A discussion between SJ Guzzo, MD of Debt Capital Markets at SouthState| DuncanWilliams and Mike Nicholas, CEO of the Bond Dealers of America

D-W had successfully competed for many years as a family-owned broker-dealer and we worked hard to maintain a family-like culture. As we all know, dealers are facing increasing regulation, expensive technology development, and competition hasn’t gotten any easier. The direction and velocity of all those issues didn’t seem to be changing, and was definitely not slowing. We didn’t go out seeking a partner but when SouthState reached out and we found that they shared the idea of a family-like culture, were familiar with our business and provided us an opportunity to be even more competitive going forward, we felt like we should explore it. The opportunity presented itself, and within a few months we reached an agreement. Duncan Williams, our CEO, felt that while the sale was bitter-sweet, moving forward with this transaction was the best option for our Team Members and to continue the D-W legacy.

Every business manager must have a close eye on profitability. And just by the laws of economics, economies of scale more greatly benefit larger rather than smaller. Time marches on, and in our industry, with it so does technology and regulation. Monitoring our business to keep up with regulation takes a tremendous amount of time and budget. Often keeping up with regulation means updating technology, and even though there’s no choice the new technology is no less expensive. We have adapted our platform to focus our time and budget more fully on our core business, Institutional Sales. All of that magnifies the challenge of operating a middle market BD, not to mention the people issues and the changes brought on by COVID. And for those reasons, having the BDA to lobby on our behalf regarding the issues that affect us daily is of paramount importance.

We have long had an eye toward expanding our platform because we can do that organically and in ways that will complement our current business and customer base. That growth includes broadening the width and breadth of security types we actively trade and increasing the situations where we ‘create the CUSIP’. With a bank partner, our ability to take advantage of opportunities that allow us to do those things increases both because of the opportunities to capitalize on the bank balance sheet and the larger pot of capital. And we shouldn’t forget Duncan-William’s beginnings as a Municipal Bond firm. Our Public Finance group is active in the Southeast, but there is opportunity to expand that business to match our fixed income distribution footprint more fully. Finally, the industry in general, especially the middle market BD sector, has changed significantly due to acquisition. We have started to make those changes so we can take advantage of our strengths. All those changes are yet to filter through, but we look forward to capitalizing on those changes. All of that implies more product and service for our clients.

COVID has been a game changer. Obviously, we were concerned about how we were going to get business done in March of 2020 when we pivoted to work-from-home. But we learned over the next 2 years that we can get it done in ways we didn’t fully consider before. Now that the genie is out of the bottle, people have an opportunity to manage the balance of their work and personal lives like never before. The cost of that is the loss of cohesion and culture at firms like BD’s. Our industry has always relied heavily on the office interaction between Sales and Traders and Analysts to get our business done. But the transfer of ideas can be less fluid over the internet. With fewer people in the office, we had to shift how we go about training new personnel. Additionally, there is a Regulatory aspect of work-from-home that requires adapting our procedures to accommodate. I think this new paradigm will continue to evolve over time – it must. Firms will have to have a way to maintain their culture and train new people. And we all enjoy the additional flexibility between our work and personal lives. We are currently in a hybrid work environment and plan to remain that way at least for the foreseeable future.

As you mentioned D-W operated as a woman-owned firm for many years. Diversity awareness is a part of our parent bank’s commitment to promoting a greater purpose as it recognizes its own corporate social responsibility. The bank has adopted a 3-year diversity plan and formed a D&I Council to oversee the strategy. For SS|DW and our industry, broadening our insights and our capabilities can only enhance our commitment to the communities we serve.

There is no doubt that technology continues to evolve – I get calls every day from technology companies talking about how their product will solve all the latest regulatory requirements. If we had enough money, we could solve all the problems. But that’s the issue, isn’t it? We have an ever-increasing regulatory burden, and evolving markets and products, both of which require more advanced technology to stay competitive and must allocate and manage our budgets to afford it. One of the exciting things about partnering with SouthState is the technology they had previously developed and brought to the table. We are using that technology to answer some of our internal needs for sales, trading, and settlement. Obviously externally, where we are dependent on third party vendors, we are very cognizant of the ‘must-haves’ v. the ‘nice-to-haves’ and allocate our budget accordingly. I do like to keep up with the evolution of technology in the industry and invite vendors to present their products regularly so we have a good idea of what’s out there and how technology might help our business.

People and culture are the fuel that makes the technology and platform and products and services valuable to our customers. COVID has had a significant impact on how people work, and what they expect from work, and there’s a gap between that and what might be the most effective answer for the collective firm. Bridging that gap is bigger than just the reconciliation of how many days a week or month someone is in the office. It’s reconciling expectations on both sides and finding the right answer somewhere in between. To complicate things further, we are currently bringing together two different platforms. We have new policies, procedures, workflows, titles, responsibilities, etc., that we are asking people to embrace. That’s a tall order. Our employees have done a great job of being open to change and working through the hurdles we run across. But the effort by everyone at our firm that has gone into bringing these two platforms together is by far my biggest focus. And frankly, given the importance of people and culture to our business, I don’t see that changing.