August 19, 2020 • 25 mins
Oyster industry leaders discuss what firm executives and decision makers should be focusing on in today's volatile and changing business environment. Topics include:
- improving your bottom line
- updating and improving your planning services to meet client needs, risk levels and employment challenges
- managing your cybersecurity and third party vendors in a pandemic world
- vendor support
- controls, testing and disclosures
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Oyster (00:05):
Welcome to this week's serving of Oyster Stew, a mix of
financial services, commentaryand insights.
Each week, we'll discuss what ishappening in the industry, based
on what we see as we work withregulators and clients.
We hope you come away with theknowledge and tools to help you
make the best decisions for yourfirm's future.
Buddy Doyle (00:23):
Hi everybody, I'm Buddy Doyle, Chief Executive
Officer of Oyster Consulting,and I'm pleased today to
introduce some of our newestteam members that have joined us
during this pandemic while we'vebeen building strength and
thinking about the things thatour clients need the most.
We've made a lot of choices hereto add to our team, to target
(00:47):
some resources towards ourclient base.
I'm really excited today tointroduce to you Jim Roth, Bill
Davis, Ed Wegener, and JeffreyHiller.
We're g oing t o start todaywith Jim Roth, who joined us
from Pershing.
We're excited to have you here.
(01:09):
Maybe y ou can talk a little bitabout some of the challenges
that our clients are facing andsome of the things that they
really ought to be focusing onand thinking about, particularly
in light of the pandemic andthis new world that we're
working in.
Jim Roth (01:27):
Thank you, Buddy.
It's a pleasure to join youtoday.
You know, to say that businessestoday are operating in an
unpredictable environment.
That would be an understatementamid the pandemic and its impact
on the industry.
We're all facing elevated levelsof instability pressure, and of
course, anxiety.
But I think you've got to askyourself the question:"What is
(01:48):
the new normal and what will itlook like?" The immediate
challenge may be meeting theheightened client service
regulatory and reportingdemands, especially if social
distancing limits toface-to-face interaction.
I think it's also important tohelp your employees through what
continues to be a stressful anduncertain time.
(02:09):
Your firm may have to puttemporary measures in place to
get through the immediate crisisto a more sustainable footing.
Longer term considerationsshould include how to accelerate
digital and workforcetransformation while meeting the
changing expectations ofinvestors, your advisors, and
your employees.
Further questions you mayaddress could be how to align
(02:31):
the cost structures andrevisiting any operational
efficiencies.
And in a few moments, my partnerBill Davis will share his
observations in this area.
The new normal may m akecustomer engagement harder yet.
It's more important than ever to s ustain relationships, as
this crisis may have unsettledmany of your investors.
We've also seen that regulatorswill want to ensure that
(02:53):
investors understand whatthey're buying and whether it
matches their needs, which canbe difficult to do when
interactions is strictlydigital.
Firms will need to step up theircapabilities to fulfill this
priority.
You know, I think this crisishas heightened the need for
clarity on your fi rm's strategic plans about where and
how you compete.
(03:13):
This means that you may have todecide whether it's to be a
scale or a niche player.
You may also have to considerwhether it's best to build, buy,
or borrow the capabilities youneed.
You know, building capabilitiescan be difficult when you're
trying to move quickly.
Buying can be costly though.
Market movements can bring moretargets to a more affordable
(03:35):
range, and borrowing throughpartnerships and collaboration
could help you strengthen yourcapabilities and meet your
changing investor demandswithout imposing prohibited,
extra costs.
In some cases, for the sake ofensuring business continuity, it
may be necessarily to reduceinvestments, freeze hiring, or
even avoid entering new markets.
(03:56):
But in other instances, theseshort term tactics may have
repercussions on your longerterm strategy.
So it's always important to usea broad lens and a balanced
perspective.
We know from experiences atOyster that organizations with a
clear outlook and a proactivestrategy are more resilient and
usually earn a competitiveadvantage over the long-term.
(04:19):
Buddy, I'll turn it back over toyou.
Buddy Doyle (04:22):
Thanks, Jim.
I think, wow, you just mentioneda few things that really struck
me (04:29):
unsettled investors and how to meet their needs, taking a
longer term view in terms ofwhat you're doing and what
you're trying to accomplish, andhaving that balanced
perspective.
Those are all things that arereally kind of important,
particularly in thisenvironment, along with the
(04:51):
digital tools in order to serveyour clients' needs and really
keep your employees and teamsafe during this time.
Bill, you've been at Wells Fargoa dvisors and Folio, and you've
kind of been in the industry fora good while.
Maybe you could talk a littlebit about some of those
(05:13):
challenges of meeting theinvestors' needs and aligning to
their risk profiles, and i nthat longer term view a nd i n a
time where short term, it justcan be really u nsettled.
Bill Davis (05:27):
Thanks, Buddy.
One of the things that we'rewe're working on here is
advisory and planning servicesto help firms execute on those,
howto become more effective andefficient at how you can put
together a client's plans.
Many firms want to increaseplanning and the FAs typically
(05:50):
don't want to take the time todo that, or there's difficulty
with getting buy-in there.
So there's been some significantchallenges there.
One of the things we've heardand read is that about 93% of
advisors say that clients havecontacted them about their
retirement plans.
Firms are looking at thechallenge of beefing up planning
(06:14):
so they can help clients move inthe right direction.
P air p lanning is one thing that that's been critical in the
industry, and talking to ourpartners, we're seeing that it's
really taken off.
There has been a huge interestin firms across the country in
trying to increase assets undermanagement, to be more efficient
(06:37):
in how they build plans.
That's something that we'rereally looking closely at-
helping clients gather data,reorganize the data, review
assumptions, input information,develop a target plan, review
those target plans and workclosely with the FAs.
Because we have a risk andcompliance background, it's
(06:59):
something that we really areinterested in looking at and
working closely with, witheveryone on and doing the
research, with others in theindustry to ensure that we're on
target with things like softwareselection.
There are many companies outthere who offer planning
services.
Something that we can also helpwith is how you select your
(07:23):
software, what's best for theculture and the best for the fit
for your firm.
And then one of the other thingsfirms seem to struggle with is,
once you choose software,"how doI transition?" And,"I moved from
one software to the other- ifI'm currently wi th t he
software planning service, and Iwant to move to another one, how
(07:43):
do I effectively do that?"There's some pieces of that,
that can be uploadedautomatically, but there are
other pieces that can't beuploaded and that's extremely
challenging for firms as theymove to a new vendor.
Also the change of culture forthe firm as you move from one
vendor to another.
(08:04):
The last thing, one of thethings we really look at and are
very interested in, is aroundmentoring and helping firms
understand the planningsoftware, how better to use it,
how to be more effective.
How can you effectively use thesoftware, help the FAs as
they're putting together theplans through pair planning to
(08:24):
give them more time, to helpincrease assets under
management, identify thoseassets that are held away and
create a culture that you canbring those assets in.
Covid-19 has disrupted personallives and businesses creating a
challenging environment in theretirement planning industry.
Some of the changes areirreversible.
(08:45):
Small business owners have bornethe brunt of the disruption.
Valuations have fallen, rol esfo r retirement planning have
changed, health insurance pricesare expected to go up.
Life, disability and long-termcare insurance are having
increases in product pricing.
When it comes to retirementplanning tools, it can be very
(09:08):
complex and cumbersome to dealwith an influx of clients
concerned about where they needto go from here.
So Buddy, that's part of whatwe're really looking at today
and part of what I'm excitedabout and working at Oyster,
working with the great team hereto help folks with the planning
(09:28):
and advisory service piece.
Buddy Doyle (09:30):
These planning tools, they're very powerful
tools, but they haveassumptions.
As Bill mentioned, they're allbuilt on some assumptions about
how the market's going toperform, but with all the
clients reaching out today, andso many clients reaching out to
(09:50):
talk about their retirementplans and their concerns about
that.
As Jim talked about having theright tools, digital tools to
engage with your clients, I justkeep thinking about the
unemployment levels right now,and the risk in this market and
all those 401Ks that are sittingthere and investments that
(10:18):
haven't had a plan around them,and to take these plans and
think about life goals andlonger term goals is really
important in today's world.
But to do that properly, I thinkthere is a regulatory risk that
comes along with some of this.
(10:38):
You mentioned conversions andgetting data in the wrong way.
The last thing you want is baddata to lead you to a bad plan,
that's an outcome where yourclient i sn't successful.
But there's a lot of differentrisks that come along with
serving your clients today inthis environment.
Ed, maybe you could talk alittle bit about some of the
(11:01):
regulatory views on planning andserving clients.
I know we've got this big Reg BIthing that is now out there in
the world and has been for sixweeks.
Ed's joined us from FINRA, whichwas his prior employer, and they
(11:22):
have perspectives from aregulatory perspective on these
topics.
Maybe you could share a littlebit about what o ur c lients
could be thinking about.
Ed Wegener (11:31):
When I listen to what Jim and Bill talked about,
it's pretty dizzy, right?
And you think about where we'reat right now.
It's an extremely difficult timeto navigate on top of all the
normal concerns that you dealwith on a day-to-day basis.
As Jim mentioned, there's thesesignificant challenges just in
(11:52):
dealing with impact that thepandemic is having, but at the
same time, other things don'tstop.
You had mentioned Reg BI forretail firms.
This is one of the biggestchanges to the standard of care,
to conflict mitigation, todisclosure requirements, that
firms have had in decades.
At the same time this hashappening, there's major changes
(12:14):
to the reporting requirementswith CAT.
And then, as everybody hadmentioned that the increasing
reliance on technology tools andmoving to digital, it increases
the vulnerabilities that firmsface in terms of things like
cyber attacks and intrusions,and all of this is happening all
at the same time.
It's really like an inflectionpoint.
(12:35):
While I think that regulatorsare sensitive to the issues and
the challenges that firms arefacing these days, at the end of
the day they still expect firmsto be vigilant and ensuring that
these risks are managed and thatinvestors are protected.
So firms are really going toneed to make sure that they're
able to adapt their processes,their systems, their controls
(13:00):
for this new environment.
And some of this might betemporary.
In other cases, it's nottemporary.
This is what everybody's sayingis the new normal and firms are
just going to have to make surethat they're able to adapt to
these changes, while at the sametime making sure that they're
keeping all their otheroperations going as usual.
(13:21):
The ability that firms are going t o need to be able to
effectively operate a nd monitorand task remotely now is going
to be a must.
I think that's one of thereasons that I'm excited to be
here with Oyster because I thinkthat the breadth and the depth
of experience that we have canhelp firms through this, but
(13:43):
also the ability that we'vecreated through the technology
and tools that you h admentioned in your recent blog p
osts, I think w ill really helpposition us to be able to
support firms as they do thingsmore remotely now.
Buddy Doyle (13:58):
In this remote world and using tools like
Bill's talking about brings thatout a little bit- o ur
cybersecurity risk, and we're athird party vendor to firms in
the financial services industry,both through software and
(14:19):
consulting, and we get kind ofrun through the ringer quite a
bit, which is great.
We feel good about that becausewe know our clients are
listening to us when theyimplement controls, even when
we're the victim of them, as faras dealing with routine
questionnaires and things likethat.
But one of the things about thisworld is there is an entire
(14:42):
eco-structure built aroundsupporting organizations through
the use of third party tools.
I know that could be everythingfrom your clearing provider to
your custodian, for youradvisory business, to your
commission systems.
And Jim, I know you're doing alot with organizations to
(15:05):
evaluate how to benefit fromthird party providers.
Can you talk a little bit aboutsome of the work that you're
doing in terms of vendorselection and the approach to
that?
Jim Roth (15:21):
Yeah, Buddy, I appreciate this question because
we have leveraged third partyrelationships over the years.
Think about it for a moment.
Businesses increasingly don't doit alone.
You know, over the years we'veseen firms leveraging a network
of third party relationships,some being strategic and some
not, but these generalrelationships can provide
(15:42):
organizational value and clearlya competitive advantage.
I'd say to you over the pastfive years, the use of third
party relationships hasincreased exponentially, but you
also have to pause by doing thisby saying organizations could
also be exposing themselves to ahigh risk profile like never
(16:03):
before.
So you've got to be careful withthat one way or the other.
It could cause you a financialor a reputational risk.
Clearly, as Ed can attest, andJeffery, there's a legal and
regulatory risk involved intothis as well, and obviously
there's an operational risk.
Think about for a moment (16:19):
if your system was down and it
caused a disruption in youroperations.
But my point to you is thatthere's just a wealth of
information from many of thesethird party relationships.
And I think you do yourself adisservice if you didn't reach
out to those third partyrelationships and try to
leverage their talent and theirexpertise.
(16:40):
It's out there.
You should take advantage of itif you can.
Buddy Doyle (16:44):
Yeah, it is definitely out there.
And I think too, the way youtake advantage of that can be
important as well.
And Jeffrey, I know you've spenta lot of time working with
advisors and you've lived thisconflict management life that
Reg BI has put on broker-dealersover the last six weeks, but
(17:08):
you've been obviously livingthat your entire career with
conflicts needing to bedisclosed.
One of the things that I oftenthink about is custodians and
clearing firms, they offerservices for you.
There's ways to disclose that,that they will keep you safe,
but Jeffrey, maybe you couldtalk a little bit about some of
(17:30):
the controls around disclosuresand conflicts and some other
things that our clients couldcould learn from, from your
experience, both at the SEC, aswell as being a CCO for some
large organizations.
Jeffrey Hiller (17:46):
Thank you, buddy.
I think what I emphasize herethat everybody uses vendors and
service providers and the SEC,as well as a lot of states,
require firms to conductoversight of their service
providers to ensure they'recarrying out their contracted
services effectively.
And in the manner intendedservice providers can be
(18:08):
custodians pricing services,tech support, proxy, voting
services, and other servicesthat you use to manage your
counts.
Due diligence of these serviceproviders should include a
review of their policies andprocedures, the effectiveness of
their services and other issuessuch as private for privacy
(18:28):
protections that they mayprovide in SEC-speak.
You would say that you want toensure that the vendors have in
place policies and proceduresdesigned reasonably to prevent
and detect violations of thefederal securities laws and
state laws.
In addition to reviewing theirpolicies and controls, you
should also look at theirdisclosures as well as testing
(18:51):
where appropriate.
In this age and thecircumstances w e're in, you
have to be creative in terms ofwhat you need and how you can
test service providers andvendors.
You should oversee them andreview them at least annually.
More frequently if red flagsarise.
These reviews can take differentforms.
(19:13):
It can be done on site ascircumstances allow.
Some may present more risks thanothers and require more
oversight.
And finally, these reviewsshould be on your compliance
calendar and can be done overthe course of the year.
So the different vendors arereviewed at different times, but
can be rolled up into yourannual review.
(19:34):
These are really critical andI've experienced in the past
where a vendor has some redflags or had an exception.
You really have to stay on topof this and make sure you know
your vendors.
Buddy Doyle (19:48):
Yeah, I think knowing your vendors is really,
really important.
And as a vendor, we love to knowour clients.
We do much better serving ourclients the more we know about
them, the more we're able tohelp them define that reasonable
or appropriate standard, right?
The regulators throw out"reasonable," and it's really
(20:10):
hard to know what thatGoldilocks standard looks like.
Is it too big?
Is it too small?
Is it too hard?
Is it too soft?
In order to know that, we haveto understand our clients, which
is why you guys are here.
And we're excited that you are,to be able to wrap ourselves
(20:31):
around o ur clients, understandtheir strategies, understand how
they serve their clients inthoughtful ways and how to keep
them in compliance with rulesand regulations as well as being
efficient.
I'm really pleased that you guysare here.
(20:53):
I thank you for sharing yourwisdom with o ur client base.
There a re friends in theindustry who are listening
today.
I'm g oing t o open it up to seeif anybody has some, some final
thoughts for our clients.
Jeffrey Hiller (21:09):
Every business is unique.
And so there's, no, we can't sayyou've got to do a, B, C, and D.
You have to understand and havethe rules and oversight fit your
business rather than you fittinginto some model.
And I think that's reallycritical.
Ed Wegener (21:26):
Having the ability to effectively operate, monitor
and test remotely is going to bea must.
And that's where I thinkOyster's, breadth and depth of
experience can be verybeneficial.
Jim Roth (21:38):
But what's at the heart of every business is it's
customers.
Before making any changes,consider how they'll a ffect the
customer experience.
If customer experience is one ofyour key competitive advantages,
be especially careful aboutchanges.
If you destroy one of yourcompetitive advantages, you
might end up dealing a deathblow to your business.
(22:00):
If you do make changes that willdirectly affect the customer,
communicate those clearly.
Ex plain t o the customer whyyou have to make the changes and
the outcomes you expect.
The more transparent you arewith your customers, the more
understanding they'll be duringtimes of global crisis.
It's especially important tokeep the focus on the customers.
(22:21):
People will always remember theactions you took and how it made
them feel.
Buddy Doyle (22:26):
Yeah, I can tell you as an entrepreneur and a CEO
of an organization, that it is avery challenging environment,
both from the emotions of ourclients, the emotions of our
teams, our own emotions.
Is the market in a bubble?
(22:48):
Is the economy going tocollapse?
What is going on with the virus?
When will we go back to work?
How will we keep our employeessafe?
When we go back to work, allthese things are coming at us
fast and furious and every day.
And we're in an election cycle,which is not unusual for us, but
(23:12):
it's unusual for us to be in anelection cycle, in a pandemic,
in a global recession withunemployment off the charts, but
getting better.
And so there's so many differentways the market can go so many
ways the economy can go andhaving a plan for all of them,
(23:34):
the likely scenarios, is reallyimportant.
Knowing what bets to place now and what b ets to pull off the
table is really important.
And it's a real unique time.
I think that it's a good time toreach out and collaborate with
(23:55):
folks in the industry, expertslike the ones we have on this
podcast today, and people thatyou compete with, y our worthy
competitors.
I work with lots of CEOs andhave lots of conversations about
all the things that we'redealing with today.
(24:15):
I n this environment I'mfortunate to have a team of
industry experts that surroundedme every day, that help me make
the best choices that I canmake.
I'm happy that they're availableto help you make the same
choices.
So with that, thank you so muchfor listening.
Thank you for your time, and Ihope you'll tune in next time.
Oyster (24:41):
Thanks again for listening to the Oyster Stew
podcast.
Don't forget to subscribe so wecan continue to bring you
resources to help you make thebest decisions for your firm.
If you're struggling with atopic and you'd like us to do a
podcast on it, or you'd like afree consultation, feel free to
reach out to us at(804)965-5400, or by visiting our
(25:04):
website oysterllc.com.
Welcome to this week's serving of Oyster Stew, a mix of
financial services, commentaryand insights.
Each week, we'll discuss what ishappening in the industry, based
on what we see as we work withregulators and clients.
We hope you come away with theknowledge and tools to help you
make the best decisions for yourfirm's future.
Buddy Doyle (00:23):
Hi everybody, I'm Buddy Doyle, Chief Executive
Officer of Oyster Consulting,and I'm pleased today to
introduce some of our newestteam members that have joined us
during this pandemic while we'vebeen building strength and
thinking about the things thatour clients need the most.
We've made a lot of choices hereto add to our team, to target
(00:47):
some resources towards ourclient base.
I'm really excited today tointroduce to you Jim Roth, Bill
Davis, Ed Wegener, and JeffreyHiller.
We're g oing t o start todaywith Jim Roth, who joined us
from Pershing.
We're excited to have you here.
(01:09):
Maybe y ou can talk a little bitabout some of the challenges
that our clients are facing andsome of the things that they
really ought to be focusing onand thinking about, particularly
in light of the pandemic andthis new world that we're
working in.
Jim Roth (01:27):
Thank you, Buddy.
It's a pleasure to join youtoday.
You know, to say that businessestoday are operating in an
unpredictable environment.
That would be an understatementamid the pandemic and its impact
on the industry.
We're all facing elevated levelsof instability pressure, and of
course, anxiety.
But I think you've got to askyourself the question:"What is
(01:48):
the new normal and what will itlook like?" The immediate
challenge may be meeting theheightened client service
regulatory and reportingdemands, especially if social
distancing limits toface-to-face interaction.
I think it's also important tohelp your employees through what
continues to be a stressful anduncertain time.
(02:09):
Your firm may have to puttemporary measures in place to
get through the immediate crisisto a more sustainable footing.
Longer term considerationsshould include how to accelerate
digital and workforcetransformation while meeting the
changing expectations ofinvestors, your advisors, and
your employees.
Further questions you mayaddress could be how to align
(02:31):
the cost structures andrevisiting any operational
efficiencies.
And in a few moments, my partnerBill Davis will share his
observations in this area.
The new normal may m akecustomer engagement harder yet.
It's more important than ever to s ustain relationships, as
this crisis may have unsettledmany of your investors.
We've also seen that regulatorswill want to ensure that
(02:53):
investors understand whatthey're buying and whether it
matches their needs, which canbe difficult to do when
interactions is strictlydigital.
Firms will need to step up theircapabilities to fulfill this
priority.
You know, I think this crisishas heightened the need for
clarity on your fi rm's strategic plans about where and
how you compete.
(03:13):
This means that you may have todecide whether it's to be a
scale or a niche player.
You may also have to considerwhether it's best to build, buy,
or borrow the capabilities youneed.
You know, building capabilitiescan be difficult when you're
trying to move quickly.
Buying can be costly though.
Market movements can bring moretargets to a more affordable
(03:35):
range, and borrowing throughpartnerships and collaboration
could help you strengthen yourcapabilities and meet your
changing investor demandswithout imposing prohibited,
extra costs.
In some cases, for the sake ofensuring business continuity, it
may be necessarily to reduceinvestments, freeze hiring, or
even avoid entering new markets.
(03:56):
But in other instances, theseshort term tactics may have
repercussions on your longerterm strategy.
So it's always important to usea broad lens and a balanced
perspective.
We know from experiences atOyster that organizations with a
clear outlook and a proactivestrategy are more resilient and
usually earn a competitiveadvantage over the long-term.
(04:19):
Buddy, I'll turn it back over toyou.
Buddy Doyle (04:22):
Thanks, Jim.
I think, wow, you just mentioneda few things that really struck
me (04:29):
unsettled investors and how to meet their needs, taking a
longer term view in terms ofwhat you're doing and what
you're trying to accomplish, andhaving that balanced
perspective.
Those are all things that arereally kind of important,
particularly in thisenvironment, along with the
(04:51):
digital tools in order to serveyour clients' needs and really
keep your employees and teamsafe during this time.
Bill, you've been at Wells Fargoa dvisors and Folio, and you've
kind of been in the industry fora good while.
Maybe you could talk a littlebit about some of those
(05:13):
challenges of meeting theinvestors' needs and aligning to
their risk profiles, and i nthat longer term view a nd i n a
time where short term, it justcan be really u nsettled.
Bill Davis (05:27):
Thanks, Buddy.
One of the things that we'rewe're working on here is
advisory and planning servicesto help firms execute on those,
howto become more effective andefficient at how you can put
together a client's plans.
Many firms want to increaseplanning and the FAs typically
(05:50):
don't want to take the time todo that, or there's difficulty
with getting buy-in there.
So there's been some significantchallenges there.
One of the things we've heardand read is that about 93% of
advisors say that clients havecontacted them about their
retirement plans.
Firms are looking at thechallenge of beefing up planning
(06:14):
so they can help clients move inthe right direction.
P air p lanning is one thing that that's been critical in the
industry, and talking to ourpartners, we're seeing that it's
really taken off.
There has been a huge interestin firms across the country in
trying to increase assets undermanagement, to be more efficient
(06:37):
in how they build plans.
That's something that we'rereally looking closely at-
helping clients gather data,reorganize the data, review
assumptions, input information,develop a target plan, review
those target plans and workclosely with the FAs.
Because we have a risk andcompliance background, it's
(06:59):
something that we really areinterested in looking at and
working closely with, witheveryone on and doing the
research, with others in theindustry to ensure that we're on
target with things like softwareselection.
There are many companies outthere who offer planning
services.
Something that we can also helpwith is how you select your
(07:23):
software, what's best for theculture and the best for the fit
for your firm.
And then one of the other thingsfirms seem to struggle with is,
once you choose software,"how doI transition?" And,"I moved from
one software to the other- ifI'm currently wi th t he
software planning service, and Iwant to move to another one, how
(07:43):
do I effectively do that?"There's some pieces of that,
that can be uploadedautomatically, but there are
other pieces that can't beuploaded and that's extremely
challenging for firms as theymove to a new vendor.
Also the change of culture forthe firm as you move from one
vendor to another.
(08:04):
The last thing, one of thethings we really look at and are
very interested in, is aroundmentoring and helping firms
understand the planningsoftware, how better to use it,
how to be more effective.
How can you effectively use thesoftware, help the FAs as
they're putting together theplans through pair planning to
(08:24):
give them more time, to helpincrease assets under
management, identify thoseassets that are held away and
create a culture that you canbring those assets in.
Covid-19 has disrupted personallives and businesses creating a
challenging environment in theretirement planning industry.
Some of the changes areirreversible.
(08:45):
Small business owners have bornethe brunt of the disruption.
Valuations have fallen, rol esfo r retirement planning have
changed, health insurance pricesare expected to go up.
Life, disability and long-termcare insurance are having
increases in product pricing.
When it comes to retirementplanning tools, it can be very
(09:08):
complex and cumbersome to dealwith an influx of clients
concerned about where they needto go from here.
So Buddy, that's part of whatwe're really looking at today
and part of what I'm excitedabout and working at Oyster,
working with the great team hereto help folks with the planning
(09:28):
and advisory service piece.
Buddy Doyle (09:30):
These planning tools, they're very powerful
tools, but they haveassumptions.
As Bill mentioned, they're allbuilt on some assumptions about
how the market's going toperform, but with all the
clients reaching out today, andso many clients reaching out to
(09:50):
talk about their retirementplans and their concerns about
that.
As Jim talked about having theright tools, digital tools to
engage with your clients, I justkeep thinking about the
unemployment levels right now,and the risk in this market and
all those 401Ks that are sittingthere and investments that
(10:18):
haven't had a plan around them,and to take these plans and
think about life goals andlonger term goals is really
important in today's world.
But to do that properly, I thinkthere is a regulatory risk that
comes along with some of this.
(10:38):
You mentioned conversions andgetting data in the wrong way.
The last thing you want is baddata to lead you to a bad plan,
that's an outcome where yourclient i sn't successful.
But there's a lot of differentrisks that come along with
serving your clients today inthis environment.
Ed, maybe you could talk alittle bit about some of the
(11:01):
regulatory views on planning andserving clients.
I know we've got this big Reg BIthing that is now out there in
the world and has been for sixweeks.
Ed's joined us from FINRA, whichwas his prior employer, and they
(11:22):
have perspectives from aregulatory perspective on these
topics.
Maybe you could share a littlebit about what o ur c lients
could be thinking about.
Ed Wegener (11:31):
When I listen to what Jim and Bill talked about,
it's pretty dizzy, right?
And you think about where we'reat right now.
It's an extremely difficult timeto navigate on top of all the
normal concerns that you dealwith on a day-to-day basis.
As Jim mentioned, there's thesesignificant challenges just in
(11:52):
dealing with impact that thepandemic is having, but at the
same time, other things don'tstop.
You had mentioned Reg BI forretail firms.
This is one of the biggestchanges to the standard of care,
to conflict mitigation, todisclosure requirements, that
firms have had in decades.
At the same time this hashappening, there's major changes
(12:14):
to the reporting requirementswith CAT.
And then, as everybody hadmentioned that the increasing
reliance on technology tools andmoving to digital, it increases
the vulnerabilities that firmsface in terms of things like
cyber attacks and intrusions,and all of this is happening all
at the same time.
It's really like an inflectionpoint.
(12:35):
While I think that regulatorsare sensitive to the issues and
the challenges that firms arefacing these days, at the end of
the day they still expect firmsto be vigilant and ensuring that
these risks are managed and thatinvestors are protected.
So firms are really going toneed to make sure that they're
able to adapt their processes,their systems, their controls
(13:00):
for this new environment.
And some of this might betemporary.
In other cases, it's nottemporary.
This is what everybody's sayingis the new normal and firms are
just going to have to make surethat they're able to adapt to
these changes, while at the sametime making sure that they're
keeping all their otheroperations going as usual.
(13:21):
The ability that firms are going t o need to be able to
effectively operate a nd monitorand task remotely now is going
to be a must.
I think that's one of thereasons that I'm excited to be
here with Oyster because I thinkthat the breadth and the depth
of experience that we have canhelp firms through this, but
(13:43):
also the ability that we'vecreated through the technology
and tools that you h admentioned in your recent blog p
osts, I think w ill really helpposition us to be able to
support firms as they do thingsmore remotely now.
Buddy Doyle (13:58):
In this remote world and using tools like
Bill's talking about brings thatout a little bit- o ur
cybersecurity risk, and we're athird party vendor to firms in
the financial services industry,both through software and
(14:19):
consulting, and we get kind ofrun through the ringer quite a
bit, which is great.
We feel good about that becausewe know our clients are
listening to us when theyimplement controls, even when
we're the victim of them, as faras dealing with routine
questionnaires and things likethat.
But one of the things about thisworld is there is an entire
(14:42):
eco-structure built aroundsupporting organizations through
the use of third party tools.
I know that could be everythingfrom your clearing provider to
your custodian, for youradvisory business, to your
commission systems.
And Jim, I know you're doing alot with organizations to
(15:05):
evaluate how to benefit fromthird party providers.
Can you talk a little bit aboutsome of the work that you're
doing in terms of vendorselection and the approach to
that?
Jim Roth (15:21):
Yeah, Buddy, I appreciate this question because
we have leveraged third partyrelationships over the years.
Think about it for a moment.
Businesses increasingly don't doit alone.
You know, over the years we'veseen firms leveraging a network
of third party relationships,some being strategic and some
not, but these generalrelationships can provide
(15:42):
organizational value and clearlya competitive advantage.
I'd say to you over the pastfive years, the use of third
party relationships hasincreased exponentially, but you
also have to pause by doing thisby saying organizations could
also be exposing themselves to ahigh risk profile like never
(16:03):
before.
So you've got to be careful withthat one way or the other.
It could cause you a financialor a reputational risk.
Clearly, as Ed can attest, andJeffery, there's a legal and
regulatory risk involved intothis as well, and obviously
there's an operational risk.
Think about for a moment (16:19):
if your system was down and it
caused a disruption in youroperations.
But my point to you is thatthere's just a wealth of
information from many of thesethird party relationships.
And I think you do yourself adisservice if you didn't reach
out to those third partyrelationships and try to
leverage their talent and theirexpertise.
(16:40):
It's out there.
You should take advantage of itif you can.
Buddy Doyle (16:44):
Yeah, it is definitely out there.
And I think too, the way youtake advantage of that can be
important as well.
And Jeffrey, I know you've spenta lot of time working with
advisors and you've lived thisconflict management life that
Reg BI has put on broker-dealersover the last six weeks, but
(17:08):
you've been obviously livingthat your entire career with
conflicts needing to bedisclosed.
One of the things that I oftenthink about is custodians and
clearing firms, they offerservices for you.
There's ways to disclose that,that they will keep you safe,
but Jeffrey, maybe you couldtalk a little bit about some of
(17:30):
the controls around disclosuresand conflicts and some other
things that our clients couldcould learn from, from your
experience, both at the SEC, aswell as being a CCO for some
large organizations.
Jeffrey Hiller (17:46):
Thank you, buddy.
I think what I emphasize herethat everybody uses vendors and
service providers and the SEC,as well as a lot of states,
require firms to conductoversight of their service
providers to ensure they'recarrying out their contracted
services effectively.
And in the manner intendedservice providers can be
(18:08):
custodians pricing services,tech support, proxy, voting
services, and other servicesthat you use to manage your
counts.
Due diligence of these serviceproviders should include a
review of their policies andprocedures, the effectiveness of
their services and other issuessuch as private for privacy
(18:28):
protections that they mayprovide in SEC-speak.
You would say that you want toensure that the vendors have in
place policies and proceduresdesigned reasonably to prevent
and detect violations of thefederal securities laws and
state laws.
In addition to reviewing theirpolicies and controls, you
should also look at theirdisclosures as well as testing
(18:51):
where appropriate.
In this age and thecircumstances w e're in, you
have to be creative in terms ofwhat you need and how you can
test service providers andvendors.
You should oversee them andreview them at least annually.
More frequently if red flagsarise.
These reviews can take differentforms.
(19:13):
It can be done on site ascircumstances allow.
Some may present more risks thanothers and require more
oversight.
And finally, these reviewsshould be on your compliance
calendar and can be done overthe course of the year.
So the different vendors arereviewed at different times, but
can be rolled up into yourannual review.
(19:34):
These are really critical andI've experienced in the past
where a vendor has some redflags or had an exception.
You really have to stay on topof this and make sure you know
your vendors.
Buddy Doyle (19:48):
Yeah, I think knowing your vendors is really,
really important.
And as a vendor, we love to knowour clients.
We do much better serving ourclients the more we know about
them, the more we're able tohelp them define that reasonable
or appropriate standard, right?
The regulators throw out"reasonable," and it's really
(20:10):
hard to know what thatGoldilocks standard looks like.
Is it too big?
Is it too small?
Is it too hard?
Is it too soft?
In order to know that, we haveto understand our clients, which
is why you guys are here.
And we're excited that you are,to be able to wrap ourselves
(20:31):
around o ur clients, understandtheir strategies, understand how
they serve their clients inthoughtful ways and how to keep
them in compliance with rulesand regulations as well as being
efficient.
I'm really pleased that you guysare here.
(20:53):
I thank you for sharing yourwisdom with o ur client base.
There a re friends in theindustry who are listening
today.
I'm g oing t o open it up to seeif anybody has some, some final
thoughts for our clients.
Jeffrey Hiller (21:09):
Every business is unique.
And so there's, no, we can't sayyou've got to do a, B, C, and D.
You have to understand and havethe rules and oversight fit your
business rather than you fittinginto some model.
And I think that's reallycritical.
Ed Wegener (21:26):
Having the ability to effectively operate, monitor
and test remotely is going to bea must.
And that's where I thinkOyster's, breadth and depth of
experience can be verybeneficial.
Jim Roth (21:38):
But what's at the heart of every business is it's
customers.
Before making any changes,consider how they'll a ffect the
customer experience.
If customer experience is one ofyour key competitive advantages,
be especially careful aboutchanges.
If you destroy one of yourcompetitive advantages, you
might end up dealing a deathblow to your business.
(22:00):
If you do make changes that willdirectly affect the customer,
communicate those clearly.
Ex plain t o the customer whyyou have to make the changes and
the outcomes you expect.
The more transparent you arewith your customers, the more
understanding they'll be duringtimes of global crisis.
It's especially important tokeep the focus on the customers.
(22:21):
People will always remember theactions you took and how it made
them feel.
Buddy Doyle (22:26):
Yeah, I can tell you as an entrepreneur and a CEO
of an organization, that it is avery challenging environment,
both from the emotions of ourclients, the emotions of our
teams, our own emotions.
Is the market in a bubble?
(22:48):
Is the economy going tocollapse?
What is going on with the virus?
When will we go back to work?
How will we keep our employeessafe?
When we go back to work, allthese things are coming at us
fast and furious and every day.
And we're in an election cycle,which is not unusual for us, but
(23:12):
it's unusual for us to be in anelection cycle, in a pandemic,
in a global recession withunemployment off the charts, but
getting better.
And so there's so many differentways the market can go so many
ways the economy can go andhaving a plan for all of them,
(23:34):
the likely scenarios, is reallyimportant.
Knowing what bets to place now and what b ets to pull off the
table is really important.
And it's a real unique time.
I think that it's a good time toreach out and collaborate with
(23:55):
folks in the industry, expertslike the ones we have on this
podcast today, and people thatyou compete with, y our worthy
competitors.
I work with lots of CEOs andhave lots of conversations about
all the things that we'redealing with today.
(24:15):
I n this environment I'mfortunate to have a team of
industry experts that surroundedme every day, that help me make
the best choices that I canmake.
I'm happy that they're availableto help you make the same
choices.
So with that, thank you so muchfor listening.
Thank you for your time, and Ihope you'll tune in next time.
Oyster (24:41):
Thanks again for listening to the Oyster Stew
podcast.
Don't forget to subscribe so wecan continue to bring you
resources to help you make thebest decisions for your firm.
If you're struggling with atopic and you'd like us to do a
podcast on it, or you'd like afree consultation, feel free to
reach out to us at(804)965-5400, or by visiting our
(25:04):
website oysterllc.com.
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