Clearing Platform Selection and Implementation

By Pete McAteer

Gray and blue speed abstract technology background

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. In this week’s episode of Oyster Stew, Part 2 of a 3, Managing Director Pete McAteer discusses what you should do after you’ve identified any gaps in your clearing platform needs and the change management process.

Whether you are considering exploring your clearing options, changing from self-clearing to fully-disclosed (or vice-versa) or starting a broker-dealer, Oyster will help you make the best decisions with an assessment of your business, analysis to help drive decisions, and even walk you step-by-step through a vendor selection and conversion processes. We work as an advisor to your executive leadership team. Our experience will help you find the optimum clearing model and service provider(s) best suited for your firm while ensuring alignment with strategy, growth objectives, service levels and budget.  Our consultants are seasoned experts who have been on both sides when it comes to clearing decisions and can provide you with faster, better results.

For more information about our platform advisory services, listen to our previous podcast, “Should You Be Assessing Your Clearing Platform” or click here for additional information.

Oyster provides free resources such as podcasts and blogs, as well a team of consultants and software to help you organize and automate your compliance program. Oyster Consulting has the knowledge and experience to support your efforts to achieve compliance. To learn more about how we can help your firm, please give us a call at (804) 965-5400 and a Relationship Manager will be glad to connect you with an Oyster expert.


Elizabeth Gatlin: 0:00

Elizabeth Gatlin:  Welcome to this week’s serving of Oyster Stew a mix of financial services, commentary, and insights. Each week we’ll discuss what is happening in the industry based on what we see as we work with regulators and clients. We hope you come away with the knowledge and tools to help you make the best decisions for your firm’s future. I’m Elizabeth Gatlin, your host for today’s podcast. In previous episodes, we’ve talked about when and why you should be evaluating your clearing platform and some things to consider. Today I’m joined by Oyster Managing Director Pete McAteer, who will talk about what to do after you’ve identified any gaps in your platform needs. Pete has spent the past 20 years leading complex organizational and operational integrations, change management and implementations, client service programs, technology and SDLC control programs, process improvements, and clearing vendor evaluations. So, Pete, last time we talked about evaluating your clearing platform provider. As a firm, how do you manage and prioritize the issues and enhancements with your current clearing firm?  

Pete McAteer  So tracking those items, action items, risks, issues, enhancement opportunities is important. It’s IT project management 101 – assigning accountability, assigning priority to those items, and having ongoing discussions and getting ongoing updates on where those things stand. Setting dates, target dates for delivery and holding your vendor, whether it’s your clearing vendor or another vendor, holding them accountable for delivery is, I think, a good, best practice.  

Elizabeth Gatlin:  So, what are some recent changes in clearing agreements that you can share with us?  

Pete McAteer:  What we see is a lot more of incentivizing growth where there’s a win-win or a symbiotic relationship between the clearing firm and the introducing broker-dealer. There are opportunities that we see more and more that there’s pricing options around asset-based pricing. So as the firm grows, as assets are gathered and assets under management, or AUM, increases, that the basis point pricing also incentivizes the clearing firms to bring their resources to bear to help support and enhance, and even catalyze the growth that your firm is going through.  

Let me say a few things about revenue sharing. What we’re seeing, as I think everybody’s aware with DOL, then the Reg BI and other regulatory scrutiny of the business that we’re in, that revenue sharing opportunities are being scrutinized by the regulators. It’s important to that before you launch into a long-term agreement that incentivizes you as the introducing broker-dealer to sign a contract based upon revenue sharing opportunities that may or may not be there. In the coming years, we as Oyster Consulting and our practice are staying in tune with that, and then staying in tune with what’s happening across the industry. And we’re seeing these agreements less and less dependent upon revenue sharing going forward. Things like 12b-1 or 529 plans, share class conversions, things like that, change the economics of the arrangement with your clearing firm. It’s important to really understand those opportunities, to understand where those things exist in your P and L, and what the long-term impacts could be if those changes do occur.  

On expense reductions, it’s important to understand volumes of transactions, how your business is growing, the product types of really ensuring that expenses are being scrutinized, and that if there are opportunities with scale, there’s some repricing opportunities as well. You know, the postage and handling is a big, big price lever that comes into play where clearing firms are starting to incentivize, or have been for years, frankly, but are starting to incentivize a delivery of documentation to reduce the postage and handling costs as well. The delivery shouldn’t be a very large cost. The capability may be, should be a subscription, but there should not be any per transaction or per delivery charges in your agreement.  

Elizabeth Gatlin:  How do you know if that makes sense to stay with your current claiming partner?  

Pete McAteer:  Well, I think after doing a clearing evaluation or clearing assessment, after we fully understand the current state of your firm. We understand what your growth plan and strategy is to get there, and you’ve evaluated other clearing firms and their abilities to meet your needs. It’s important then to do a side-by-side comparison. Ahead of doing that side-by-side comparison, we strongly urge each of our clients to establish their key decision criteria in making that decision, understanding what’s important to your firm. That’s establishing a clearly documented decision criteria including weighing how much of a priority are each of those decision criteria. Establishing those ahead of time before you get into the sales process will help your firm and help your leadership team, who are involved in the evaluation of clearing vendors, and will help them all to remain objective and to stay on point.  

It’s important to establish that going forward. A lot of times, we often joke the clearing firm evaluation is often like marriage counseling. And we say that jokingly, but I think folks that are listening to this understand exactly what we’re saying. Sometimes the relationship can get long and expected, and just needs to be reset or refreshed. Most of the time it’s about us re-establishing and re-setting communications. More than 50% of our engagements, the clients choose to stay with their current clearing provider. However, we always say status quo is not an option. By that we mean it can’t keep going the same way it’s gone. You’ve gotten your partner’s attention and some marriage counseling, the relationship changes, the relationship ship should get deeper, should get better and should be refreshed for the next three to five years. If you decide to renew with your current clearing provider, it does not mean though, once you’ve established that and maintained that relationship and kept it current, refreshed it, reset it, that you shouldn’t continuously be aware of and staying in touch with the other clearing providers in order to just ensure that you’re staying current with the technology that’s out there, with the integrations that are out there, and the opportunities to create a better platform for your advisors, to be more productive and more efficient.  

Elizabeth Gatlin:  Let’s talk about the process of selecting a clearing provider. So what should you know before you start the process?  

Pete McAteer:  I think it’s important to understand the industry landscape, what’s been going on in the industry over the past few years, even the most recent few months. What are the trends? What are the most recent relevant benchmarks to firms like yours? Oyster has a lot of that industry expertise, those benchmarks with recent experience and again, those relationships with clearing vendors that we can bring to bear. It’s also important as you’re going through this process to make sure that you’re transparent with your entire leadership team. Getting the team on board to understand the rationale and the reasons for going through a clearing evaluation. Oftentimes it’s just as simple as saying this is a healthy vendor evaluation step that we need to take because this is our largest vendor expense. Oftentimes that’s enough to get everybody’s attention. It is also healthy, as we’ve said in earlier podcasts that evaluating these other clearing vendors is healthy. It’s important. Seeing what else is out there. As I’ve heard a Pete Bowman say, who is the Managing Director of Strategic Planning and Execution, “Many, many times, one, two, three years are light years in this industry.” We’ve seen so much change over the past few years that it’s really, really important – it’s vitally important – for you to stay abreast of what’s going on out there around you.  

Elizabeth Gatlin:  So once you’ve made your decision to change, what comes next?  

Pete McAteer:  Well, it’s the planning and preparation for the conversion, I think are really important. Again, communicating the decision and what is your overall communication plan? Oyster can help you with that. Executives must buy in and that must be communicated to understand that the leadership team made the decision and reach consensus. The leadership team has to be fully on board and if the one chink in the armor and someone is out there saying, “I don’t know why we’re making this change.” It’s important that the leadership team presents itself as making that consensus decision that it’s in the best interest of the firm, the advisors, and its clients. Explain your business case. What’s in it for the staff? What’s in it for the users and the folks who are going to be impacted by this change? The business case, I think everybody understands what a business case is about, is what were the problems that we were trying to solve, what we did about it, what was our journey to get to this point and how are we going to go about managing this change and how are we going to be supporting the folks that are impacted by the change properly?  

Elizabeth Gatlin:  So what should you take into account before executing your communication plan?  

Pete McAteer:  You need to think of a communication plan as both internal and external. I think it’s important that you communicate clearly why you’re changing. What are the key things? If you aren’t making that decision to change clearing platforms, everybody knows it’s painful, it’s painful to your advisors. It’s painful to their support staff, the sales assistants. It’s painful if the operations and those are the internal changes, but most importantly it’s also painful to your clients. Re-papering is a challenge. A repapering can be done in more painless ways or in less painful ways.  

Pete McAteer:  How your clearing firm can support those efforts and reducing pain is really, really important. If you’re considering that change, what has driven you to this decision? What are the compelling reasons to make you really look hard at making a change? If you decided to make the change, you have to be crystal clear on what those compelling reasons were to make the change, and clearly articulate what the wins are, what’s in it for the client, what’s in it for your advisors, what’s in it for your home office, users of the system and the application. It’s important to note those upticks to get everybody excited about the upcoming change, to be looking at the positives, but understanding and being transparent about how you’re mitigating or managing the downside, which is the pain of change. The community internal communication plan should also involve providing management with updates and Talking Points.  

And so, it’s important to provide Talking Points for your advisors that are out there talking to their clients, to give them a script, to give them some key bullets to stay on message so that the communication as decisions made as you’re going through the conversion process can be articulated and clearly conveyed out there to the advisors. It’s also important to have feedback mechanisms as you’re going through the conversion process to ensure that whether clients, client feedback or advisor feedback, or internal, home office feedback, it’s important to ensure that there’s a mechanism to capture and hear those internal questions so it can be managed and responded to in a timely fashion. Oftentimes the questions are being asked before those decisions are made and will help inform better decisions that meet the firm’s needs as soon as those key decisions are made, and fully vetted and grounded and understood, get those decisions out there.  

Communicate regularly. Oftentimes we see firms use internal communication mechanisms are their intranet sites as well as they’ll maybe even create a conversion page or a landing page where they can keep all conversion related materials, whether it’s training materials or links to training materials or recorded roadshows or the FAQ, is most frequently asked questions. Those decisions can be posed out there and can be communicated in such a way. We’ve also seen email communications go out as monthly status reports on how the conversion’s going and as you get closer to the conversion, there’ll be more frequent communications out to the field, or perhaps even town halls or conference calls to give quick updates on a weekly basis. As you get closer to conversion date tracking, the conversion metrics, being sure that you’ve got ability to give credit to those folks that are out there working hard to make sure these conversions are happening, that conversion activities are being done in a timely fashion. Decisions are being made and the hard work, the heavy lifting of executing on the conversion is being recognized and rewarded and acknowledged. Sometimes public recognition is the best form of flattery and recognition.  

Elizabeth Gatlin:  What things should you be doing to ensure your team is ready for the execution?  

Pete McAteer:  Making sure that you have the appropriate resources in place, I think is important. If your team’s already working 50, 60-hour weeks, adding a conversion on top of that is probably not going to go over well. That’s another place where Oyster can help. But there’s also other ways to pass along or turnover some key work to other resources within your organization, or perhaps take some of the more manual or administrative type tasks and support or fortify your existing staff with some temporary associates that can come in and help you for a confined period of time. It’s also important to really look at what are the risks, where the worries, what are the concerns that are out there? I think to brainstorm ahead of a conversion.  

just to say, what are you worried about? And ask your field, ask your key advisors, ask some key sales assistants, operations leaders, compliance, especially compliance, and legal to ensure all the right folks.  

Are you getting all perspectives of the change and what is worrying them or what’s keeping them awake at night? Once you have that laundry list, you can then do a risk assessment of all those risks. Ensure that all the right people are weighing in. You can prioritize those risks. You can determine some mitigation strategies and decide whether or not you’re going to act upon those. Identifying what those triggers are for some of those risks is going to be important as well. But I think the earlier you do that risk assessment, the earlier you get some of those risks, those worries and concerns out there and documented and discussed and be transparent about that process and about those discussions, I think the better your conversion will go.  

Elizabeth Gatlin:  What are your suggestions for managing your vendor relationship?  

Pete McAteer:  A clearing vendor relationship is truly a strategic relationship. It’s vital to your firm. For an introducing broker-dealer or an RIA, to ensure that you are communicating clearly, effectively with your, with your vendors is important. We often talk about ensuring that your vendor, your clearing partner is not just a vendor. Your clearing partner is a strategic partner that is engaged, fully engaged in your business and again, via the contract and being at growth incentives, and even the pricing model of how the contract is arranged and executed. It’s important that you work to transform a vendor relationship, which sounds very cold, black and white, into a more strategic relationship with a fully engaged clearing vendor that will help your firm grow, and make sure growth objectives for existing clearing partners. Oftentimes we see with marriage counseling that communication and more effective communication, more regular communication, holding each other accountable for deliverables, is very important.  

So from Oyster’s perspective, we spend a lot of time talking about that vendor management process or our governance processes or PMO that will help manage all the needs across your firm. Larger firms, a lot of time, just get spread out and there’s not a centralized mechanism to collect the requests that had been going out to your clearing partner. And as those are collected, there’s an opportunity then to track each of those, to hold the clearing partner accountable and ensure that the right priorities are being addressed. If you’re asking from 14 different points of contact across your firm to your clearing vendor, it’s impossible for the clearing vendor to react and respond to those needs. And it’s also impossible for your leadership team to hold your clearing partner accountable for delivering on those needs.  

Elizabeth Gatlin:  What’s the hardest part of a conversion?  

Pete McAteer:  I think it’s clear and timely communication and delivering communications in ways that you’re touching everybody in the most effective way possible. We often say you need to communicate in multiple ways the same information. You also don’t want to communicate too much too regularly, too consistently with the same mechanisms because the folks that are receiving those communications are numb to it at some point. It’s important that communications that you really need to get out there, the urgent, important communications are delivered in ways that the field, the recipients of those communications are aware that these are the headlines. These are the things I do need to pay attention to. Oftentimes we see firms get within a week or two of conversion. Then, there will be affected folks, whether it’s the clients, whether it’s the advisors, whether it’s the sales assistants, all of a sudden wake up and realize the conversion is here. How do I do six or eight weeks of training in two weeks or the Monday after conversion? How do I log in? Those are things that you want to ensure you’ve taken care of well in advance. It’s important that you clearly articulate early on in the process what the communication plan is, how you’re going to communicate, when you can communicate and who’s going to be doing the communication. If you do that early and stay with that strategy and stay on point, stay on task, you’ll be highly successful. There are always going to be folks that don’t pay attention, that are busy serving their clients’ needs. And it’s important to assess that, evaluate that and the closer you get, and I think it’s important to, as you do your readiness assessment, which we recommend about four to six weeks ahead of the conversion, that you kind of touch base with each of your key constituents, with each of your key branches, and go through a readiness assessment, evaluation with them. Assess early enough that you can address the concerns.  

Elizabeth Gatlin:  Thanks Pete for sharing all that. I know there’s a lot more to say on the subject, but to be respectful of everyone’s time, we’ll have one more podcast about how and why oyster is uniquely positioned to help your firm with the evaluation and potential implementation and change management process. Thanks again for listening to the Oyster Stew podcast. Don’t forget to subscribe so we can continue to bring you resources to help you make the best decisions for your firm. If you’re struggling with a topic and you’d like us to do a podcast on it, or you’d like a free consultation, feel free to reach out to us at 804-965-5400 or by visiting our website at  

About The Author
Photo of Pete McAteer

Pete McAteer

Pete McAteer has senior level management experience in coaching, consulting and leading large programs and operations teams, which drive significant, impactful change management, process improvement and implementation efforts. He possesses a deep background with over 30 years of experience with Fortune 500 companies working in International Quality Manufacturing and Financial Services industries.