Making Your Clearing Firm’s Technology Work for You

By David Williams

DNA joined and stacked vertically

Previously, Oyster posted a blog about the importance of your clearing relationship, as it affects almost every facet of your day-to-day business.  As a broker-dealer your dependency on this relationship is paramount because it touches your clients, advisors and how you manage your business.  In this next edition we will expand on one of the most important aspects of this relationship: technology.

When most people think of a clearing relationship, the first thing they think about is the technology platform.  Larger introducing firms typically create a unique front-end experience for their advisors and supplement the back-end operational servicing to make processing easier and more efficient.  Mid-sized and smaller firms usually don’t have the resources to build a platform, and therefore rely on the off-the-shelf offering their clearing firm provides.

Years ago, firms were content with the one-size-fits-all platform provided by their clearing firm because there were limited choices with supplemental technology.  Today, firms have an almost infinite choice with the many FinTech offerings that range from CRMs, Portfolio Management Systems, Risk and Compliance platforms, Aggregation Vehicles, and Trading Systems.  Some clearing firms have made it simple to interface with these vendors through various levels of API integrations. Other clearing firms offer fully integrated platforms that combine all or parts of these services with their own proprietary platform.  Each model has pros and cons. 

Open architecture provided by a clearing firm, allowing a wide variety of choice to advisors, still requires firm resources to maintain those vendor relationships.  This can become expensive and resource intensive.  Closed architecture, although simpler from a firm standpoint, may not offer the flexibility that advisors ask for, as they address a variety of client servicing needs.  Ideally, a clearing firm should offer the best of both worlds – proprietary technology that covers a majority of the advisors’ needs, supplemented by full integration capabilities for supplemental FinTech providers.

Ultimately, you need to decide how much flexibility and customization your advisors really need.  All firms, small, medium and large, need to attain a level of scalability.  Scale is critical. If you have a hundred advisors, you can’t have a hundred different ways you interact with them.  The first building block of attaining scale begins with your technology platform and how much flexibility you want to offer vs. piggybacking onto what your clearing firm already offers, usually at a very reasonable cost. Take a closer look at your clearing firm’s technology offering and get a better understanding of the various proprietary components, the integrations they offer, and how seamlessly and efficient they provide support for external partners.  Your objective is to eliminate one-offs and create standards that will result in a much more efficient organization and, in the long run, greater profitability.

Oyster has extensive experience in clearing contract reviews and negotiations, as well as full business assessments. We help firms navigate their current clearing relationship and customize an approach to address needs, based on our proven process.  Our current state assessment allows you to objectively ‘look in the mirror’ to determine what model best fits your culture, advisors, and shareholder goals.

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.