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

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

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

Bill Hortz: Can you give us a lay of the land of where the financial services industry currently stands as to becoming digital and strategically being able to use all its data?
Michael Pinsker: Today, when we look around the industry, many financial services firms are diving into digitization projects very aggressively. They are shedding paper and embracing an omnichannel digital experience - an experience where the input, management, and analysis of data has gone to the front of the priority line by management. Some of the examples that we are seeing are in the areas of account opening, advisor transitions, and ongoing communications.

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

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

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

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

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

Hortz: Any other research you can share to help advisors and industry leaders to see beyond the buzzwords to the true competitive bottom line and immediate needs for becoming a digital firm?
Pinsker: We are in the midst of a digital transformation age for financial service firms. We have some history behind us now where data clearly shows that the buzzwords are no longer just words, they define current reality. Consulting firms have been measuring and reporting the effects of digital transformation for some time now.

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