July 28, 2026 • 26 mins
Featuring Mitch Avnet, Founder & Managing Partner of CRC-Oyster, and Devin Sullivan, Deputy General Counsel at Altruist.
Fintech is at an inflection point. More companies are stepping into regulated territory: standing up broker-dealers, registering as investment advisers, and building the infrastructure regulators expect from day one.
In Episode 2 of Built to Scale, we sat down with Mitch Avnet, who guides tech-enabled firms through registration and operational build-out, and Devin Sullivan, a former SEC rulemaking attorney whose in-house career runs through Robinhood, AngelList, Cash App, and now Altruist.
CRC-Oyster: Compliance Risk Concepts / Oyster Consulting
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SPEAKER_00 (00:02):
Welcome to the Built to Scale podcast with CRC
Oyster.
This is the new, rebrandedOyster Stew podcast following
the acquisition of OysterConsulting by Compliance Risk
Concepts.
(00:25):
Thanks so much for joining theBuilt to Scale podcast with CRC
Oyster.
I'm joined today by Mitch Avnet,the founder and managing partner
of CRC Oyster.
Hey Mitch, how are you?
I'm doing well.
Thanks so much for having me,Michael.
Of course.
And a special guest, DevinSullivan, Deputy General Counsel
at Altruist.
Devin, thanks so much forjoining us.
SPEAKER_02 (00:45):
Well, thanks for having me, Michael, and exciting
us.
SPEAKER_00 (00:48):
Absolutely.
We're very lucky to have you.
Devin, it uh it would be helpfulfor the audience if you could
give a quick background on uh onyour history.
Where did you where did youstart?
How'd you get here?
And would love to learn moreabout uh your career.
SPEAKER_02 (01:02):
Yeah, absolutely.
Thank you.
I started my career, legalcareer, at a large law firm,
like so many do, a firm calledHogan and Hartson in Washington,
D.C.
It's now called Hogan Levels.
Following that, I joined the SECstaff in the division of
investment management in arulemaking role and was there
for four years working on rulesuh governing investment
companies and investmentadvisors in particular.
(01:24):
In 2011, I moved to the WestCoast and went in-house, started
at uh large uh financialservices firms, Wells Fargo and
Franklin Templeton.
And then in 2019, I made a leftturn for FinTech and joined
Robin Hood, a pre-IPO.
And since then, I've been at uhcompanies including Angelist,
Cash App, and now Altruist, uh,where as deputy general counsel,
(01:48):
I'm I'm responsible for productand regulatory legal matters.
SPEAKER_00 (01:52):
So, in terms of kind of looking at the environment
today, I think we're seeing anexplosion in fintechs.
And we've seen that for probablythe last several years, and then
there was a little bit of aslowdown about three or four
years ago.
And then over the past 18 to 24months, we've really seen the
growth and really at aninteresting inflection point now
(02:13):
with fintechs.
Devin, would love to hear yourthoughts as being on the outside
and advising those firms, andthen on the inside helping grow
and scale.
What did you look for in termsof partnership scaling?
How did you view that while youwere both inside and outside?
SPEAKER_02 (02:29):
Yeah, I mean, I'll probably speak more about the
inside part of it, but you know,in particular at fintechs, so
the fintechs that I've joinedhave all been highly regulated.
They've had broker dealers andor investment advisors in each
circumstance.
And, you know, I think withfintech startups, they naturally
grow from generalists to addingmore specialists as time goes
(02:50):
on.
You know, you start withengineers, obviously, because
you have to have a product inorder to have a business.
Regulatory obligations beginimmediately.
And so a company has to figureout how to meet those,
particularly with limitedresources and they're
particularly limited early on.
And so the thing that I found orthat I've learned in the process
(03:10):
is that these fintech companiesthat are entering highly
regulated businesses have todevelop a stack, if you will, of
external expertise in order toscale in a compliant manner.
And, you know, obviously outsidelegal counsel is a part of that.
But I found in particular thatgetting outside expertise on the
compliance and operational sideis absolutely crucial.
(03:33):
And that's that's how I began towork with Mitch, you know, at a
Past Company and have continuedto work with him and CRC up to
up to the present day.
SPEAKER_00 (03:42):
Thank you.
And Mitch, you know, would loveyour thoughts as well, kind of
helping firms and working withtalented individuals like Devin
and others.
How do you view kind of helpinggrow and scale as a partner some
of these fintech firms?
SPEAKER_01 (03:56):
When we launched in 2013, if you asked me how often
I thought I would be going toSilicon Valley or working with
fintech startups, my answer in13 would have probably been not
at all.
We were very focused on what Iwould call traditional financial
services markets.
Fast forward to 2017, 2018, wereally started to see the
(04:19):
opportunity come to fruition interms of working with
tech-enabled companies who werebuilding newer, better ways to
skin the cat in terms ofoffering financial services to
the masses.
The term we always were hearingback then was democratization of
financial services.
But the point being, we weremeeting so many smart people who
(04:43):
had been building bettermousetraps, let's call it.
But so very smart, verytechnically astute, but little
to no experience operating inheavily regulated markets, like
you know, dealing with FINRA orthe SEC.
So, with that said, there was aneed for our expertise, but more
importantly, there was a needfor our sort of expertise at CRC
(05:08):
Oyster that could really distillwhat the client, the
fintech-enabled companies werelooking for, and really
translate that into theregulatory requirements or the
impact of those requirements onthose companies.
And the truth of the matter isthe only reason they needed to
become a broker dealer andor aninvestment advisor was the
(05:29):
utility of having thoseregistrations because their
business model necessitated itbased on how they wanted to be
compensated for doing thatbusiness.
SPEAKER_00 (05:38):
And Devin, any thoughts on that?
SPEAKER_02 (05:40):
That describes uh my experience working with CRC
entirely.
So, I mean, when I was at largecompanies, the two large
companies, I obviously workedwith outside counsel and you use
outside counsel for manydifferent things, but one of
them is their expertise inworking with many different
firms.
Like you're if you're anin-house lawyer, you have you're
(06:01):
getting great experience at theparticular firms where you are,
but you don't necessarily havethat bird's eye view of how
other firms are addressingparticularly difficult legal
problems.
The thing that I've learned, andand it's been since joining
FinTechs and working with CRC isthat you need some of that same
expertise for those same reasonson the compliance and
(06:22):
operational side.
It's it's very difficult tobuild uh compliance and
operational systems andprocesses from scratch without
understanding how other firmshave done it.
So, you know, I have found it'sbeen incredibly effective to go
to Mitch and and CRC to get thatinformation in building those
(06:45):
systems and processes and inadvising my internal clients on
on doing so.
I mean, part of FinTech,obviously, is uh, as Mitch
mentioned, remaking the way thatfinancing services has worked in
the past and particularlyapplying technology to make it
more efficient and costeffective and the like.
But I don't think you cansuccessfully innovate unless you
(07:07):
understand how others have donethings in the past.
And CRC folks have that breadthof knowledge and they act as
creative partners in buildingupon those past processes or
figuring out a new way to dothem, in particular uh in using
technology.
SPEAKER_00 (07:22):
And Mitch, looking at what what Devin had just
walked through, does anythingstand out to you as pitfalls or
certain things that fintechsthat get right have the ability
to scale versus going the wrongdirection and then kind of
facing their own demise, right?
Given the experience that you'vehad and Devin has had in terms
(07:43):
of advising and helping grow,scale, and operationalize these
ideas into full-blown entities.
Are there any certain areas thatyou look at as either things
that a firm needs to do orpitfalls that a firm should try
and stay away from in order toreceive commercial success?
SPEAKER_01 (08:00):
It's a great question and it's the right
question.
It's not that these firms aresetting out to do things the
wrong way or trying to takeshortcuts to get to an outcome.
I think it's the lack ofeducation and knowledge, and
that's not unique, or and that'snot a criticism, but it's the
(08:21):
truth.
And often we'll talk to fintechcompanies or tech-enabled
companies, I should say, andthey're under the impression
that they can stand up thesebusinesses with little to no
internal resources or theutilization of external support.
Great example is we get fintechcompanies coming to us all the
(08:42):
time saying we want to set up aself-clearing business.
And they really just don'tunderstand the intense
operational support that'srequired.
And a lot of that middle andback office expertise is very
hard to find.
And so if you were going to tryto staff something like this and
(09:03):
go out and hire teams of people,that would be very hard to do on
a de novo basis.
What you really need to thinkabout, and that's where your
legal, your accounting, yourops, your compliance partners
come in, is you need to workwith those who have been there,
who have done it, who have beenthe practitioners, and not only
help you with the guidance andadvice, but also help you with
(09:26):
staff augmentation and reallyhelping you to think about what
do those first 12 to 24 to 36months look like until you can
fully operationalize itinternally as you scale the
business.
SPEAKER_00 (09:40):
And Devin, any thoughts?
SPEAKER_02 (09:41):
Number one, I've worked uh at two companies with
clearing firms, and I couldn'tagree more that it is an intense
thing to build and that it'sabsolutely essential to get
external expertise in doing so.
I think if there are pitfalls,particularly in the brokerage
space, it's you know,circumstances where you're
building a product and you're oryou're building internal
operations, you're havingengineers do it, and it's not
(10:03):
properly supervised by folks whohave their licenses and the
expertise uh uh at the end ofthe day.
And the other part uh that Ididn't mention in in working,
say, with CRC or uh othercompliance consultants is it,
and I want to say I agree thatyou can't staff it up
immediately.
But I've worked with CRC in thepast where uh you know we've
(10:25):
brought on personnel uh uh ascontractors to help us scale the
business.
They're external, but they'reworking with us internally, and
that's been very successful.
SPEAKER_00 (10:34):
Mitch.
So when we take a look at atfintechs and tech-enabled firms,
they can't build everythingin-house, especially early on in
their journey.
How do fintechs make smartdecisions about what to own
versus what to outsource?
SPEAKER_01 (10:47):
So I think one of the things that we see that's
very common as it relates tothat scenario, that question, is
they want the utility, let'ssay, of a broker dealer, but
they're smart enough to knowthat they don't have the
licensed principles, they don'thave the expertise of operating
a FENRA-regulated broker dealer.
(11:08):
And so they're like, we want toset this up, but we want to do
this where there's enoughguardrails in place so we're not
overstepping into an area thatwe don't understand.
That's why we're hiring you.
So, great example.
When we're registering a brokerdealer for the first time, you
have to have a minimum of threeprinciples for that broker deal:
(11:28):
two series 24s and a series 27.
The most common thing that wesee is we want you and your team
to do that.
Can you give us the principles?
And what do we do here to ensurethat we're not overstepping so
that we at the let's call ittechco are inadvertently causing
(11:49):
our folks to be uh licensed asprincipals.
So there are ways to do that,and these organizations want
that sort of guardrail in place.
And and the way that we we guideand advise our clients to do
that is number one, when you'regoing through the registration
process, you can have all theprinciples, not the securities
(12:11):
principles, but you call it theprinciples of the fintech
company, sign attestations thatthey're not going to be involved
in the day-to-day operations.
We work closely with council toensure that operating agreements
are written in such a way that apower and authority isn't given
to someone or multipleindividuals that can bring them
(12:32):
into the broker dealer world.
And then the way that we set uptheir governance oversight
programs is you can set thestrategic goals and objectives
for the broker dealer, but thenit's our job, the principles of
the broker dealer, to affectthose.
And so that's an area where wesee our clients saying, we want
to rely on you.
(12:52):
Tell us how we do that withoutstepping over a line that we
don't want to.
SPEAKER_02 (12:56):
I just to riff on that a little bit, even beyond
Mitch just talked about sort ofstarting up a brokerage from
scratch, but I'm at a companynow where brokerage has been
operating for some period oftime, but there still are
opportunities to assess where weneed additional outside help or
expertise.
And I think that often shows upwhere you know you've scaled to
(13:17):
the point where internal folkscan be overwhelmed by the
workload.
At that point in time, like it'simportant to figure out whether
you need to hire, whether youneed to seek outside help from
CRC or others.
The other is when you know anexisting business tries to go
into new areas of business andnobody internally has bird's eye
view of how to get into thatother business, how to develop
(13:40):
policies, procedures, internalcontrols, et cetera.
And at that point, like I've Ifound working with external uh
compliance and and operationsexperts uh like CRC has been
it's been very helpful.
SPEAKER_00 (13:53):
And I think one of the most exciting and and
possibly dangerous moments for afintech is when they decide to
expand, right?
So either it's a new product, anew vertical, a new customer
segment.
So from your experience and andMitch or Devin, or both of you,
can you guys walk us throughwhat that inflection point
actually requires?
SPEAKER_02 (14:14):
Yeah, I mean, I I I can speak about it.
I think from the in-house side.
I mean, we obviously we havethese companies develop product
roadmaps, and at times thoseproduct roadmaps will add a new
line of business that you knowis highly regulated or that's
regulated differently.
Uh, and then there's a processof developing a uh product
(14:34):
requirements document, havinglegal counsel, internal legal
counsel and compliance expertssort of ferret out all the
particular legal and regulatoryissues, and then work with the
business to figure out whetherwe have the internal resources
to staff it.
And if we don't, then it I thinkit's time to get creative and in
looking at your sort of outsideexpert stack.
SPEAKER_01 (14:55):
Absolutely.
From my perspective, it's reallyrefreshing when you have an
organization that isstrategically thinking about
where they want to play or wherethey want to go next.
But more often than not, we seefolks who are attracted to shiny
objects.
And um, and so they reallyimmediately want to go where
(15:18):
they think the the ball isgoing, right?
And what happens is then you getinto the world of the one-offs,
and we want to do this becausethis opportunity landed on our
desk, and we think we can dothis and we and we want to give
it a shot.
That's awesome, but you cannotdo that, and this is how we
would guide our clients and ourand anyone who came to me and
(15:39):
asked this question is it'sgreat if you want to take this
strategic next step, but youcan't do it in a world where you
have no operationalinfrastructure to support it.
Even if you've been presentedwith the most amazing
opportunity that nobody else inthe world has been presented, I
will tell you, as somebody whowill attest to history repeating
(16:00):
itself, is when you get into theworld of the one-off, you will
have a problem.
Because guess what?
If you are not operationally setup to support it, you're gonna
have operational breakdowns, andoperational breakdowns lead to
compliance issues, andcompliance issues lead to
regulatory problems.
If you're serious about wantingto play in a certain area, then
(16:21):
you have to have that strategicroadmap and that outlook.
And if you want to get therefaster, there are ways to
potentially do that, i.e., youcan work with a third party
who's already built it andcreate some sort of channel
partnership with that partywhile you're building it
yourself.
Or you could take the step backand say, this is important
enough that we're gonna take thenext three, six, or nine months
(16:43):
to build this correctly becausewe truly want to be in this
business rather than takingadvantage of an opportunity that
may or may not be theretomorrow.
SPEAKER_02 (16:52):
In fintech, there's this concept of minimum viable
product where you're shipping aproduct that works and that you
hope customers love, but it'snot the fully built-out product
yet.
I think it's an excellentconcept and allows companies to
dabble into scale and to and todo all the things that they want
to do.
But with these regulatedentities, there isn't sort of a
(17:14):
minimum viable product from acompliance perspective, if that
makes any sense.
Regulators don't care thatyou're just a startup or that
you, you know, that you're newat this.
They expect uh, for good reason,strong compliance programs to
start with.
SPEAKER_00 (17:29):
So, one other thing, kind of looking at the growing
and scaling of a fintech, right?
And and sometimes founders orexecutive teams, they sometimes
resist to bringing in outsidehelp because it's almost like an
admission that they don't haveit figured out or there's a loss
of control.
How do you reframe that?
You know, Mitch, when you'rehaving conversations with
(17:51):
fintechs that are reaching outto you and talking about either
standing up a broker dealer,investment advisor, or just
general support, how do you kindof frame the partnership between
the executive team and CRCOyster, you know, so that it
really is a collaborativeapproach, not something where
they don't know it, so they'reoutsourcing it.
(18:11):
How do you work with them?
SPEAKER_01 (18:12):
Front and center is flexibility.
So we look to provide a flexiblemodel that can scale up or scale
down as needed.
And so when we understand theaspirations of the client, and
some clients may say we want afractional model because that's
in line with who we arestrategically.
More often than not, they lookat this as a point in time till
(18:36):
they hit that inflection pointwhere they can say, now we want
to internalize this.
And that was the goal of CRC andCRC Oyster from the start, is we
wanted to help companies get tothat point where we were
eventually working ourselves outof a job.
And we were comfortable in doingso because we would figure out
(18:56):
other ways to work with thatclient.
If and when the client getsthere, we're happy to work with
them, to turn it over to themand still be there as a
resource.
And that in and of itself isdisarming to those who might be
skeptical about the model andwhat it means and how you unwind
that once you're ready tointernalize it.
We believe so much in what wedo, we give clients a 60 day
(19:19):
out, no matter what.
And so you can't do that unlessyou know the model works.
And so I don't want anybody tobe stuck long term with
something that they don't need.
I want to help them figure outwhat it is they need and be a
value-added partner to help themget there.
And if you're dealing with folkswho are suspicious or skeptical
of the model, I think it justtakes an honest, direct
(19:41):
conversation to get to the pointwhere they see what this is and
what it isn't.
SPEAKER_02 (19:45):
Yeah, I agree with all of that.
I tend to frame it as soresources at a startup are
scarce and just it by nature.
And so I think that executivesare naturally looking to
allocate resources mostefficiently.
And I think oftentimes whenyou're starting in a new line of
business, new regulated line ofbusiness, the most efficient
(20:07):
allocation of resources is tooutsource some of those, you
know, some of the operationaland compliance functions to
begin with.
Hiring is very expensive,obviously, in terms of time,
obviously in terms of money.
And, you know, if you're justtrying to figure out whether
this line of business or thisproduct works or as product
market fit or the like,oftentimes the most efficient
(20:27):
way to get into it is to leginto it using, say, CRC or other
experts, and then bring thatexpertise in-house.
If you have the good fortunethat that line of business or
product is scaling.
SPEAKER_01 (20:39):
And the other thing we should talk about is it's not
necessarily when you're startingnet new.
And Devin, you and I have beenthrough this together in a
number of iterations.
There are mature businesses attimes that need stopgap support.
And so it's not only aboutstarting from scratch.
It's sometimes you have a maturebusiness model, but there are
(21:00):
times where you need thoseresources because you may have
had internal turnover, somebodymay be going out on a maternity
leave, whatever it is.
So these sorts of situationsreally lend themselves to our
business model because it's notonly when we're looking for
these long-term relationships.
(21:21):
Of course, we want thoselong-term relationships, but
part of a long-term relationshipis being able to provide your
clients with point solutions ona just-in-time basis as they
need it.
SPEAKER_02 (21:31):
FinTechs are leanly staffed by nature.
And in the startup world,there's lots of movement of
workers.
I mean, people gain veryvaluable experience very quickly
at startups, and you know, theymay leave for another one.
I think you probably find morestaffing gaps at startups than
you would Morgan Stanley.
(21:52):
Lots of people go there and staythere for their entire careers.
That really isn't usually thestartup model.
And so there have beencircumstances where.
It's been essential to fill agap that all of a sudden have as
a result of turnover, thatnature of turnover.
And it's incredibly important tohave that resource at hand as
necessary.
SPEAKER_00 (22:12):
Overall, Mitch, what should firms be thinking about
outside of just compliance andoperations?
SPEAKER_01 (22:18):
They need to think about how they're going to staff
their customer service desk ortheir customer success desk,
however they want to call it,because the regulators are going
to be very focused on that.
And I'll talk about it from aregulatory perspective, but
maybe Devin, you can share somereal-world perspective in terms
of things that you've seen.
But from a regulatoryperspective, especially if
(22:40):
you're setting up self-directedsorts of businesses where your
customer service desk orcustomer success individuals are
there to field questions.
And most of the time, especiallyin these self-directed sorts of
businesses, and vis-a-visRobinhood and all those who look
and feel or want to be doingwhat Robinhood is doing, is how
(23:03):
are you staffing that businessfrom a customer success
standpoint?
Because in these businesses,you're going to get calls,
texts, emails, however, it'scoming in about why did my trade
not settle?
Where's my cash?
Why can't I access the app?
You guys suck.
Like whatever it may be, youhave to educate those folks
(23:25):
because now they're operating ina regulated environment, and you
need to track and deal withcustomer grievances from a FINRA
perspective.
You have to report yourquarterly customer complaint
statistics.
And there's all these hosts offields that are applicable.
Most people erroneously thinkabout that.
Customer complaints are salespractice or predatory selling or
(23:49):
unauthorized trading.
Most customer complaints areoperational in nature.
And it can be like, where's mymoney?
And so you need to be able totrack that and deal with that
and have people who are educatedto deal with that.
And most importantly, havesomebody overseeing or
supervising those folks who hasthe right expertise, experience,
(24:10):
and licensing to deal with that.
But interested in your thoughtson that, Devin.
SPEAKER_02 (24:14):
The regulatory piece is absolutely correct.
I think even on the commercialside, though, I mean, these
fintechs are trying to displaceincumbents.
And the only way that they cando that is by delighting their
customers.
That is the goal.
And I've been lucky enough towork at fintechs that we're
obsessed with customer serviceand ensuring that the customers
were happy with our products andservices.
(24:36):
Where that falls down, or if itfalls down, it can be
catastrophic for a fintech.
Uh customers going to socialmedia to complain about it can
be a significant problem.
I imagine the customers ofUnited Airlines complain about
it on social media all the time.
It doesn't pose any sort ofsignificant threat to them, but
it does for startups in thefintech space.
SPEAKER_01 (24:57):
Back in the early days of doing this and working
with organizations as they werelooking to operationalize social
media, one of the thoughts is,well, just to take that post
down.
You don't take the post down.
You show how you've dealt withit.
And so it's an opportunitybecause you only get so many
shots.
SPEAKER_02 (25:13):
I couldn't agree more.
I think trying to run one ofthese businesses without a
social media presence is justunrealistic.
And I agree with you when acompany is responsive to
customer complaints and isdemonstrably so, you know, it
can work in their favor.
Absolutely.
SPEAKER_00 (25:29):
Great.
Well, I want to thank Devin andMitch for joining us today and
talking about a little bitbehind the scenes in regards to
fintechs, how to grow and scalethe issues and the roadblocks
and how to overcome them.
So with that, I want to thankour special guest, Devin
Sullivan from Altruist and MitchAvnet, the founder and managing
(25:50):
partner at CRC Oyster, forjoining and look forward to
everyone tuning in to the nextepisode of the Built to Scale
podcast with CRC Oyster.
SPEAKER_02 (25:57):
Thanks so much for having me.
Thank you.
SPEAKER_00 (26:06):
Thank you for listening to today's podcast.
For more information, you canfind us at compliance-risk dot
com or oyster LLC dot com.
Don't forget to subscribe so younever miss an episode.
Take care, and we will see yousoon.
Welcome to the Built to Scale podcast with CRC
Oyster.
This is the new, rebrandedOyster Stew podcast following
the acquisition of OysterConsulting by Compliance Risk
Concepts.
(00:25):
Thanks so much for joining theBuilt to Scale podcast with CRC
Oyster.
I'm joined today by Mitch Avnet,the founder and managing partner
of CRC Oyster.
Hey Mitch, how are you?
I'm doing well.
Thanks so much for having me,Michael.
Of course.
And a special guest, DevinSullivan, Deputy General Counsel
at Altruist.
Devin, thanks so much forjoining us.
SPEAKER_02 (00:45):
Well, thanks for having me, Michael, and exciting
us.
SPEAKER_00 (00:48):
Absolutely.
We're very lucky to have you.
Devin, it uh it would be helpfulfor the audience if you could
give a quick background on uh onyour history.
Where did you where did youstart?
How'd you get here?
And would love to learn moreabout uh your career.
SPEAKER_02 (01:02):
Yeah, absolutely.
Thank you.
I started my career, legalcareer, at a large law firm,
like so many do, a firm calledHogan and Hartson in Washington,
D.C.
It's now called Hogan Levels.
Following that, I joined the SECstaff in the division of
investment management in arulemaking role and was there
for four years working on rulesuh governing investment
companies and investmentadvisors in particular.
(01:24):
In 2011, I moved to the WestCoast and went in-house, started
at uh large uh financialservices firms, Wells Fargo and
Franklin Templeton.
And then in 2019, I made a leftturn for FinTech and joined
Robin Hood, a pre-IPO.
And since then, I've been at uhcompanies including Angelist,
Cash App, and now Altruist, uh,where as deputy general counsel,
(01:48):
I'm I'm responsible for productand regulatory legal matters.
SPEAKER_00 (01:52):
So, in terms of kind of looking at the environment
today, I think we're seeing anexplosion in fintechs.
And we've seen that for probablythe last several years, and then
there was a little bit of aslowdown about three or four
years ago.
And then over the past 18 to 24months, we've really seen the
growth and really at aninteresting inflection point now
(02:13):
with fintechs.
Devin, would love to hear yourthoughts as being on the outside
and advising those firms, andthen on the inside helping grow
and scale.
What did you look for in termsof partnership scaling?
How did you view that while youwere both inside and outside?
SPEAKER_02 (02:29):
Yeah, I mean, I'll probably speak more about the
inside part of it, but you know,in particular at fintechs, so
the fintechs that I've joinedhave all been highly regulated.
They've had broker dealers andor investment advisors in each
circumstance.
And, you know, I think withfintech startups, they naturally
grow from generalists to addingmore specialists as time goes
(02:50):
on.
You know, you start withengineers, obviously, because
you have to have a product inorder to have a business.
Regulatory obligations beginimmediately.
And so a company has to figureout how to meet those,
particularly with limitedresources and they're
particularly limited early on.
And so the thing that I found orthat I've learned in the process
(03:10):
is that these fintech companiesthat are entering highly
regulated businesses have todevelop a stack, if you will, of
external expertise in order toscale in a compliant manner.
And, you know, obviously outsidelegal counsel is a part of that.
But I found in particular thatgetting outside expertise on the
compliance and operational sideis absolutely crucial.
(03:33):
And that's that's how I began towork with Mitch, you know, at a
Past Company and have continuedto work with him and CRC up to
up to the present day.
SPEAKER_00 (03:42):
Thank you.
And Mitch, you know, would loveyour thoughts as well, kind of
helping firms and working withtalented individuals like Devin
and others.
How do you view kind of helpinggrow and scale as a partner some
of these fintech firms?
SPEAKER_01 (03:56):
When we launched in 2013, if you asked me how often
I thought I would be going toSilicon Valley or working with
fintech startups, my answer in13 would have probably been not
at all.
We were very focused on what Iwould call traditional financial
services markets.
Fast forward to 2017, 2018, wereally started to see the
(04:19):
opportunity come to fruition interms of working with
tech-enabled companies who werebuilding newer, better ways to
skin the cat in terms ofoffering financial services to
the masses.
The term we always were hearingback then was democratization of
financial services.
But the point being, we weremeeting so many smart people who
(04:43):
had been building bettermousetraps, let's call it.
But so very smart, verytechnically astute, but little
to no experience operating inheavily regulated markets, like
you know, dealing with FINRA orthe SEC.
So, with that said, there was aneed for our expertise, but more
importantly, there was a needfor our sort of expertise at CRC
(05:08):
Oyster that could really distillwhat the client, the
fintech-enabled companies werelooking for, and really
translate that into theregulatory requirements or the
impact of those requirements onthose companies.
And the truth of the matter isthe only reason they needed to
become a broker dealer andor aninvestment advisor was the
(05:29):
utility of having thoseregistrations because their
business model necessitated itbased on how they wanted to be
compensated for doing thatbusiness.
SPEAKER_00 (05:38):
And Devin, any thoughts on that?
SPEAKER_02 (05:40):
That describes uh my experience working with CRC
entirely.
So, I mean, when I was at largecompanies, the two large
companies, I obviously workedwith outside counsel and you use
outside counsel for manydifferent things, but one of
them is their expertise inworking with many different
firms.
Like you're if you're anin-house lawyer, you have you're
(06:01):
getting great experience at theparticular firms where you are,
but you don't necessarily havethat bird's eye view of how
other firms are addressingparticularly difficult legal
problems.
The thing that I've learned, andand it's been since joining
FinTechs and working with CRC isthat you need some of that same
expertise for those same reasonson the compliance and
(06:22):
operational side.
It's it's very difficult tobuild uh compliance and
operational systems andprocesses from scratch without
understanding how other firmshave done it.
So, you know, I have found it'sbeen incredibly effective to go
to Mitch and and CRC to get thatinformation in building those
(06:45):
systems and processes and inadvising my internal clients on
on doing so.
I mean, part of FinTech,obviously, is uh, as Mitch
mentioned, remaking the way thatfinancing services has worked in
the past and particularlyapplying technology to make it
more efficient and costeffective and the like.
But I don't think you cansuccessfully innovate unless you
(07:07):
understand how others have donethings in the past.
And CRC folks have that breadthof knowledge and they act as
creative partners in buildingupon those past processes or
figuring out a new way to dothem, in particular uh in using
technology.
SPEAKER_00 (07:22):
And Mitch, looking at what what Devin had just
walked through, does anythingstand out to you as pitfalls or
certain things that fintechsthat get right have the ability
to scale versus going the wrongdirection and then kind of
facing their own demise, right?
Given the experience that you'vehad and Devin has had in terms
(07:43):
of advising and helping grow,scale, and operationalize these
ideas into full-blown entities.
Are there any certain areas thatyou look at as either things
that a firm needs to do orpitfalls that a firm should try
and stay away from in order toreceive commercial success?
SPEAKER_01 (08:00):
It's a great question and it's the right
question.
It's not that these firms aresetting out to do things the
wrong way or trying to takeshortcuts to get to an outcome.
I think it's the lack ofeducation and knowledge, and
that's not unique, or and that'snot a criticism, but it's the
(08:21):
truth.
And often we'll talk to fintechcompanies or tech-enabled
companies, I should say, andthey're under the impression
that they can stand up thesebusinesses with little to no
internal resources or theutilization of external support.
Great example is we get fintechcompanies coming to us all the
(08:42):
time saying we want to set up aself-clearing business.
And they really just don'tunderstand the intense
operational support that'srequired.
And a lot of that middle andback office expertise is very
hard to find.
And so if you were going to tryto staff something like this and
(09:03):
go out and hire teams of people,that would be very hard to do on
a de novo basis.
What you really need to thinkabout, and that's where your
legal, your accounting, yourops, your compliance partners
come in, is you need to workwith those who have been there,
who have done it, who have beenthe practitioners, and not only
help you with the guidance andadvice, but also help you with
(09:26):
staff augmentation and reallyhelping you to think about what
do those first 12 to 24 to 36months look like until you can
fully operationalize itinternally as you scale the
business.
SPEAKER_00 (09:40):
And Devin, any thoughts?
SPEAKER_02 (09:41):
Number one, I've worked uh at two companies with
clearing firms, and I couldn'tagree more that it is an intense
thing to build and that it'sabsolutely essential to get
external expertise in doing so.
I think if there are pitfalls,particularly in the brokerage
space, it's you know,circumstances where you're
building a product and you're oryou're building internal
operations, you're havingengineers do it, and it's not
(10:03):
properly supervised by folks whohave their licenses and the
expertise uh uh at the end ofthe day.
And the other part uh that Ididn't mention in in working,
say, with CRC or uh othercompliance consultants is it,
and I want to say I agree thatyou can't staff it up
immediately.
But I've worked with CRC in thepast where uh you know we've
(10:25):
brought on personnel uh uh ascontractors to help us scale the
business.
They're external, but they'reworking with us internally, and
that's been very successful.
SPEAKER_00 (10:34):
Mitch.
So when we take a look at atfintechs and tech-enabled firms,
they can't build everythingin-house, especially early on in
their journey.
How do fintechs make smartdecisions about what to own
versus what to outsource?
SPEAKER_01 (10:47):
So I think one of the things that we see that's
very common as it relates tothat scenario, that question, is
they want the utility, let'ssay, of a broker dealer, but
they're smart enough to knowthat they don't have the
licensed principles, they don'thave the expertise of operating
a FENRA-regulated broker dealer.
(11:08):
And so they're like, we want toset this up, but we want to do
this where there's enoughguardrails in place so we're not
overstepping into an area thatwe don't understand.
That's why we're hiring you.
So, great example.
When we're registering a brokerdealer for the first time, you
have to have a minimum of threeprinciples for that broker deal:
(11:28):
two series 24s and a series 27.
The most common thing that wesee is we want you and your team
to do that.
Can you give us the principles?
And what do we do here to ensurethat we're not overstepping so
that we at the let's call ittechco are inadvertently causing
(11:49):
our folks to be uh licensed asprincipals.
So there are ways to do that,and these organizations want
that sort of guardrail in place.
And and the way that we we guideand advise our clients to do
that is number one, when you'regoing through the registration
process, you can have all theprinciples, not the securities
(12:11):
principles, but you call it theprinciples of the fintech
company, sign attestations thatthey're not going to be involved
in the day-to-day operations.
We work closely with council toensure that operating agreements
are written in such a way that apower and authority isn't given
to someone or multipleindividuals that can bring them
(12:32):
into the broker dealer world.
And then the way that we set uptheir governance oversight
programs is you can set thestrategic goals and objectives
for the broker dealer, but thenit's our job, the principles of
the broker dealer, to affectthose.
And so that's an area where wesee our clients saying, we want
to rely on you.
(12:52):
Tell us how we do that withoutstepping over a line that we
don't want to.
SPEAKER_02 (12:56):
I just to riff on that a little bit, even beyond
Mitch just talked about sort ofstarting up a brokerage from
scratch, but I'm at a companynow where brokerage has been
operating for some period oftime, but there still are
opportunities to assess where weneed additional outside help or
expertise.
And I think that often shows upwhere you know you've scaled to
(13:17):
the point where internal folkscan be overwhelmed by the
workload.
At that point in time, like it'simportant to figure out whether
you need to hire, whether youneed to seek outside help from
CRC or others.
The other is when you know anexisting business tries to go
into new areas of business andnobody internally has bird's eye
view of how to get into thatother business, how to develop
(13:40):
policies, procedures, internalcontrols, et cetera.
And at that point, like I've Ifound working with external uh
compliance and and operationsexperts uh like CRC has been
it's been very helpful.
SPEAKER_00 (13:53):
And I think one of the most exciting and and
possibly dangerous moments for afintech is when they decide to
expand, right?
So either it's a new product, anew vertical, a new customer
segment.
So from your experience and andMitch or Devin, or both of you,
can you guys walk us throughwhat that inflection point
actually requires?
SPEAKER_02 (14:14):
Yeah, I mean, I I I can speak about it.
I think from the in-house side.
I mean, we obviously we havethese companies develop product
roadmaps, and at times thoseproduct roadmaps will add a new
line of business that you knowis highly regulated or that's
regulated differently.
Uh, and then there's a processof developing a uh product
(14:34):
requirements document, havinglegal counsel, internal legal
counsel and compliance expertssort of ferret out all the
particular legal and regulatoryissues, and then work with the
business to figure out whetherwe have the internal resources
to staff it.
And if we don't, then it I thinkit's time to get creative and in
looking at your sort of outsideexpert stack.
SPEAKER_01 (14:55):
Absolutely.
From my perspective, it's reallyrefreshing when you have an
organization that isstrategically thinking about
where they want to play or wherethey want to go next.
But more often than not, we seefolks who are attracted to shiny
objects.
And um, and so they reallyimmediately want to go where
(15:18):
they think the the ball isgoing, right?
And what happens is then you getinto the world of the one-offs,
and we want to do this becausethis opportunity landed on our
desk, and we think we can dothis and we and we want to give
it a shot.
That's awesome, but you cannotdo that, and this is how we
would guide our clients and ourand anyone who came to me and
(15:39):
asked this question is it'sgreat if you want to take this
strategic next step, but youcan't do it in a world where you
have no operationalinfrastructure to support it.
Even if you've been presentedwith the most amazing
opportunity that nobody else inthe world has been presented, I
will tell you, as somebody whowill attest to history repeating
(16:00):
itself, is when you get into theworld of the one-off, you will
have a problem.
Because guess what?
If you are not operationally setup to support it, you're gonna
have operational breakdowns, andoperational breakdowns lead to
compliance issues, andcompliance issues lead to
regulatory problems.
If you're serious about wantingto play in a certain area, then
(16:21):
you have to have that strategicroadmap and that outlook.
And if you want to get therefaster, there are ways to
potentially do that, i.e., youcan work with a third party
who's already built it andcreate some sort of channel
partnership with that partywhile you're building it
yourself.
Or you could take the step backand say, this is important
enough that we're gonna take thenext three, six, or nine months
(16:43):
to build this correctly becausewe truly want to be in this
business rather than takingadvantage of an opportunity that
may or may not be theretomorrow.
SPEAKER_02 (16:52):
In fintech, there's this concept of minimum viable
product where you're shipping aproduct that works and that you
hope customers love, but it'snot the fully built-out product
yet.
I think it's an excellentconcept and allows companies to
dabble into scale and to and todo all the things that they want
to do.
But with these regulatedentities, there isn't sort of a
(17:14):
minimum viable product from acompliance perspective, if that
makes any sense.
Regulators don't care thatyou're just a startup or that
you, you know, that you're newat this.
They expect uh, for good reason,strong compliance programs to
start with.
SPEAKER_00 (17:29):
So, one other thing, kind of looking at the growing
and scaling of a fintech, right?
And and sometimes founders orexecutive teams, they sometimes
resist to bringing in outsidehelp because it's almost like an
admission that they don't haveit figured out or there's a loss
of control.
How do you reframe that?
You know, Mitch, when you'rehaving conversations with
(17:51):
fintechs that are reaching outto you and talking about either
standing up a broker dealer,investment advisor, or just
general support, how do you kindof frame the partnership between
the executive team and CRCOyster, you know, so that it
really is a collaborativeapproach, not something where
they don't know it, so they'reoutsourcing it.
(18:11):
How do you work with them?
SPEAKER_01 (18:12):
Front and center is flexibility.
So we look to provide a flexiblemodel that can scale up or scale
down as needed.
And so when we understand theaspirations of the client, and
some clients may say we want afractional model because that's
in line with who we arestrategically.
More often than not, they lookat this as a point in time till
(18:36):
they hit that inflection pointwhere they can say, now we want
to internalize this.
And that was the goal of CRC andCRC Oyster from the start, is we
wanted to help companies get tothat point where we were
eventually working ourselves outof a job.
And we were comfortable in doingso because we would figure out
(18:56):
other ways to work with thatclient.
If and when the client getsthere, we're happy to work with
them, to turn it over to themand still be there as a
resource.
And that in and of itself isdisarming to those who might be
skeptical about the model andwhat it means and how you unwind
that once you're ready tointernalize it.
We believe so much in what wedo, we give clients a 60 day
(19:19):
out, no matter what.
And so you can't do that unlessyou know the model works.
And so I don't want anybody tobe stuck long term with
something that they don't need.
I want to help them figure outwhat it is they need and be a
value-added partner to help themget there.
And if you're dealing with folkswho are suspicious or skeptical
of the model, I think it justtakes an honest, direct
(19:41):
conversation to get to the pointwhere they see what this is and
what it isn't.
SPEAKER_02 (19:45):
Yeah, I agree with all of that.
I tend to frame it as soresources at a startup are
scarce and just it by nature.
And so I think that executivesare naturally looking to
allocate resources mostefficiently.
And I think oftentimes whenyou're starting in a new line of
business, new regulated line ofbusiness, the most efficient
(20:07):
allocation of resources is tooutsource some of those, you
know, some of the operationaland compliance functions to
begin with.
Hiring is very expensive,obviously, in terms of time,
obviously in terms of money.
And, you know, if you're justtrying to figure out whether
this line of business or thisproduct works or as product
market fit or the like,oftentimes the most efficient
(20:27):
way to get into it is to leginto it using, say, CRC or other
experts, and then bring thatexpertise in-house.
If you have the good fortunethat that line of business or
product is scaling.
SPEAKER_01 (20:39):
And the other thing we should talk about is it's not
necessarily when you're startingnet new.
And Devin, you and I have beenthrough this together in a
number of iterations.
There are mature businesses attimes that need stopgap support.
And so it's not only aboutstarting from scratch.
It's sometimes you have a maturebusiness model, but there are
(21:00):
times where you need thoseresources because you may have
had internal turnover, somebodymay be going out on a maternity
leave, whatever it is.
So these sorts of situationsreally lend themselves to our
business model because it's notonly when we're looking for
these long-term relationships.
(21:21):
Of course, we want thoselong-term relationships, but
part of a long-term relationshipis being able to provide your
clients with point solutions ona just-in-time basis as they
need it.
SPEAKER_02 (21:31):
FinTechs are leanly staffed by nature.
And in the startup world,there's lots of movement of
workers.
I mean, people gain veryvaluable experience very quickly
at startups, and you know, theymay leave for another one.
I think you probably find morestaffing gaps at startups than
you would Morgan Stanley.
(21:52):
Lots of people go there and staythere for their entire careers.
That really isn't usually thestartup model.
And so there have beencircumstances where.
It's been essential to fill agap that all of a sudden have as
a result of turnover, thatnature of turnover.
And it's incredibly important tohave that resource at hand as
necessary.
SPEAKER_00 (22:12):
Overall, Mitch, what should firms be thinking about
outside of just compliance andoperations?
SPEAKER_01 (22:18):
They need to think about how they're going to staff
their customer service desk ortheir customer success desk,
however they want to call it,because the regulators are going
to be very focused on that.
And I'll talk about it from aregulatory perspective, but
maybe Devin, you can share somereal-world perspective in terms
of things that you've seen.
But from a regulatoryperspective, especially if
(22:40):
you're setting up self-directedsorts of businesses where your
customer service desk orcustomer success individuals are
there to field questions.
And most of the time, especiallyin these self-directed sorts of
businesses, and vis-a-visRobinhood and all those who look
and feel or want to be doingwhat Robinhood is doing, is how
(23:03):
are you staffing that businessfrom a customer success
standpoint?
Because in these businesses,you're going to get calls,
texts, emails, however, it'scoming in about why did my trade
not settle?
Where's my cash?
Why can't I access the app?
You guys suck.
Like whatever it may be, youhave to educate those folks
(23:25):
because now they're operating ina regulated environment, and you
need to track and deal withcustomer grievances from a FINRA
perspective.
You have to report yourquarterly customer complaint
statistics.
And there's all these hosts offields that are applicable.
Most people erroneously thinkabout that.
Customer complaints are salespractice or predatory selling or
(23:49):
unauthorized trading.
Most customer complaints areoperational in nature.
And it can be like, where's mymoney?
And so you need to be able totrack that and deal with that
and have people who are educatedto deal with that.
And most importantly, havesomebody overseeing or
supervising those folks who hasthe right expertise, experience,
(24:10):
and licensing to deal with that.
But interested in your thoughtson that, Devin.
SPEAKER_02 (24:14):
The regulatory piece is absolutely correct.
I think even on the commercialside, though, I mean, these
fintechs are trying to displaceincumbents.
And the only way that they cando that is by delighting their
customers.
That is the goal.
And I've been lucky enough towork at fintechs that we're
obsessed with customer serviceand ensuring that the customers
were happy with our products andservices.
(24:36):
Where that falls down, or if itfalls down, it can be
catastrophic for a fintech.
Uh customers going to socialmedia to complain about it can
be a significant problem.
I imagine the customers ofUnited Airlines complain about
it on social media all the time.
It doesn't pose any sort ofsignificant threat to them, but
it does for startups in thefintech space.
SPEAKER_01 (24:57):
Back in the early days of doing this and working
with organizations as they werelooking to operationalize social
media, one of the thoughts is,well, just to take that post
down.
You don't take the post down.
You show how you've dealt withit.
And so it's an opportunitybecause you only get so many
shots.
SPEAKER_02 (25:13):
I couldn't agree more.
I think trying to run one ofthese businesses without a
social media presence is justunrealistic.
And I agree with you when acompany is responsive to
customer complaints and isdemonstrably so, you know, it
can work in their favor.
Absolutely.
SPEAKER_00 (25:29):
Great.
Well, I want to thank Devin andMitch for joining us today and
talking about a little bitbehind the scenes in regards to
fintechs, how to grow and scalethe issues and the roadblocks
and how to overcome them.
So with that, I want to thankour special guest, Devin
Sullivan from Altruist and MitchAvnet, the founder and managing
(25:50):
partner at CRC Oyster, forjoining and look forward to
everyone tuning in to the nextepisode of the Built to Scale
podcast with CRC Oyster.
SPEAKER_02 (25:57):
Thanks so much for having me.
Thank you.
SPEAKER_00 (26:06):
Thank you for listening to today's podcast.
For more information, you canfind us at compliance-risk dot
com or oyster LLC dot com.
Don't forget to subscribe so younever miss an episode.
Take care, and we will see yousoon.
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