Steve Booth and John Taft sitting on stage at the SIFMA annual meeting.

My Conversation With Steve Booth

The State of Finance Today

At SIFMA’s 2023 Annual Meeting, I had the opportunity to sit down with my colleague Steve Booth, Chairman & CEO of Baird, to talk through the state of the financial services industry and where he sees it heading in 2024 and beyond. I wanted to share a few takeaways from that conversation.

The Business Impact of New Regulations

I’ve long been a proponent for balance when it comes to financial regulations. Over the past few years, we’ve seen the SEC promote the most aggressive and broadest regulatory agenda seen since the financial crisis, and I wanted Steve’s perspective on the steps Baird is taking to minimize the impact on our clients and associates.

Steve’s role at Baird allows him to witness firsthand the way this regulatory environment impacts how Baird does business. Each of Baird’s businesses is affected by the SEC’s regulatory initiatives, and in 2023 the firm formed individual committees to consider the cumulative impact of 11 new final rules, as well as seven proposals and two FAQs. But it wasn’t just the SEC: New regulations from individual states, the Department of Labor and even the Markets in Financial Instruments Directive in Europe all required thoughtful analysis and planning.

Steve articulated how his goal is to commit the resources needed to comply with these new regulations without letting them interfere with the level of service we provide our clients. Baird has invested heavily in its 100-person Legal and Compliance team, making it one of the fastest-growing teams in the firm. Baird also created a dedicated IT team within Compliance to create real-time regulatory solutions and help business units create new business processes that are in sync with new rules.

The M&A Landscape

The financial services industry has seen several notable mergers and acquisitions in recent years – including at Baird, which acquired two major financial services firms in Hefren-Tillotson and Hilliard Lyons within the past five years. That gives Steve a unique vantage point to comment on the current M&A landscape, specifically in wealth and asset management.

Steve attributed the wave of mergers within wealth management to the combination of industry trends and market conditions. The sheer size of the private wealth industry, combined with the move toward a recurring revenue model, makes it a very attractive time for consolidation. In addition, the equities market continues to trade near all-time highs, creating the conditions for a highly active marketplace.

Another of Steve’s insights that struck me was the motivation behind an acquisition at Baird. While the financial implications of an acquisition are always important, it was refreshing to hear Steve state that Baird’s strategy is “focused on getting better,” and how Baird’s strong organizational culture – including its famous no-asshole rule – makes the firm an “acquirer of choice.” He made it clear that Baird views these transactions as a partnership – an attitude that pays dividends for the transitioning companies and their clients as well as for Baird.

Trends for 2024 and Beyond

With more than 40 years in the industry, Steve has seen an incredible amount of evolution in financial services. I wanted to hear his perspective on the unparalleled challenges – and opportunities – facing our industry right now.

What was especially interesting in Steve’s response was how he split the challenges facing the industry into the “known” – which he feels the industry has done a tremendous job mitigating and turning into opportunities – and the “unknown,” which can be tougher to navigate. But even then, he mentioned that if you have a low-complexity business model and can be forward-looking, those unknowns can turn into opportunities, pointing out how Baird was well-positioned to bring in incredibly talented people following the financial crises in 2000 and 2009.

Looking at the challenges of today, Steve cited cybersecurity and information security as two of the biggest risks facing our industry. He also expressed concern over a new SEC rule requiring firms to maintain a consolidated audit trail, and what that could mean for our clients’ data. But he sees great opportunity in emerging technologies like artificial intelligence as well as industry trends like ongoing transfer of generational wealth. He also cited extraordinary opportunities generated by the breadth and growth of private capital markets in the United States and expects to see growth in that market for the next decade.

In addition to these topics, Steve weighed in on his philosophy on growth, the “power of relationships” and the importance of maintaining our firm’s culture. I invite you to watch the entire discussion here.