If you ask typical financial advisors to name the top three concerns they have about their current broker-dealers, the odds are that technology will not be among them-but perhaps it should be. There are many reasons why technology is an important factor in choosing a B-D (or evaluating your own), but for now, two reasons should suffice.
One of them is that the survival of B-D itself may depend on it. Many broker-dealers are operating on thin profit margins, and this means they may be financially vulnerable to small shifts in their revenues. If they have high fixed costs and volume declines, for example, their profits could evaporate. If they can't deal with new regulatory burdens efficiently, their margins may contract. More important, if its competitors can lower costs over the long term and your B-D can't, there is a good chance it will lose market share. If the problem gets bad enough, the financial advisor will suffer if his company raises costs, curtails service or both.
The second major reason technology matters is that there is a trickle-down effect to you. In the current economic environment, many independent financial advisors are finding their margins are under pressure. To boost profitability, they need to either bring in new business or manage their existing business at a lower cost. In either case, technology is the least expensive way to do it. If your B-D can give you the right kind technology at the right price, you benefit.
Most reps, whether they're captives or independent, largely depend on their B-Ds for this technology-for example, to open new accounts and process orders. If the technology is good, you get better, faster service, as does your client. This keeps your costs low and boosts client satisfaction. The opposite is also true. Inefficient manual processes slow the response time and increase the likelihood of error. This adds to your overhead and does nothing to boost your standing with your clients.
Many B-Ds offer their reps additional software at attractive prices, such as CRM applications, financial planning programs and portfolio management software. Not only do you benefit from the buying power of the group, you also benefit from the due diligence of the B-D. You don't have to become a software expert because the broker-dealer has qualified people doing the work for you.
When advisors now have so much riding on the technological prowess of their B-Ds, it seems like a good time to survey a few firms to see what new items they are launching or upgrading.
Pershing offers a broad range of clearing services to hundreds of independent broker-dealers and has approximately $786.5 billion in assets held in custody. Its parent company, the Bank of New York Mellon Corp., has $20.2 trillion in assets in custody. When technology evolves at Pershing, literally tens of thousands of reps feel it, and this year, many changes are afoot.
One change that will have wide-reaching effects is that Pershing will launch the successor to NetExchangePro, its advisor-facing technology platform, which currently supports over 90,000 users. Pershing Vice President Michael Geller says that in June 2009 the firm will be introducing NetX360, "an innovative, open-architecture technology platform for introducing broker-dealer firms, investment professionals, and independent registered investment advisors (RIAs). This new next-generation NetExchange offering will provide Pershing's customers with a complete solution to help them manage their firm's entire commission and fee-based business, including their advisory and managed accounts, on a single, integrated platform."
Pershing is also relaunching its annuity automation initiative, which matches up annuity orders and supporting documentation as they enter the Pershing work flow. When the digital documents are accessed, all of them will be available in one place, saving time and improving efficiency.
iNautix (USA) LLC, a Pershing affiliate that offers enterprise-wide business and technology solutions to institutional and retail financial organizations and independent registered advisors, is also moving forward technologically on a number of fronts. For some time, iNautix has provided custom data warehousing solutions to financial firms. The firm's expertise in requirement studies, existing data warehouse models and scale allow it to offer solutions more efficiently than its client firms can on their own. Now, iNautix is looking to further leverage its expertise by developing one or more "standard" data warehouse packages. Since these packages will not entail extensive customization, they should be less expensive, and implementation times should decrease substantially.