Remarks as Prepared for SIFMA Ops 2019 – Joe Seidel, SIFMA

Remarks as prepared for SIFMA’s 46th annual Operations Conference & Exhibition.

Good morning, and welcome to day two of SIFMA Ops.  We have another full day of terrific sessions ahead of us. I’d like to extend a special thank you to all our speakers, as well as to our sponsors.  We appreciate your ongoing support of SIFMA.

We had a great day yesterday.  We heard from SIFMA CEO, Ken Bentsen on some of the key themes here this week:

  • First, what’s ahead for you as operations professionals, given the ever-changing nature of your role and the very important role you play.
  • Second, throughout yesterday, we gained insight on how the industry is leveraging innovations in technology to better serve customers including the need to advance efforts to protect client data.
  • Third, we discussed how ever-improving risk management protocols are working to keep our firms and clients safe.

Today we’ll be exploring these topics with insights from featured speakers Tim Gokey, President and CEO of Broadridge; Peter Driscoll, Director in the SEC’s Office of Compliance Inspections and Examinations; Stuart Wexler, Group General Counsel of NEX Group; and Steven Randich, Executive Vice President and CIO at FINRA; along with a panel of regulatory and industry experts and a group of DTCC leaders, and numerous breakout session panels.

As I look at the operations space, I see two perspectives – we are operating on the offense or the defense and, at many times, both sides simultaneously.  On the offense, you are our front-line operations experts as you look at innovations and translate them into new products which drive revenue opportunities, drive down front office costs and boost net income. At the same time, you are working to adhere to a myriad of regulatory requirements, all while staying ahead on the cybersecurity and business preparedness fronts such as participating in SIFMA’s Quantum Dawn exercises and leveraging new technologies in the artificial intelligence realm.

We are exploring the factors reshaping operations, the customer experience and market requirements on both sides—including the evolving role of the operations professional.  I know I don’t need to walk this group through the many changes which have taken place in recent years:  you’ve lived it and continue to keep pace with the rapid progression of new ways of doing your jobs, while accepting increasing responsibility for helping to bring innovation and new technologies to your firms.  That is no small task.

As we talk about where we go from here, it is impossible to consider the future of our industry, and particularly the operations function, without talking about fintech and the ever-expanding role of technology in how we do business.

On the whole, new fintech applications drive improvements in efficiency and client experience and enhance results.  Whether the impacts are complementary to existing business models or create disruptive forces for established players and systems, the application of emerging technologies is moving our industry forward.

The transformation we are seeing today is not just an extension of prior applications or technology, but instead is the introduction of new ways that firms can understand their customers, their businesses, and the markets as a whole.

Wealth managers are using technology to complement the work of human financial advisors with individual investors. Tech innovations are providing firms new tools to support their clients’ financial objectives. Social media is helping advisors and firms stay connected with their customers.  Technology allows retail investors greater and faster access to their accounts and their advisors, and helps lower costs in the back office. This in turn allows for new product development which helps investors better meet their financial goals. Robotic process automation and cloud-based technologies have the potential to further enhance client service and our operations functions.

In the institutional business, firms are using artificial intelligence and machine learning to generate new trading ideas and interact with customers.  A new report from Deloitte indicates 25% of the businesses surveyed have implemented technologies such as AI to remain competitive, and Deloitte projects that number will rise to 75% within two years.  This is in line with a report from earlier this spring from International Data Corp. which projects global AI spending will more than double to $79.2 billion in the next three years. Machine learning is being leveraged to quickly analyze news and historical events to develop market strategies, to simplify the process of research report development, and to help trading desks interact with their customers quickly and efficiently.

Financial technologies will continue to enhance regulatory compliance and supervision.  Tools like machine learning can help firms better understand risk and meet their compliance and reporting requirements. Natural language processing can support more effective monitoring of phone calls and email to meet compliance requirements. Know-Your-Customer practices can be greatly enhanced with better data and analytics. Regulators may be able to use big data and machine learning to carry out market supervision and surveillance more efficiently.

Underlying these new technologies is the aggregation and integration of unprecedented volumes of data, which provide the raw materials for advanced analytics, offering new insights that can further enhance the customer offering and experience and improve regulatory oversight.

Of course, understanding and managing the risks associated with new technologies is critically important, and operations professionals are at the forefront of the identification of new risks.

Cybersecurity, of course, is the key risk.  SIFMA and its members are working to make sure the industry and its clients are protected.  Cyber-attacks are increasing in frequency and sophistication and are a daily reality for the industry.  Firms must be prepared for when, not if, a cyber-attack occurs, no matter how severe it may be, and virtually any new technology implemented by firms will require consideration of cybersecurity and associated risks.

SIFMA, with our members, will continue to lead in developing policies and procedures for cyber defense and recovery. We are increasingly focused on operational resiliency, which serves as one of the foremost disciplines in enabling a robust security program within a financial institution.  We also engage in preparedness drills–and planning for our Quantum Dawn V exercise this fall is already underway.  We continue to collaborate with our members, along with regulators and government partners, around the globe to make our industry as secure and resilient as possible.

Of course, as the industry reinvents its processes and develops products powered by new technologies, we will need to remain focused on managing the operational risks they may introduce. SIFMA and its members are working together to understand what new technologies may mean and what their legal, regulatory, and risk implications may be.

Through SIFMA, industry professionals, technology innovators, and regulators come together at working groups, roundtables, seminars and conferences like this one.  I encourage you to be involved with our work.

I also hope you leave this conference tomorrow armed with new ideas for your playbooks—both offensive and defensive—that make you a more effective operations professional, help you find new ways to leverage technological innovation, and boost your risk management efforts.

Again, I thank you for your participation at this year’s Ops Conference.

And now I’d like to welcome our next speaker, Timothy Gokey, President and CEO of Broadridge Financial Solutions, to the stage. Tim joined Broadridge in 2010 to lead the company’s growth initiatives. He was named Chief Operating Officer in 2012 and President in August 2017. In those roles, he led the sustained development of the Governance, Capital Markets, and Wealth Management businesses.  Prior to joining Broadridge, Tim was President of the Retail Tax business at H&R Block, and previously spent 13 years at McKinsey and Company.  Please join me in welcoming Tim Gokey.

Joseph L. Seidel is Chief Operating Officer at SIFMA. He manages day-to-day operations of the Association, including core legal, regulatory, business practices, public policy and communication activities.