Broker-dealers are living through a period of change. The move towards financial investment services like merged handled accounts (UMAs), the ongoing shift to fee-based rather than commission-based services, and new demands from financiers and consultants have broker-dealers aiming to make smart bets on innovation and strategy that will enable them to prosper.
For an allegory, believe about the wireless interactions industry. Provider understands what clients want –– more speed –– and needs to put bets years ahead of time on what sort of network they will construct to be able to provide it at a retail level. They need to find out what it will cost along with what customers will pay for it. And they need partners to develop the infrastructure and gadgets to support it. The 5G phone in people’s hands today would be useless if a wireless business hadn’t started planning and constructing their networks years back.
The same principle requests broker-dealer firms, and by extension, Vestmark. We’re always trying to keep an eye on the trends leading us into the future to make certain we have a platform that is well-positioned to support our customers as they pursue their long-term strategic objectives.
The debt consolidation of the industry –– the variety of FINRA-registered broker-dealer firms has decreased by 23% in the past decade –– has been remarkable, however not unexpected. As the broker-dealer market has evolved, efficiencies of scale have rewarded larger firms with higher revenues. This has caused a set of trends: an emphasis on natural development through service and efficiency, and debt consolidation through mergers and acquisitions.
Driving growth by empowering advisors
Size has become essential to broker-dealer firms as the industry has shifted from commission-based to fee-based services, narrowing margins, and rewarding scale and effectiveness, which larger firms can much better provide.
One of the biggest and longest-lasting advantages occurs when we can assist advisors to get back time. To a consultant, less time invested in administrative jobs, inputting trades, or rebalancing accounts indicates:
- More time to offer their clients the tailored services they expect
- More time to the possibility for a brand-new organization
- The ability to handle more customers at the same time
A firm that desires to grow naturally by bring in more advisors and assist those advisors each support more financiers not just requires to be able to resolve scale, however, requires versatility to develop their special, value-added options for consultants (and by extension investors) and an overall experience and level of assistance they can’t get in other places.
All of this amounts to more chances for consultant success –– which is key to a broker-dealer’s success. It’s why we see companies that worth service, and whose strategic plan calls for drawing in and retaining the best consultants, buy best-in-class advisor tools. If a firm can help their advisors succeed, they will have the ability to attract and keep the talent required to not simply survive but grow.
Protecting success through back-office performance
Efficiencies of scale are becoming table stakes for the house workplace, where a company can understand cost savings with automated processes. These can consist of automated tools to allow the operations group to onboard new customers, carry out day-to-day reconciliation, corporate actions processing, performance calculations, and others. It frequently likewise includes automatic workflows to scale the central trading and overlay group accountable for home office-managed programs and portfolios.
Compliance with guidelines also rewards scale –– a large company can invest in the tools to simplify and boost compliance, while smaller sized companies may discover the cost of developing compliance requirements expensive as margins diminish.
Keeping tactical alternatives open with versatility
Having an effective, scalable innovation suite likewise puts a company in a stronger position when it pertains to progressing their service models or engaging in acquisitions.
First, effectiveness helps enhance a firm’s bottom line, which can indicate it has more resources to pursue strategic deals.
Second, a system that can scale to take on a significant influx of accounts seamlessly allows a firm to continue operations without interruption throughout a post-acquisition combination. If you can be all set to take in those possessions and quickly handle new programs and books of organization, you can be nimbler and more opportunistic in identifying acquisition targets. And equally as essential, you can be more efficient in flawlessly integrating the gotten firm’s operations, programs, advisors, and customers.
The VestmarkONE® Platform: Designed with the future in mind
And finally, a system that makes it simple to produce and deploy brand-new services for consultants permits a firm to be nimble, providing financiers the type of guidance and investment management they desire in a customized and responsive manner. This can allow a company to grow by taking advantage of brand-new markets or attracting assets from competitors.
For example, as the 5G phone example noted previously, the VestmarkONE platform was created with the future in mind; it has ideal pipes required for UMAs, and we’ve continued to fine-tune and strengthen that ability. As we see these programs growing more in appeal and versatility, we are confident our clients will have the ability to make use of that pattern as it plays out over the next 5 or 10 years.
In whatever kind upscaling takes, mergers, and acquisitions or organic development, broker-dealers need to be ready to manage more advisors, more accounts, more versatile services, more assets under management, and more synchronized deals and reporting. This begins with having a robust handled accounts platform that is shown under real-world conditions to be able to manage the numbers involved –– which’s where you can depend on Vestmark.
