Constantly changing market factors, evolving regulations, and advancements in technology have resulted in competitive challenges that are causing forward-thinking firms to determine the appropriate process, technology, financial and strategic investments to stay ahead or even just keep up. In a rapidly changing environment, the analysis to decide if it’s best to invest in your current platform or consider a different path should not be ignored or pushed too far into the future. One of the most meaningful relationships any introducing broker-dealer has is with its clearing provider.
Is the grass really green enough to move, or does your own lawn just need some attention?
Selecting a clearing firm goes beyond just looking at today’s business challenges to see what kind of expenses can be slashed or up-front check is available. Assessing your firm’s strategic plan and financials is the first step when considering whether to stay with your current clearing arrangement or seek a new partner. Once you determine where you want your firm to be in the next five, ten or fifteen years, other more tactical questions should be asked and answered:
- Does your current clearing arrangement align with your mid- to long-range business plan?
- Is your business understood by your current clearing partner? How well do they know you? Are they a strategic partner or advisor?
- Is your firm being supported well? Is your clearing firm fully engaged?
- Are there any technology gaps or functionality not being readily supported? Have you had to engage additional vendors on your own to find solutions?
- Are their Servicing and Support models meeting your needs?
- Are you effectively managing and prioritizing defects and enhancements with your clearing platform vendor?
- Are their incentives in your current Clearing Agreement (a.k.a. Schedule A) that reward growth and share the gains?
- Revenue sharing
- Expense reduction
- Basis point pricing
- Mark-up/Mark-down client fee opportunities (pass-thru savings to clients)
- Bundled vs. a la carte pricing
Whether you are considering a change from self-clearing to fully-disclosed (or vice-versa), exploring your clearing options or just starting a broker-dealer, the assessment of your firm’s current state, setting your growth objectives and ensuring alignment are critical to your long-term success. Identifying gaps, and examining priorities and requirements enable a more objective analysis of potential clearing partners. Oyster’s competitive intelligence, benchmarking, unbiased recommendations and best practices will help your firm make the best decision.
