Does a broker-dealer's technology help its reps grow their business?

    How large a role does technology play in an independent broker-dealer's ability to attract and retain representatives? The data is sketchy, but there are indications that technology is, or at least should be, one of the key factors independent reps use when evaluating broker-dealers.
    The five most important business goals among reps all involved growing their business or retaining existing clients, according to a September 2005 study, A Synopsis of the Independent Rep and Independent Broker/Dealer Markets, by Tiburon Strategic Advisors ( On a scale of one through ten, with ten being the highest score, the leading goals were: increase revenues (9.2), increase assets under management (9.1), increase income (9.1), retain clients (8.9) and acquire larger clients (8.1). The top-ranking goal that was not directly related to growth and retention, in sixth place, was to integrate technology, which scored a very respectable 8.0. On a question about business concerns, the two highest-scoring answers were the ability to manage multiple tasks and government regulations.
    These answers indicate that finding a "good" broker-dealer involves much more than simply searching for the firm with the highest payout ratio. In fact, if growing one's business is of paramount importance, a broker-dealer's technology could arguably be more important than their payout schedule.
    It may be a bit of an exaggeration to argue that technology alone can address all the goals and concerns that independent reps grapple with today, but it is reasonable to state that technology is part of the solution. If independent reps want to increase revenues, increase AUM, increase income and retain clients, they need to leverage their time and minimize activities that do not contribute to the bottom line. Clearly, technology tools can help.
    Need some examples? Processing new clients used to be a huge chore in the independent world. Determining which forms were required to open various accounts could be a frustrating task. Once the correct forms were identified, they had to be completed, copied and mailed to the B-D's office. Then the waiting began. Some accounts were opened in a timely fashion, but often they were not. The advisor then needed to pull out copies of the paperwork and phone the head office to find out what the problem was.
    Today, many brokerage firms have automated this process to a greater or lesser degree. A highly automated system allows an advisor to select the type of account he or she wishes to open. The system will "know" what forms are required to open the account and automatically provide them to the advisor. If the client the account is being opened for is already in the system, the program will also pre-populate the forms with all of the necessary information. If additional information is required, the program flags the required fields so that the advisor can provide the information. If a signature is not required, the form instantly can be transmitted electronically for processing. If a signature is required, the forms can be printed, and then scanned back into the system. As the forms are being processed, they can be tracked online in real time by the advisor. If any problems arise, the advisor can be alerted electronically.
    Such a system saves time, reduces errors, allows for real time work-flow tracking and provides a central, paperless, searchable repository for all brokerage-related records.
    Not all broker-dealers offer this level of automation, but many are moving in this direction. Some provide blank, fillable forms without the data integration; some offer form-filling capabilities through a third-party vendor such at Quik Forms or LaserApp. A number of firms allow their reps to scan and upload forms; others allow advisors to fax them to the B-D, where the image is uploaded into the system.
    Many advisors leverage themselves by assigning these administrative tasks to employees or virtual work partners, so they may believe that this discussion does not apply to them. But it does. While adding competent staff is often a necessary part of the growth process, the staff needs to be productive, too. Supplying staff with the best possible tools allows them to become more productive, which may eliminate the need to hire additional staff. Furthermore, if the staff can minimize the time they spend on routine administrative tasks, they can devote more time to other activities like marketing or client service. A collateral benefit of all this is that the staff member freed from administrative drudgery to perform more stimulating tasks is likely to be a more satisfied employee, too.

In Search Of Good Broker-Dealer Technology
    OK, let's assume that you are sold on the importance of technology and you are an independent rep looking for a new broker-dealer. How would you find the right firm? One method would be to identify a few large firms that are recognized for their superior technology, and compare any candidates you might be interviewing against what these firms offer.
    The task of identifying firms to use as a benchmark is much more daunting than one might imagine. According to Dale Brown, executive director and CEO of the Financial Services Institute (FSI), an organization that bills itself as the "voice of the independent contractor broker-dealer," roughly 150 firms would qualify as viable candidates for FSI membership; which means that there are at least that many firms vying for the business of independent reps. Unfortunately, there is no single comprehensive, independent source on the technological prowess of brokerage firms, so know where to start is difficult.
    I turned to Chip Roame, managing principal at Tiburon Strategic Advisors, for some guidance. Roame supplied me with some metrics that helped with the selection process. His firm conducted a telephone survey of reps, which included a question asking reps to rank their B-D's technology offerings and support. Commonwealth Financial Network scored the highest, garnering an impressive score of 9.3 out of a possible 10. Raymond James was right on their heels with a 9.2, followed by FSC at 9.1 and LPL at 8.9.
    Tiburon also has a free benchmarking tool for independent reps (, which it uses as a source of data for its reports. Here, on the technology offering and support, LPL ranked highest at 8.7 followed by Raymond James at 8.1. FSC ranked substantially worse on this study at 6.5. There were too few Commonwealth respondents on the benchmarking survey to arrive at a ranking.
    "Does this mean that the companies that scored highest on your surveys have the best technology? The results reflect the reps' opinions, says Roame, and don't necessarily indicate that one B-D's technology is actually better than another's.
    How knowledgeable are independent reps? In all likelihood, they are less sophisticated than their counterparts in the RIA world because they do less comparison shopping than RIAs, who typically have multiple relationships with several custodians. "Reps know what they have, and they know that what they have may be better than what they had from their B-D last year, but they don't know what they are missing," Roame adds.
    Some statistical evidence supports this. According to Tiburon, when asked what type of conferences they attend, 69% of respondents said they attend their broker-dealer's annual sales or educational conference;  43%, their B-D's regional forum; 36% went on a mutual fund due diligence trip; and 27% went on a top producer's trip. But only 17% attended an FPA conference. Of all the possibilities, the FPA conference would most likely provide an opportunity to compare the offerings of multiple B-Ds side by side.
    By contrast, independent RIAs who are affiliated with a custodian rather than a B-D are much more likely to attend conferences where multiple B-Ds and numerous competing technologies are on display. (It is interesting to note that those reps attending FPA conferences appear to be satisfied with the experience. Reps give FPA events a satisfaction score of 7.5, almost identical to the 7.6 they give to their annual B-D conference.)
    Nevertheless, while it is true that the survey numbers are inconclusive, we can infer that those firms constantly upgrading their tools and satisfying their reps are probably doing a good job on the technology front. Thus, I decided to concentrate my efforts on surveying the technology at three high-ranking firms, Commonwealth, LPL and Raymond James.
    I looked at the following areas: account administration, document management of B-D documents, management of non-B-D documents, trading, research, CRM software, portfolio management software, financial planning software and integration.
    I conducted interviews with technology executives at all three firms, performed a cursory examination of the technology each offered and, where possible, spoke to a number of independent reps using the platforms. Generally speaking, I was favorably impressed with the technological prowess at all three. When it comes to account administration, each firm is very strong. Representatives from all three firms tell me that opening accounts is highly automated. In most cases, account applications can be completed online. If the client's data is already in the system, the program will automatically populate the required fields. Once the forms are completed and submitted for processing, all three firms currently offer or are about to offer the ability to track all administrative tasks in real time.
    Trading and research also appeared to be uniformly strong. All offer decent online trading capabilities and online research, although the research provided varies by firm.
    Each firm has some method of capturing, storing and allowing reps to retrieve B-D documents, but they differ in their ability to provide a true paperless office repository for their reps. According to Darren Tedesco, director of business systems and strategic development at Commonwealth, his firm offers a custom version of LaserFiche software that reps can use to create a "paperless office." Within a matter of months, Commonwealth intends to offer a hosted "paperless office" solution as an alternative to the LaserFiche system.
    According to Mike Shelly, vice president of technology product management at Raymond James, his firm has a pilot program that allows reps to store all of their documents on the Raymond James servers. Andrew Duggan, LPL's chief information officer, says advisors could, in effect, go paperless with their LPL-related documents today. He would not say if a total paperless office solution was in the pipeline, but given the competitive nature of the business, many believe there is a good chance LPL will offer this capability in 2006.
    The three firms are taking divergent paths when it comes to CRM software. Commonwealth, which offers a customized version of Goldmine to its reps, is about to roll out a proprietary online CRM product as an alternative. Raymond James is testing Sales Logix, a customizable, enterprise CRM platform with "mobile" capabilities from Sage CRM Solutions, the same company that markets ACT! LPL does not offer a unified CRM solution, although they do help advisors integrate ACT! and Goldmine into their practices. "We continue to look at what is the aggregated functionality advisors need," says Duggan.
    Each firm offers different financial planning software. LPL allows its reps to use different programs, including Financial Profiles, MoneyTree and NaviPlan Extended; however the preferred program is BranchPlan, a private-labeled desktop version of NaviPlan Standard. For reps using BranchPlan, LPL offers internal support including training, marketing support and case design. Raymond James is about to roll out SunGard Planning Station, a comprehensive enterprise financial planning platform. According to Shelly, "Reps will be able to dump holding information into the financial planning package by pushing a single button." Commonwealth currently supports MoneyGuidePro. Reps can move data from the Commonwealth platform into Morningstar for analysis, and then to MoneyGuidePro. MoneyTree financial planning software is supported as well, and Commonwealth intends to add a third program soon.
    They approach portfolio management tools differently as well. LPL and Raymond James use proprietary portfolio performance engines. Commonwealth's primary performance reporting solution is powered by Advent. Each firm emphasized their focus on usability, integration and their desire to constantly improve their technology. Based on my conversations with a few of their users, they seem to be succeeding. Mark Ferris, CFP, of Yankee Cents Financial Services in Old Saybrook, Conn., has high praise for Commonwealth: "They are always improving. Their tools have made my practice much more efficient." Carol Lilly, CFP, of Marion, Wis., feels the same way about LPL. "They spend a ton of money on technology, and it shows. They are always looking to improve what they've got.
    Despite their different technologies, my short investigation leads me to believe that Tiburon's rankings are on the mark. No one clear winner emerged; however all three offered a highly competitive and up-to-date technology platform. Thus, one or more of these firms would serve as a good benchmark by which to compare another B-D's technology.
    Going through the comparative process may sound like a lot of work, but it could be worth it. Consider this: There appears to be a correlation between technology and revenues per rep. According to Tiburon, among the leading 15 firms, Commonwealth reps rank first in revenue generated, LPL reps rank third and Raymond James reps rank fifth. Furthermore, there appears to be a correlation between good technology and a rep's overall satisfaction with the brokerage firm. Commonwealth, which scored highest on the technology telephone survey question, scored highest on overall satisfaction in the September 2005 study with an impressive score of 9.6. LPL and Raymond James, the two other firms with high technology rankings, scored 9.0 and 8.9 respectively in overall satisfaction.
    The bottom line is that a broker-dealer's technology can play a key role in a rep's success and satisfaction. Perhaps independent reps should regularly compare the technology that their B-D offers against what leaders in the field have to offer. 

Joel P. Bruckenstein, an expert in applied technology for financial services professionals, can be contacted at