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Episode 50: “Invest for Tomorrow, Disrupt Today and Transform Always” with Rich Daly, Executive Chairman of Broadridge

Reflecting on a transformative history and looking ahead to an exciting digital-first future, Rich Daly, Executive Chairman of Broadridge, shares his experiences in navigating change, managing crisis and embracing digital disruption with a forward-thinking mindset.

Matt: I'm Matt Swain, and you're listening to the "Reimagining Communications” podcast, where we discuss the opportunities and challenges facing companies on the road to optimizing their communications for the future. Today's a special day. This is episode number 50. I have a special guest with me to celebrate that. Rich Daly, executive chairman of Broadridge Financial Solutions. Rich, thanks for joining.

Rich: It's great to be here.

Matt: Well, Rich, I want to get to the present and the future, but to get there, I really want to start where you started your career.

Rich: Oh, boy.

Matt: So 1974, you graduate from New York Institute of Technology with a degree in accounting, you cut your teeth at a few public accounting firms. Talk to me a little bit about those years and how those may have served as a foundation for where we are today.

Rich: You know, public accounting for me was terrific. I grew up in a very street-smart environment. So, when I became an accountant, I always had this natural ability and desire to get behind the numbers. Very early in my career, within the first year, I found fraud in, literally, a major public company. And it was that desire again to say, "Okay, I see what it's supposed to be, but I just can't make this work." And you just keep pushing and digging. And then beyond the numbers – the actual “are they right?” – that same street smarts always gave me a desire of, okay, well then how could it work better? And if it could work better, how would the numbers and the results be better? So, it was a good foundation for me to start in business.

Matt: So, Rich, during those years, did you already have an entrepreneurial spirit? Talk to me a little bit about your background.

Rich: Yeah. It's crazy. At nine years old, I had forged working papers. I was "Newsday's" carrier of the year because I could sell even back then. So, I did have a desire to control destiny, but in my early stage I thought, you know what, being a partner in a Big 8 firm, which was what they called the largest accounting firms back then was the initial desire.

Matt: So, Rich, 1987, you start your own proxy services business, Certified Services. Talk to me a little bit about that.

Rich: Sure. So, after my last Big 8 gig, I went with a client that was in the proxy business. And it was a startup and it seemed like a pretty good idea. When I had left there, I went to work for the largest client of that company. The company was called Independent Election and that client was Thomson McKinnon. And I got the call from the guy who had just got promoted from senior vice president of operations to the executive committee, John Hogan. And he asked me if I'd be interested in his old job. And I thought, wow, this could really be interesting, because I had a desire to start another business when I left Independent Election. I had a non-compete and this gave me an opportunity to go to Wall Street, and really learn about the organizations I was going to try to service.

And at the same time, John said to me, you know, "We'll teach you the back office if you teach us about customer service." So, we were really pretty good at that point in time. And it was at Thomson McKinnon and on Wall Street, two things happened. One, I really did learn what the right proxy product would be, along with other products, whether it be statements, prospectus, etc. And the other thing is I became part of the fraternity of back-office executives. And that was instrumental in helping me grow the business once we launched.

Matt: So, two years later, you sell to ADP. Talk to me about the reasoning for that sale.

Rich: Sure. When I started the business, I was the senior vice president of operations at Thomson McKinnon, and I had hired programmers and the programming was going extraordinarily well. I did this with the financial support of a guy by the name of Artie Long who owned a company called D.F. King, which was one of the premier proxy solicitors at the time. Very quickly into the deal, within three or four months, Artie passed away. So now I have this situation where my backer is gone, the programming is going better than anticipated, which is almost never the case. So now I have to make a decision.

So, I funded the programming myself as we went forward looking for capital. I had two VCs, Venrock and J.H. Whitney who backed out. And the problem was, this was just after the '87 financial crisis, so we have this problem – when I say there's no capital – I couldn't raise 3 million bucks for what's now a $20 billion market cap company. So, when I say there's no capital–it would've been a fair return for someone.

Matt: Fair. Yeah.

Rich: So, it was then that I got the call from ADP, and I really wanted to see this thing get launched. I didn't really want to give up that control of destiny that I was looking to get again, but I really did want to see this launch. And partnering with ADP in so many ways was really the right way to go forward. It gave us brand credibility and it also gave me the opportunity to have a pretty good career at ADP for 17 years.

Matt: And you went into ADP as senior vice president of the Brokerage Services Group, right?

Rich: That's correct. Reporting to Bob Casale, who was a great mentor and just somebody who gave me all the leeway I needed to do the job they hired me for as well as launch this communications business.

You know, I got to ADP in '89 and we grew the communications business from zero to 1 billion bucks in a little over 7 years. It was the fastest-growing business from start to where we were in the history of ADP, including the payroll business. So, it was remarkable. When the tech bubble burst, leading to that, the brokerage group within ADP was dragging ADP's average even higher. I mean, we were telling The Street we could probably do 15%. And a lot of that was because of the Brokerage Services Group within ADP.

When that tech bubble burst, we missed our plan by a significant amount. It was the first time ADP missed double-digit quarters. I think it was like 168 quarters in a row or something like that was the run, which was just extraordinary. That put ADP, which in the employer services unit just had incredible predictability, and it made them challenge, is the Brokerage Group and some of these other units really the right fit? That led to the spin, and that's how we became Broadridge.

Matt: Yeah. That spin was 2006-announced, 2007 you spun off and at that point you were then CEO of Broadridge Financial Solutions. And I'd be curious, did that bring you back to those days where you were in control, and did it bring back some of that passion around where you started?

Rich: One would think, all right? I guess it fits into, it was spectacular, and be careful what you wish for. Because, yes, we were spun, but, like, 20 minutes after we were spun, the real financial crisis happened. And now you're talking about a company that services the financial services industry, we have major clients like Bear Stearns and Lehman going away. Those financial hits we were taking were pretty significant. But it was a really exciting time, and throughout it, we always believed that the opportunity for Broadridge and the need for Broadridge to take us and our clients to the next level was very real.

Matt: Also, at the same time, you had ADP probably feeling vindicated for having spun you off at that time, but then you got through the dip and it's just been growth from there forward.

Rich: Well, let's talk about the time of the spin and the things we needed to do to set the course, because that really has a lot to do with, you know, how Broadridge became Broadridge. And then it's so exciting to see where Tim Gokey and the team are taking Broadridge today. But let's go back to that. You know, at the time of the roadshow, I remember being at The Pierre Hotel with about 200 potential investors in the room, and saying that we were committed to transform this business and do the right thing, and that we would disrupt ourselves before we let anyone else disrupt us, right? The business was built in the philosophy of the service profit chain, which says, "If you want to have a growing successful business, you don't start with the bottom line, you start with the associates."

You invest in those associates and you make them the best treated and best capable associates in your space. That will enable you to exceed customer expectations on a consistent basis. And that consistent execution will lead to the best financial performance. So, it sounds simple, but too many people start with, "How do I get the best financial performance? Let me cut here. Let me not invest there. Let me goose the bottom line here." And it just doesn't work. We're looking to invest for the long term, we have a financial crisis, and even to keep everyone in the boat whole, you know, customers, shareholders, and associates, okay, you know, we're looking for change in the seat cushions at the end of the night. So, I mean, it was a pretty interesting time. But what I really am most proud of is the way we managed through the financial crisis, okay? And as soon as things started to turn, instead of jamming it all to the bottom line, we made commitments to invest for the long term, all right?

Matt: Yeah.

Rich: And that investing in the long term enabled us to eliminate 80% of the paper, it enabled us to focus on investing in issuers, digital, tax, data, global. We got into blockchain. In GTO very early on when Tim Gokey joined, when he transformed from being the head of strategy, which I really wanted him to have that opportunity to be able to participate in Broadridge overall, and when we moved him to be the COO of the business, I asked him to transform GTO, our back-office business. And working with Charlie Marchesani, it was extraordinary what they did. That business went from shrinking every year to growing every year.

We invested there in things like LTX, which was the very beginning of the fixed income transformation to really use AI to look at all the data we have and find natural buyers going forward. And that led to LTX. There were early investments into wealth, nothing like what Tim and the team have done now. And of course, we were looking to be cloud everywhere. So, it was an exciting time to get to that value creation. But we spent years stuck between 20 and 24, and not taking an eye off the ball and still investing for the long term.

Matt: And that was dollars per share you're talking about, $20 to $24 per share and you're at 170...

Rich: Share price.

Rich: Yes. Well, this team got us to 170. We got close to 140 and then took a step back during the transition, and now it's been, you know, just a fabulous run.

Matt: So, on that note, you moved to the executive chairman role in early 2019. You gave Tim the reins of CEO. Talk to me about what excites you now about what you're seeing happening at Broadridge.

Rich: Going back to the very beginning, we knew that it was going to be about talent. So, when I talk about that service profit chain, if you start with the associate, you have to have the best, highest engaged associates. And I don't care who you are, what you're doing, and what you're running, bringing in the best talent and bringing in talent better and smarter than you are, is what leaders need to do, particularly in a world that's moving as quickly as this. So, I started and was very blessed with the core I had when we spun. You know, John Hogan, God smiled on me when I met John. He was a great customer. John was my boss, I was John's boss, you know, we always both agreed it would be better not to be the boss, okay?

I had Bob Schifellite who was my right hand. I hired Bob in '85 and Bob has just been the guy you could count on every day forever. Charlie Marchesani was very strong in his role in GTO. Adam Amsterdam was my confidant and the guy who when I say we need to do the right thing, Adam always helped me keep on the right path as general counsel. Doug, I convinced to join us at the spin, Doug DeSchutter. He started with strategy and I was the one who said, "Look, you know, if this business is going to be successful for the long term, we have to lead in digital. Not participate, we have to lead." And that was a thankless task I gave Doug and I'm so proud how they really took that.

Transforming something, disrupting yourself is never an easy thing to do, and by the way, within your own organization, it's never a popular thing to do. I don't think he ever had to have his wife start his car, but I'm sure it came close at times. Bob Kalenka has always been just a very solid guy, and Tom Carey was always there for us on the global side. And then, of course, you had VLK in India who also played just such a significant role. And I know I'm forgetting somebody, and I know I'm going to be writing apology notes at some point here. Then we had adds like Tim Gokey. And I specifically recruited Tim very hard. Chris Perry, I recruited very hard. Vijay Mayadas. I mean, Vijay did a great job with strategy and now what he's doing overall in fixed income in GTO overall.

But I have a bias and I am really, really, excited about LTX. Mike Tae, coming in for Strategy. Dorothy Flynn, Martin Koopman, Mike Liberatore, who's always been a solid performer there. So, talent is what excites me. And I'm particularly excited because, now this is as chairman, the board and I couldn't be more excited in how seriously Tim has taken what I thought was a great run I had in talent, taking it to the next level with the people that he's now bringing in to take Broadridge yet again, dramatically, to the next level. And let me tell you something. It's always more difficult to grow something from, I call it 10 million to 15 million up...billion, excuse me, than it is to grow something from, a billion or two to 12 or 15. It's the compounding of numbers. It's just much harder when the numbers are larger.

Again, what excites me going forward? Wealth, what Tim is doing with UBS and the team, creating a true modular environment, making investments as part of this that we really need to make, and finding that money and that commitment, just like I called it in the past, do the right thing, invest for the future. These are meaningful investments Broadridge is making right now. We're going to create a new industry standard. In fixed income, absolutely the same thing. Using AI. We're making it a sell-side play because we've always been a sell-side company. That's who our real customer is.

And with that real customer, we're going to create a quantum leap in the way fixed income is transacted, with a level of transparency and efficiency never seen before. Really exciting. And then, of course, that leads us to Digital.

Matt: Rich, I'm glad you mentioned digital.

Rich: Whoa, whoa. Isn't that why we're here?

Matt: Well, it sure is. I know that it's a topic that's very relevant for our listeners and our audience, so I'd love to hear your thoughts about what makes you so excited about what we're doing with digital.

Rich: All right. So earlier on I mentioned, we eliminated 80% of the paper, and a lot of people would look at that and say, "Check the box, mission accomplished, move on." Digital isn't about eliminating paper. It's about transforming the customer experience, right? It's about people are willing to give up paper because it's a hassle. But the digital experience has not yet transformed to where it's dramatically better than a paper experience. That is what Broadridge Digital is all about. So, over the last decade, we've invested probably if you add everything going into, this close to 1 billion bucks to make this happen. And obviously, it needs to be efficient. Obviously, it needs to be easier.

But if you think about the lives that everyone lives today, and I mean, everyone, time versus managing all the content that's sent at you is critical. And we need to get at people on arguably one of the most important aspects of their life, their financial wellbeing. We need to get them massive amounts of information very efficiently so that they can understand financial decisions that they've made better and potential financial decisions going forward better. I mean, I could go on all day about this. But I'm so excited when I look at where Broadridge's Communications Cloud is and what it's going to enable going forward.

Matt: Speaking of going forward, what are your thoughts on the future of the communications space?

Rich: Let's use a great example where Broadridge partnered with a large fund client. Now, most people own mutual funds. If you own a mutual fund, you're going to get a semi-annual and annual at a minimum, and you could get other communications. These documents are written by lawyers. There's really important information in there. There's information you should really want to know. But it's not easy to manage. With this client that wanted to transform their customers' experience, we went into these documents and pulled out the key information for their customers to see. The hit rate on that was 40 times higher. So, people want this information. Now, that's where we talk about transforming an experience. Where you can, in the face of an email, know really what you need to know about that investment, so you can follow up with your financial advisor, so you can be better informed, so you can invest more, challenge more, understand more. It's your financial future.

Matt: And think about those emails today. Often, they're very transactional in nature. It says, "Click here to view this document," and it doesn't have the experience embedded in it that you're talking about now.

Rich: Exactly. And this goes all the way back to that roadshow about disrupting ourselves. So, think about it. Doug DeSchutter was given the job a decade ago to completely disrupt what we do in the communication space under Bob Schifellite's leadership. And now, obviously, Tim, who has picked up where I left off and has taken that to a next level. But we're disrupting ourselves, going all the way back to that roadshow at The Pierre Hotel before we spun in April of '87. All right? And it's that Communications Cloud that gives us the back end because our clients are actually pretty good at transforming the look and feel on the front end. You go to their website, you want to see what your balance is, you want to see a transaction, it's all there.

But these are complex organizations and aggregating across all their different platforms. Take our bank broker clients. You can have a mortgage, you can have a car loan, you can have multiple brokerage loans, you can have your 401(k). You can have all these pieces there. What we're doing with that cloud is giving the ability to look across all those different systems on the back end and put it all in that Communications Cloud and allow the customer, through their choice, to have one experience for everything they're doing with that financial institution. It's really an exciting time.

Matt: Excellent. Well, Rich, thank you for your perspective, your insights, your presence, and sharing this 50th episode with me.

Rich: Well, look, it was a blast to be here. And, you know, now that I'm chairman on the sidelines here, looking at this journey across everything Broadridge is doing, and specifically Digital, is just a blast for me to have a front-row seat.

Matt: Well, I welcome you in the front row, so thank you. I'm Matt Swain, and you've been listening to the "Reimagining Communications Podcast." If you liked this episode and think someone else would too, please share it, leave a review, and don't forget to subscribe. And if you're ready to reimagine your customer experiences, consider the Broadridge Communications Cloud, an end-to-end platform for creating, delivering, and managing omnichannel customer communications. To learn more about Broadridge, our insights and our innovations, visit broadridge.com or find us on Twitter and LinkedIn.