As part of the Heard at Ops series, Stephen C. Daffron explains the role of data science, how to create more value for clients, and the importance of industry collaboration. Watch the video and read the Q&A below.

Q. Describe the role of data science and data governance in financial services.

Data science is required to understand what is happening in the securities industry. It is like smoke in a wind tunnel to see which way the winds are blowing. Data science and data governance are the things that allow us to see which way the industry is going. To do that, we must listen very carefully to what clients are saying. Clients expect financial services to:

1. Have fully digitized data – Clients want to access and use data whenever they need it. That’s something we have been talking about for years.
2. Help them visualize the data – Data science and data governance provide that visualization so the advisor and the client can see what the data means.
3. Add context to the data – We are expected to curate the data and put it into the context of the portfolio in a way that’s effective for the client.
4. Automate the data – How rapidly do we automate, using AI, to help clients better understand the data? Candidly at this point, I’m not sure, which is why we should work in the order mentioned above.

Q. As the industry evolves, what do operations teams need to succeed?

When I was recruiting in the nineties, I insisted on having industrial engineers who understood the flow of the business and the flow of the accounting. And then later, I realized that we had to add to that the technologists. Not just for coding but to study how the technology works to move the data from place to place: the timing, the flow, the pressure, the rapidity with which you had to react.

Adding to the operational engineering perspective and the technology perspective, the third perspective that operations need – and probably most pointedly these days – is the data perspective, an understanding of where the data comes from and how it is used throughout the entire trading process flow.

Q. During your Ops session, you highlighted the importance of collaboration. How can firms be better partners across the ecosystem?

We are competitors. Everybody in the conference is representing someone who is competing with something else. This is a very competitive business, which is as it should be. And that is an important part of how we make our businesses work for our clients and the value we create. At the same time, there has to be a level of cooperation.

A long time ago, when I was a kid, I used to jump out of airplanes. I was in the military, and we would jump together from a military aircraft. You’re jumping out from both sides of the airplane at the same time, and you need to be constantly concerned about the other people you jump with because they are the ones who can cause you to fall.

One of the things that you do when you’re getting ready to jump is you stand up, hook up and then check the equipment – but your equipment is behind you. So, the guy behind you is checking your equipment and you’re checking the equipment for the guy in front of you. You are all realizing that we are in this together.

In financial services, we must have a frame of mind recognizing that even though we are competitors, we are also collaborators. We need to work with each other to make sure that the jump goes successfully as we go through those doors. We are going to go out the door next year, on May 28^th, for the move to the T+1 settlement cycle. That is something we’re all jumping out together for. Between now and then, we have to be prepared to work, test, and ask each other questions – the hard questions: Are you seeing what I’m seeing when you are testing with DTCC? Is your test working like my test is with DTCC? Are you asking the right questions?

This is not a zero-sum game. Our collaboration, our ability to work together to make T+1 work is a function of something we all have to do together.

Stephen C. Daffron is a Co-Founder and Industry Partner at Motive Partners and serves as Chairman and Chief Executive Officer of BetaNXT, a Motive Partners portfolio company.

Watch his session from SIFMA Ops 2023: Know Better. Do Better.

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