this path before the pandemic are ahead of the pack and are able to serve their clients better and in a more efficient manner, while the firms that are just starting are learning what it truly takes to digitally transform their business. Regardless, the industry advanced tremendously in the last 18 months, and as painful as it has been, I believe we have shaved quite a few years from the digital transformation adoption journey for the financial services industry.    

Hortz: The term “transformational” has been widely used in citing the effects of becoming a digital firm. Is that term accurate in your experience?

Pinsker: In my humble opinion it is absolutely accurate. To become a digital firm, one must transform not only the systems, but processes, and in some instances, even a culture towards innovation. It is a significant shift going from paper-based processes to a digital way of doing business. While there are significant near- and long-term benefits to the firm, this change is very expansive and should not be underestimated. What we have seen over the years is that those who approach it as a transformation and fully commit to it, are the firms who are successful and are able to competitively get to the benefits significantly faster. 

Unfortunately, we have also seen examples where a firm would pick a small area and change a system or two, but failed to change its processes, and then be surprised that they have spent money on technology but are not getting results. The key, in our opinion, is looking at this change as transformational, a major change in the way they are operating and engaging with clients. They need to acknowledge that firms need to transform in order to keep up with the rapid changes in the business environment in which they are operating, as well as the lives of their clients. 

Hortz: Any other research you can share to help advisors and industry leaders to see beyond the buzzwords to the true competitive bottom line and immediate needs for becoming a digital firm?

Pinsker: We are in the midst of a digital transformation age for financial service firms. We have some history behind us now where data clearly shows that the buzzwords are no longer just words, they define current reality. Consulting firms have been measuring and reporting the effects of digital transformation for some time now.

For example, a KPMG article suggests that in order to stay competitive, financial institutions have to solve the customer-cost-revenue equation. The only way to be able to achieve that goal is by taking transformative actions like becoming a digital firm. Studies conducted by KPMG, Forresters and Deloitte indicate that many financial services firms now realize that and are taking bold steps to move forward and evolve their businesses.

The COVID pandemic has accelerated the focus on putting digital transformation front and center for many companies as they are keeping up with customer demands and making sure they have ways to engage with clients in different ways. That is why firms like Deloitte focus on helping companies accelerate digital transformation, creating experiences that keep customers at the core while modernizing technology to ensure high level engagement and long-term growth.

At Docupace, we work directly with firms, as well as side by side with consulting firms like Deloitte, to deliver a fully integrated approach to digital transformation. We work with organizations of different sizes to help them recognize and promote the importance of starting or accelerating the process of becoming a digital firm right now. That is why it is exciting for us to see that a recently conducted survey of financial services firms confirms that 49% of respondents have accelerated digital transformation of their organizations. For us, more than 94% of customers see the technology as “critical to the success of their business”.

Hortz: Can you walk us through a few examples of how different financial firms have successfully applied digital strategies to their business challenges and opportunities?

Pinsker: Absolutely. Let’s take a midsize broker-dealer firm, for example, who happened to be a Docupace client. This firm has been using the Docupace digital platform in their back office handling all transactions digitally. However, they wanted to ease their advisors to the adoption of digital technology and, as a result, made use of our workflow and document management system as an add-on option. The result was that about 45% of the advisors advanced their technology exposure, while the remaining group continued to use their manual, paper-driven processes.

When the pandemic hit in early 2020, this was no longer an option. The firm quickly realized that those advisors who were operating digitally, the same as their back office, were positioned significantly better to deal with the effects of the pandemic. The broker-dealer firm quickly mandated the use of the technology to all advisors and rolled it out seamlessly to the rest of the group. The result was that throughout the pandemic, the business did not diminish and continued to operate efficiently in the remote environment effectively serving their clients. This is an example where being a few steps ahead on the digital transformation journey helped the firm to adapt very quickly to the unforeseen situation.

Another example was a prominent clearing firm. A couple of years back, they started their digital journey and decided to completely overhaul their back-office technology and systems, but also wanted to provide a completely new digital experience to their correspondent firms and their advisors. The technology rollout focused on fully immersive experiences that were guided and supported by multiple systems behind the scenes. It was done with an eye not only on the advisor, but also engaging their investor clients in the digital process.

The complete redesign of the workflows, processes around them, back-end systems that handled millions of data records, and the front-end experience led to amazing results. According to Greg Beltzer, Head of Technology at RBC Wealth Management: “The account opening transactions that use to take two weeks, now takes 24 minutes. On top of that, because of the adoption of the digital technology, average revenue for accounts that are digitally opened increased by 15% within the first 90 days.” It has become much easier to do business with the firm.

As you can see by these examples, there are different ways of successfully implementing digital strategies. It works for firms of different sizes, regardless, if you are an individual advisor office or a large institution. The benefits and effects of becoming digital are clear.

Hortz: What are some best examples on how to develop digital strategies that are truly transformative? Is it all about the technology or are there other elements involved?

Pinsker: Developing a digital strategy for a firm is an all-encompassing undertaking. It should cover several key elements: technology, processes, operations and people. In many situations it is not enough to put a great system or combination of systems in place. 

One would need to make sure that systems talk to each other, and for that, you need to understand what the process is. Does your current process need to change because you are adopting a new system? In most cases, the answer is yes. Once you start changing your processes, you would want to see what kind of adjustment that would bring to your operation, and how your people will be impacted in their day-to-day operation.

We have seen a number of firms that developed digital strategies and then implemented them in phases. This is probably the most common example. There are also others who do a big bang approach and change everything at once. It is significantly riskier but can get to value realization faster.

Regardless of the approach, change in processes and implementation of new systems go hand in hand. Then there is training that includes making your people be comfortable with new systems or new ways of doing business. It is pretty challenging in some legacy organizations and requires a lot of hand holding. Depending on the type of culture in an organization, those factors need to be taken into account when developing digital strategies.  

Hortz: Any other thoughts or recommendations on implementing a digital strategy right now?

Pinsker: A key consideration when selecting your technology partners and systems is to make sure they “talk” to each other and are well integrated. The less you have to spend on putting two or more systems together, the better for your organization as it will allow you to focus on other very important elements as you navigate through this change. Lastly, planning training as part of the implementation is critical.

We invite you to learn more about becoming a digital firm by exploring some of our many support tools and resources. We’ve put together on this link everything you need to know about the Why and How of going paperless at work for broker-dealers and RIAs, including a paperless solutions provider checklist. And here we have a link to Docupace Resources, which includes access to product and solutions guides, our whitepaper series, success stories, webinars and case studies datasheets.  

Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique client/community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Ultimus Fund Solutions, NASDAQ, Pershing, Fidelity, Voya Financial, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Bill Hortz

Bill Hortz is an independent business consultant and Founder/Dean of the Institute for Innovation Development- a financial services business innovation platform and network. With over 30 years of experience in the financial services industry including expertise in sales/marketing/branding of asset management firms, as well as, creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms, including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His wide ranging experiences have led Bill to a strong belief, passion and advocation for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to address a business environment challenged by an accelerating rate of change.

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