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Get to Know Hearsay: Liberty Slater, Operations Manager

I recently realized that it’s been a while since we introduced you to someone from Hearsay. This week, our global Hearsay Systems teams are meeting regionally to align for the second half of the year.

It’s always fun to get together face to face and bond with our teammates as we get ready to execute on a new set of goals. Being with other groups also reinvigorated my desire to make sure that, as we grow, we keep that start-up vibe we had when I first came on board almost 5 years ago. Part of that is making sure we keep you up-to-date with who we are on an individual level.

This week we talked to Liberty Slater, who joined Hearsay in 2015. Thanks to her infectious passion for her coworkers and customers, she has grown right along with Hearsay. Read on to learn more about who she is and what she does!

What’s your role at Hearsay and how long have you been here?
I am currently transitioning into a new role as an Operations Manager for Client Services from managing our North American and European Support team. I’ve worked at Hearsay just shy of five years.

What do you do day-to-day?
I have two major areas at the moment: internal training and product-to-GTM (go-to-market) enablement. My day-to-day varies quite a bit, which I enjoy. I like being confronted with new challenges, new learnings, and competing priorities that push me to really think about what is most strategic at any given point.

What is your favorite thing about Hearsay
My manager, John Williams. John is incredibly gifted at supporting the growth and development of his direct reports in a manner that also meets the strategic needs of the company. In doing so, he ensures that his team remains challenged and that their contributions are meaningful to the larger Hearsay community. He is gracious, experienced, full of good-natured sarcasm, and open to learning from all those around him. I am extremely grateful to have had him as a manager and hope some of that has rubbed off on me! I fear that only the sarcasm has stuck….

What has been your favorite team building activity?

One of the most memorable team building exercises was an escape room that occurred relatively early into my Hearsay experience. It was a cross-coastal, cross-functional group who were still new to one another. Nevertheless, everyone immediately stepped outside of the absurdity of the situation and their lack of familiarity with one another to embrace the task at hand. I’ve never felt more comfortable crawling along a dusty floor, looking for trap doors with a group of relative strangers. We progressed through one, two, three layers of rooms in a frenzied (and uproarious) mix of individual and team code-cracking before we were confronted with the final puzzle.

The final challenge required us to translate the answer to a riddle into binary code, deactivating a wall of lasers that stood between us and the room key. Unfortunately, we had missed a crucial clue earlier: the riddle itself. Less than four minutes remained. The group quickly split into three: a member of our engineering team began to brute force the binary puzzle, two of us scanned the previous rooms for the riddle, and the remaining members of the team began to physically lift the smallest member of our group into the air and feed her slowly through a six inch gap in the lasers, like a new age cheerleading stunt. Just as my co-worker — rigid as a board for fear of tripping the alarm — was about to grab the key, our engineering teammate cracked the code and deactivated the lasers. Key in hand, we sprinted to the door with 54 seconds to go.

What stood out to me about this was the dynamic of that group: the decision-making was flat; the tone was always cooperative (and often hilarious); and when a seemingly impossible hurdle was placed before us, everyone focused on the solution — differentiating their approach to amplify their individual strengths, while still working as a group — and rose (literally, in the case of one of my colleagues) to the occasion until we crossed the finish line.
If that isn’t a metaphor for how we work at Hearsay, I don’t know what is.

What Hearsay value do you embrace the most? (Values here.)

G(TR)SD – Get (the Right) Stuff Done
I love that Hearsay promotes balance in its scrappiness. A strong work ethic is wonderful, but it needs direction or vision to maximize the outcome of the effort put into it. Hearsay embraces self-direction and GSD while still emphasizing that an endeavor needs to be thoughtful, strategic, and (as much as possible) focused on long-term scalability. Being scrappy AND smart is a Hearsay value that I try and carry with me in all things.

What’s your favorite part about working closely with engineering and customer success?

I love how EPD and Client Services challenge my perspective. One of my favorite things at Hearsay is when someone uses the phrase, “tell me the problem you’re trying to solve.” So often we close ourselves off from potential solutions because we have too narrowly defined a problem. Both from an Engineering and Product & Go-To-Market perspective, I so appreciate the wealth of experience around me, the solution-minded approach they have, and the different ways they look at a scenario to find an avenue forward that makes our customers more successful. I am forever learning from both teams.

What do you love about our customers?

It is humbling how focused on building community the Agents and Advisors who use Hearsay are. Their social media content highlighting the many ways they give back to their friends, neighbors, and local charities is a privilege to see and facilitate.

What’s the best piece of advice you’ve ever been given?

Character is what you do when no one is watching

Favorite place for coffee/food/drinks in your city or a city you travel to frequently?

Mother of Pearl, New York. It’s a tiki fantasy with custom (candy!) garnishings and novelty mugs that make you feel like every week can be shark week.

What do you like to do in your spare time?

An unreasonable amount of SoulCycle.

The Impact of Reg BI: Deep Dive with Mitch Avnet from Compliance Risk Concepts

On June 5, 2019 the Securities and Exchange Commission (“SEC”) voted to enhance the regulatory framework standard of conduct for broker-dealers (or “firms”) and provide an interpretation of the fiduciary duty for investment advisers by issuing Regulation Best Interest (“Reg BI”). Hearsay recently reached out to Mitch Avnet of Compliance Risk Concepts (“CRC”) to discuss the impacts of the new regulation.

Transition period, comparison to DOL Fiduciary Rule and overview of Reg BI

Chris Fernandes: What does the transition period look like for compliance with Reg BI?
Mitch Avnet: The SEC is allowing firms a transition period until the June 30, 2020 compliance date.
Chris: How does this new regulation compare to the long-anticipated Department of Labor (“DOL”) Fiduciary Rule?
Mitch: The Reg BI framework is more expansive than the vacated DOL Fiduciary Rule, as it covers all securities investment recommendations to retail customers rather than just those for retirement accounts.  By setting out specific obligations of broker-dealers and investment advisers, the SEC is seeking to tailor requirements to the different types of products and services each provide in order to preserve customer choice in the industry.
Chris: So, it is more complex. Does it place an increased burden on firms?
Mitch: Reg BI sets out new rules which will increase compliance efforts for firms but provides a more uniform standard and does not include many of the onerous aspects of the DOL rule such as a private right of action.
Chris: Could you give a high-level overview of the framework of the rule?
Mitch: Absolutely. The regulation has five principal areas, and can be broken down as follows:

  • A “best interest” standard comprising four obligations for broker-dealers when providing recommendations to retail customers (Regulation Best Interest or Reg BI);
  • A required client relationship summary disclosure (Form CRS) for both broker-dealers and investment advisers;
  • An interpretation of the federal fiduciary standard for investment advisers that would reaffirm their fiduciary obligations; and
  • An interpretation clarifying that broker-dealers that provide advisory services are not considered to be investment advisors when such services are “solely incidental” to the conduct of their business.
  • Reg BI and Form CRS have a compliance date of June 30, 2020 while the interpretations will become effective upon publication in the Federal Register.

Requirements, disclosures and compliance for broker-dealers, under Reg BI

Chris: Let’s dig a bit deeper into what is required of broker-dealers under the rule.
Mitch: Reg BI consist of four obligations for broker-dealers when providing recommendations to retail customers. However, Reg BI does not expressly define “best interest.” Instead, it states that broker-dealers must act “without placing the financial or other interest of the broker ahead of the interest of the retail customer.” The SEC has made clear that the term does not create a fiduciary obligation and explains that it will determine whether a broker-dealer has acted in their customers’ best interest based on the four obligations: (1) disclosure, (2) care, (3) conflict of interest and (4) compliance.
Chris: Reg BI imposes an obligation to provide a 2-page relationship summary to clients. Can you provide additional details on what firms can expect this to entail?
Mitch: Broker-dealers are required to provide Form CRS, which is in a question and answer format, to clients. Disclosures must contain a summary of fees, costs, conflicts, and standards of conduct along with a link to the SEC’s Investor.gov site.
Chris: When are these disclosures supposed to go out?
Mitch: The timing of the disclosure varies. For broker dealers, firms should be distributing these to clients before a recommendation of an account type, a securities transaction, or an investment strategy involving securities or placing an order for the retail investor. These disclosures should also go out prior to the opening of a brokerage account for the retail investor. For investment advisers, the disclosures should be distributed prior to or at the time of entering into the advisory contract. Dual registrants should use the earliest of the deadlines imposed under requirements for BDs and RIAs.
Chris: Are there any other times throughout the client relationship when firms need to provide additional disclosures under the rule?
Mitch: Yes; firms must provide additional disclosures when they: open a new account that is different from the retail investor’s existing account(s); recommend that the retail investor roll over assets from a retirement account into a new or existing account or investment; or recommend or provide a new brokerage or investment advisory service or investment that does not necessarily involve the opening of a new account and would not be held in an existing account (e.g., securities sold through a “check and application” process).
Chris: What should firms be doing to comply with this part of the rule?
Mitch: CRC recommends firms review their current customer agreements and disclosures to determine what changes will need to be made and involve technology teams to consider potential digital solutions. We also recommend a cross-functional team of business, compliance and operational employees work together to confirm disclosure of all material facts pertinent to a conflict of interest associated with the recommendation that are “full and fair.”
Chris: Let’s talk about the duty of care.
Mitch: Firms will have an obligation to provide reasonable “diligence, care, and skill” to satisfy three obligations: reasonable-basis, customer-specific and quantitative. Additionally, firms must evaluate reasonably available alternatives, however broker-dealers will not have to evidence review of all alternatives. Similar to the DOL fiduciary rule, Reg BI’s care obligation covers recommendations concerning rollovers and account choice (e.g., brokerage or advisory), as well as those to take a retirement plan distribution for purposes of opening a securities trading account.
Chris: What should firms be doing to start on the path to compliance relative to this aspect of the rule?
Mitch: Our team recommends that firms dust off work done during their DOL Fiduciary Rule prep. Because the rule is not prescriptive, there is no “one size fits all” model for compliance.  The compliance obligation requires firms to maintain policies and procedures to ensure compliance with Reg BI. It’s important to note, this obligation provides an opportunity for the SEC and FINRA to bring enforcement actions for compliance failures without the existence of underlying violations of Reg BI. Therefore, firms should carefully develop Reg BI policies and procedures with a view towards how they will demonstrate that they have met the best interest standard – including documenting all written and oral disclosures to clients.

Conflicts of Interest

Chris: What specific conflicts of interest should firms focus on when attempting to comply with that obligation?
Mitch: Reg BI does not explicitly define material conflicts of interest. In contrast to the DOL rule, Reg BI allows firms to sell proprietary products, including initial public offerings, and continue to receive payments from third parties for shelf space – as long as they disclose conflicts of interest. For example, in instances where a registered representative holds a limited license (e.g., only to sell mutual funds), but the firm offers a full suite of products, the representative may need to disclose this to their customers. However, the final rule makes clear that there are certain conflicts of interest that cannot be cured through disclosure, specifically prohibiting certain types of sales contests and quotas within defined parameters (e.g., for specific security types in short time periods).
Chris: Where would you recommend that firms focus their energies relative to this aspect?
Mitch: Our team at CRC recommends that firms review their range of products and services they offer along with their payout grid in order to identify potential conflicts and determine whether they will need to be mitigated, eliminated, or disclosed. The final rule also instructs firms to develop a penalty system for any representatives that do not adequately manage or disclose their conflicts of interest. Firms will need to establish, maintain, and enforce written policies and procedures reasonably designed to:

  • Identify and at a minimum disclose (in accordance with the Disclosure Obligation) or eliminate all conflicts of interest associated with the recommendation
  • Identify and mitigate conflicts of interest that create an incentive for a broker-dealer’s financial professionals to place either their interests or the broker-dealer’s interest ahead of the retail customer’s interest
  • Identify and disclose any material limitations on offerings (e.g., proprietary or other limited range of products) and any conflicts associated with the limitations, and prevent the limitations and associated conflicts from causing the broker-dealer or its financial professionals to place their interests ahead of the retail customer’s interests
  • Eliminate sales contests, sales quotas, bonuses, and non-cash compensation based on the sale of specific securities or specific types of securities within a limited period of time

SEC expectations and compliance

Chris: Can you map out the SEC’s expectation for compliance procedures relative to the rule?
Mitch: Reg BI requires firms to develop policies and procedures in order to demonstrate that they have met the best interest standard – including documenting all written and oral disclosures to clients. The SEC has made changes to Rules 17a-3 and 17a-4, which require broker-dealers to maintain records of all information collected and provided to retail customers pursuant to Reg BI for six years, including the identity of each natural person who is an associated person of the broker-dealer responsible for the customer accounts. Firms that fail to maintain adequate policies and procedures may face enforcement actions from the SEC and FINRA for compliance failures.
Chris: How should firms seek to comply?
Mitch: CRC advises firms to review and enhance their policies and procedures that address: Product and Pricing; Operations; Technology; and Communications. Additionally, firms should put in place processes to capture and retain disclosures, provide training on the new requirements and ensure that there is a supervisory structure to oversee compliance.

Is Reg BI different for Investment Advisors?

Chris: Are there any specific issues that investment advisers should consider? Are they impacted differently than broker-dealers?
Mitch: While investment advisers have an existing fiduciary obligation, the SEC’s investment adviser interpretation of Reg BI makes these obligations explicit:

  • Provide advice in the best interest of the client
  • A duty of loyalty
  • Best execution for client transactions
  • Disclosure of conflicts of interest

Because the final rule did not include enhancements contained in the proposal, investment advisor are not likely to require significant analysis or operational changes as those for broker-dealers, e.g. – licensing and continuing education requirements, provision of account statements to clients and similar financial responsibility requirements.

Exemptions

Chris: How would a broker-dealer qualify for an exemption under the rule?
Mitch: To qualify for an exemption from the Advisers Act (“the Act”), broker-dealers must satisfy 2 conditions: they must not receive any special compensation (i.e., only commissions and not asset-based fees, and must provide only “solely incidental” advice.
Chris: How should firms identify whether advice provided to retail clients is incidental?
Mitch: Determining whether advice provided to retail clients is “solely incidental” will be determined by 2 criteria: level of investment discretion and account monitoring. Unlimited investment discretion is not solely incidental advice and the broker-dealer would be subject to the Act. If investment discretion is limited in time, scope, or some other way the advice provided may be deemed solely incidental. In addition, continuous, previously agreed-upon account monitoring would likely not be considered solely incidental, while periodic account monitoring or voluntary account monitoring likely would be.
The SEC also clarified the solely incidental exception under the Advisers Act: broker-dealers do not have a fiduciary duty to a retail investor unless that broker-dealer is exercising unlimited investment discretion with respect to the account, or the broker-dealer has agreed to continuous monitoring of the account.

State regulations

Chris: What about state regulators? How do they factor into this rule?
Mitch: After the DOL rule was vacated, a number of states began to introduce their own fiduciary or best interest standards. These rules vary across states – some states like Nevada, are contemplating a private right of action and a largely ongoing obligation. Others states like New York would only apply a best interest standard to the sale of life insurance annuities. These differences will make it operationally challenging for firms to adhere to each state’s specific requirements.
Chris: Has the SEC commented on this issue?
Mitch: Currently, the SEC declined to provide any opinion on whether its rules would preempt state standards and left the question to “future judicial proceedings.”
The industry can likely expect litigation on this issue as states continue to move forward with their rulemakings and attempt to retain control over standards in their jurisdictions. Meanwhile, the DOL has stated that it will issue an updated version of its fiduciary rule later this year. While there have not been any explicit assurances, it is likely that the concepts and requirements from the DOL will align with Reg BI.

Client behavior

Chris: Finally, do you have any insight into concerns that firms have regarding broker-dealers’ responsibilities under this rule, particularly with respect to client behavior?
Mitch: It is important to remember that Reg BI does not render a BD or IA responsible for a client’s behavior or choices, provided that all above mentioned criteria are satisfied. Reg BI does not extend beyond a particular recommendation or generally require a broker-dealer to have a continuous duty to a retail customer or impose a duty to monitor. The rule also doesn’t require the broker-dealer to refuse to accept a customer’s order that is contrary to the broker-dealer’s recommendation or apply to self-directed or otherwise unsolicited transactions by a retail customer, whether or not the customer also receives separate recommendations from the broker-dealer.
Chris: Thank you for taking the time to answer our questions and provide insight on some of the key components of Reg BI.
Mitch: My pleasure, as always. The CRC team is readily available to discuss relevant regulatory issues with our clients and colleagues in the industry, and we make it our top priority to keep our thumb on the pulse of the ever-evolving regulatory landscape so that we can provide accurate, up-to-date advice.

Transforming IT for Long-Term Success

Four years ago, Mutual of Omaha launched a corporate strategy that placed a high priority on digital transformation to deliver greater value to its customers. As one of the key leaders of this initiative, Chief Information Officer Mike Lechtenberger knew it would take a combination of new digital technologies sourced both internally and externally to successfully complete the mission. Mike recently shared some of the transformation strategy, process and keys to success as the IT operation evolved to a more agile, customer-centric approach.

Digital transformation: It’s all about the business outcome

A common – and understandable – misconception about digital transformation is that it’s all about new technologies. While it’s true that technology is a critical component of these initiatives, it’s also just the tip of the iceberg; enterprises have decades of legacy systems, processes and culture that also need to change to realize the true value of the latest technologies. The true impetus for any new technology is to achieve tangible business results. For technical teams, it can be easy to lose sight of this.

A strategic decision-making framework

As Mutual of Omaha kicked off its digital transformation, the first step was to establish a mission and vision statement that would support its decision-making framework. In this case, as with many digital transformations, the ultimate goal was to better serve their customers.
One of Mutual of Omaha’s core values is “we exist for our customers,” which helps ensure everyone in the company is aligned around their customer-centric mission – from frontline advisors and customer service representatives to corporate operations and IT. Mike credits this organizational clarity as a key driver in the success of transforming the IT operation and how they perceived their role in the company. According to Mike: “We focused internally on our people, helping them adopt a new mindset and expand their skillsets, as well as hiring new people to drive innovation. Our focus on culture is the best thing we could’ve done.”

A move to scalable, agile methodologies and technologies

Within the IT operation, the culture shift was manifested in a couple of ways. The team started moving to more scalable, agile methodologies and technologies, including a preference for buying SaaS and cloud solutions rather than building solutions exclusively in-house. These changes brought meaningful gains in efficiency and cut time and expenses from projects.
“As business becomes increasingly complex, we need to deliver more value in the technology we roll out,” Mike said. “We have to move quickly and efficiently and Agile methodologies and SaaS technologies allow us to that.”
The team also shifted from selecting one-off technologies to fit a specific scenario to evaluating technology by how it complements the company’s mission and fits within the overall ecosystem.
“We took a step back to evaluate the tools we had already purchased and asked, ‘What do we use this tool for? What is its purpose and are we getting value from it? How well does it integrate with the other technologies we use? Is it positioned to grow with us, the industry and technology trends for the next 5, 10, 20 years?’” Mike said.

Technology that complements strategy for enhanced digital experience

Answering these questions helped guide Mutual to technology partners that complement their strategic focus. CRM technology was a big part of that equation, and Mike notes that when it comes to developing a CRM strategy, selecting a partner like Salesforce is only one aspect of the journey. CRM encompasses all the systems that must interact with it, including technology like Hearsay for industry-specific compliant digital communications and workflows, Marketo for marketing automation, as well as the people (customers and advisors) and processes. The goal behind this initiative is to build a true cloud ecosystem.
One of Mutual of Omaha’s overarching goals is to remain relevant to its customers long term, which will require attracting, retaining and developing a modern workforce and recruiting advisors that embrace new digital technologies as they interact with customers.
“One of the best investments we made was to update our digital presence for our Mutual of Omaha advisors to ensure consistent design and branding and an excellent user experience,” Mike said. “Not only does this updated digital experience better serve our customers and support our advisors, it helps us achieve our goal of remaining relevant in the marketplace. It has been a cost-effective and impactful effort and Hearsay has been a great partner.”

In the Spotlight: Josh Bradburn, CFP®, CWS®, Charles Schwab

Each month we put the spotlight on a customer who’s fully embraced digital transformation. We’ll share stories of advisors and agents who are using digital to be more productive, build deeper relationships and increase business, as well as those of distribution, marketing, compliance and IT leaders who successfully led or participated in digital initiatives.

Josh Bradburn was recruited to Charles Schwab by his best friend, straight out of business school from Ball State University. After he ‘bought into the culture on day 1,’ he’s still going strong 12 years later. Josh is a Certified Financial Planner™ Professional and Certified Wealth Strategist™, and holds several securities and insurance licenses (Series 7, 63, 66, 9, 10, life, health). He lives in Santa Monica and is a financial consultant in Schwab’s Santa Monica branch. After years of being really active in his community and holding board positions at the YMCA, Boys & Girls Club, Rotary and the Chamber of Commerce, he’s been weaving social networking into his daily agenda to extend his reach and build his online reputation.

What’s a typical day like for you?
I usually get to the office around 7am or so, start with a bit of market analysis, check the headlines, indexes and stocks, and move over to email to see what came in overnight. Then, one of the first things I do every single day is use Hearsay. I schedule my social posts based on the current Hearsay content provided by our marketing department. The rest of my day is full of meetings with new and existing clients and with boards of the organizations I serve.

What trends are you seeing in the industry lately?
It’s no longer enough to just put out a short tweet and some hashtags. Bloggers are getting a lot of traction and following because the audience can see them, and that personal touch helps people connect. These trends really align with the rise of ‘millennial money.’ A lot of the younger generation is taking to social media to gain financial literacy and talk about finance, and they want a real human they can trust to teach them.

What social best practices have you adopted?
You have to be active. It’s not enough to post one thing once a week and expect to get any traction. Social media moves so fast that a post disappears 10 minutes after it goes live. You really need to be consistent and responsive, not only with your posts, but also replies, comments and likes of other posts.

You also have to do some customizing, whether it’s adding hashtags or creating your own post — it gets a lot more traction than re-sharing exactly the same posts that others share. I want the audience to see that there’s a real person behind the screen, not a bot posting articles.

I’m also diligent about doing social twice a day. I spend about 15 minutes in the morning sharing content that’s been created for me. I regroup in the afternoon, maybe take a little longer and customize posts or put out original content.

How has Hearsay improved the way you work?
I take a bigger picture view of marketing and I’m playing the long game. I’ve learned to use social and digital marketing from a branding perspective. I wasn’t expecting million dollar referrals off the bat; I was looking to build a name and a brand with an extended audience, where people in my community view me as a go-to financial resource. I started using Hearsay in December of 2017 and really latched on and pushed it to the max. Now I often get people saying ‘I like the article you posted’ or ‘I see you online all the time’ and I’ve gotten some really nice referrals through social media that have turned into actual business.

What platforms are you using?
I use LinkedIn and Twitter, primarily for business, and I use Facebook a bit as well. I like LinkedIn in particular because it’s designed specifically to build your professional network.

What myths would you like to dispel about social media?
The naysayers tell me I’m wasting my time and seem to think their clients aren’t on social media. That couldn’t be further from the truth. People of all ages and all wealth levels get on social media at least occasionally — whether they’re posting vacation pictures or checking in on what family and old friends are up to. I heard recently that the #1 thing people do after they’ve met with a financial advisor is Google them. So it’s important to have a good online presence and reputation. Your prospects and clients are out there and they are looking for you.

Now let me tell you one thing that’s not a myth in financial services: Wow, is it regulated! It is incredibly regulated. When you start mixing finance and social media, you have to be careful. Sometimes the tiniest little thing that you would never think would be an issue may get flagged. But social media can be done and it can lead to revenue.

When you’re not at the office, what do you do for fun?
We just had our first baby, little Lucas. He’s my absolute pride and joy. It’s amazing how your life changes for the positive; it’s so rewarding when I come home and see his smiling face, see how he’s growing and changing right before my eyes. Right now, I spend virtually all of my free time with Lucas. Other than that, I love anything health related — I’ve been actively boxing for a few years, and I love playing tennis and basketball too. My wife and I are also really into food and are on a mission to go to all the 3-star Michelin restaurants we can!