Convergence
Two weeks ago I attended the Pershing conference in New York. As I was sitting in a conference room, my interest was suddenly sparked by a word that flew up on the screen. The word was “convergence”. Almost a week later I still cannot get that word out of my mind. Convergence is exactly the concept that all broker dealers need to keep in mind when they look at planning their future infrastructure.
When we look across broker dealers today, convergence would be not one of the processes that come to mind. Historically, broker dealers’ infrastructures have most often been a series of inefficient, disparate processes and an assortment of tool sets. The truth is – broker dealers have been duplicating duplication.
Let’s look at how an adviser’s office has traditionally processed paperwork. An adviser’s office staff manually fills out forms pulled down from the web and then manually enters data into their unique systems such as financial planning and client relationship management tools. The work gets done; but how many times is the data input, and with what guarantee of accuracy?
What happens when a broker dealers’ home office gets the paperwork described above? The home office goes through their version of the same process already performed by the advisers and their staff. The home office staff will manually review the paperwork, after which the staff manually enters data into different back office systems. That means home office staff are ten-keying data numerous times into multiple data entry screens for multiple applications and databases. How is this a good way to scale a business?
Nowhere in the previous two paragraphs does the word convergence resonate. As we look at the future for broker dealers, convergence needs to be foremost in broker dealers’ infrastructure strategies. Broker dealers must provide either system integration or a point of convergence between their systems and those of their advisers. Convergence will be driven by integration, because no single solutions provider can build a platform that will satisfy the home office and hundreds, if not thousands, of the broker dealer’s advisers. At the end of the day, an advisor needs to be able to enter data directly into the front office system. That data will then automatically be driven into the broker dealer’s back office systems. Once core system automated processing is in place, the last piece of the puzzle will be the implementation of a middle office reporting layer. This middle office reporting layer will allow broker dealers to efficiently manage and report on the various aspects of account opening, compliance, performance and management.
By embracing convergence, broker dealers will see incredible benefits. These benefits will include profitability, productivity, improved oversight and dynamic management reporting. To take the steps needed to implement convergence, a big commitment needs to be made. Making these changes can re-invent the core dynamics of a broker dealer. Convergence is the key to the successful future of the business.