Big Picture Versus Little Picture: Broker Dealer Technology Spending
History builds the reflection that broker dealers(BDs) spend money in a silo. The typically technology decisions that BDs have made, have been in the moment. An example of this is the small broker dealer moving from an excel spreadsheet to a commission system. The middle sized BD buying a document imaging system for the home office. The large sized firm buying a compliance transaction or trend surveillance system. Or all of them engaging a data aggregation solution. What very few BDs have done is leverage the spending of the silo’s into an integrated solution that adds consistent value to both the front and back offices. Instead BDs have implemented disparate solutions that may solve one issue, at the expense of others, or offer a solution that is not used by the entirety.
BDs that are looking at any technology solutions should begin with the end in mind. One of my favorite clients, who also is a producer, tells his clients, “You have to have a plan.” Likewise, BDs need a plan when it comes to evolving their infrastructures. That plan needs to incorporate what leadership see’s as their ideal end technology vision. We see our clients spending hundreds of thousands, if not millions, on solutions to their front and back offices. When we come into a consulting relationship, many times we see technology solutions where producers and BDs are paying, individually, or in concert, for solutions not being remotely maximized. Data is one area where this is an example. Today, the majority of firms only use their data to feed producer desktop client reports. Firms could, and do, use this same data for other uses like populating compliance surveillance engines. But getting back to the point, if a BD has the end in mind, and a holistic plan, they can begin to integrate solutions that can improve productivity and profitability in the front and back offices.
Productivity and profitability are buzz words to BDs today. Reality is demonstrating that BDs can leverage their silo’ed technology solutions into a firm wide solution package that can tie the front and back offices together, and delivers a higher ROI for their technology spend. Our financial model supports this based on time and motion studies. And of interest, the positive affect is delivered through trickle down improvements in the productivity and profitability starting with the producer, and moving to the home office, and ending with the future, where data has been properly accumulated, vetted and stored in secure logical formats for easy access. By building on automation and integration, organizational scalability will grow, while at the same time risk should be reduced. Currently, we are working with BDs on putting these thoughts on planning, leveraging data, and integrating a firm-wide workstation, with specific front and back office deliverables, in place. Research and experience have taught us that the firms that embrace the “end in mind” technology planning, will be more viable BDs. The ones that continue to live the silo’ed approach will be at risk to survive.