Expect The Most From Your Clearing Firm

By David Williams

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Your clearing relationship is your most important business affiliation. The contract between you as the ‘introducing firm,’ and your clearing firm, the ‘carrying firm,’ is controlled by FINRA and outlines the many regulatory obligations for both parties. Holding and settling security transactions, providing margin, and sending statements, confirmations and tax documents are a few of the rudimentary obligations of your clearing firm. The expectation that clearing firms will provide services far above and beyond the basic contract has become the reality in a marketplace where each clearing firm is trying to differentiate itself from the others.

You should be expecting a lot more from your clearing firm than you probably are today.

The core of any clearing firm’s offering is technology. The dependency that your clients, financial professionals, support team and management have, not only on the data provided but how it’s made available, is crucial to the success of your firm. 

  • Do you depend on the basic workstation provided by your clearing firm, or do you have to supplement the gaps in their technology?
  • More and more clients are viewing critical information on your website. How is their digital experience?
  • Does your support team operate in a paperless environment to transmit and store documents?
  • Can your management team run your business with real time information provided by your clearing firm?

Your clearing firm has tremendous scale that goes far beyond the operational infrastructure you use daily. Do you piggyback onto their scale? Your clearing firm is part of a much larger organization that provides many valuable services to their proprietary businesses. Ensuring that their proprietary products and programs are made available to you and are marketplace competitive is one step towards getting the most value from your clearing firm.   Is the technology the same? Are the same tools available to you to gather new assets, increasing productivity and with providing best practices.

Last and certainly not least, clearing firms are becoming more creative in their pricing models as our industry evolves toward an advisory vs. transactional relationship with clients. Where ticket charges have become ‘free’ on the RIA Custodial side of the business and basis points have become much the norm, does your Schedule A reflect those changes?  Are there revenue sharing opportunities for your firm?

We have found that many firms do not fully take advantage of the many component pieces of their clearing relationship or have a contract where the costs are not competitive in an industry that has evolved dramatically over the years. Oyster Consulting has helped many firms examine the entire relationship with their clearing firm, making sure there is alignment with your firm’s direction, both from a business and cost standpoint.

About The Author
Photo of Dave Williams

David Williams

David Williams is responsible for the leading the firm’s growth strategy. David’s team collaborates with broker-dealers and RIAs whose needs match with Oyster’s expertise.  The goal is to implement solutions that result in successful outcomes. David also works with major platform providers and large institutions on strategic initiatives including current state assessment, future operating model, clearing, platform evaluations and succession planning.