Why Outsourcing Your Clearing Platform Assessment, Selection and Implementation Processes Makes Sense

By Pete McAteer

Internal workings of a generic Chinese-made skeleton wristwatch, the mechanism based on a 100-year-old Swiss design.

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.

In this week’s episode of Oyster Stew, Part 3 of a 3, Managing Director Pete McAteer talks about why outsourcing the platform assessment, selection and implementation processes may be the right choice for your firm, and how Oyster Consulting is uniquely positioned to help.

For more information about our platform advisory services, listen to our previous podcasts “Should You Be Assessing Your Clearing Platform,” and “Clearing Platform Selection and Implementation,” 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.


Transcript provided by Temi transcript services

Elizabeth Gatlin: 0:05

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 Eizabeth Gatlin, your host for today’s podcast. In previous episodes, we talked about when, why and how you should be evaluating your claim platform and the selection and change management process. 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. He 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. Pete, last time we talked about the selection and change management process. Why is outsourcing the selection process a good idea?

Pete McAteer: 1:11

Well, I think Oyster brings a lot of value in this space. We can help with the negotiations. We understand all the key levers in the negotiations. We also have some benchmarks that we can lean upon, and that will help us inform you and consult and advise you through the negotiation period. Understanding the platforms and the competitors is also important. Being objective. That independent assessment by Oyster we hang our hat on it. Remaining objective. We have no skin in the game but yours – you’ve signed us on, you’ve asked for Oyster’s help walking you through a vendor assessment. We have to stay objective, we cannot play favorites. W e try to walk you through the process to assess the functionality, to assess the products, to assess the service and support model, to assess the change management support and the model that sits behind all of that. And then, to further evaluate the cost and the financial a pplications of signing an agreement with a specific clearing vendor is vitally important. Staying independent, staying objective. That’s our trademark.

Elizabeth Gatlin: 2:28

Pete, we’ve done a lot in this space. How can Oyster help and why are we unique?

Pete McAteer: 2:33

Well, over the last four to five years, we’ve done several dozen of these engagements. Small, medium and large clients self clearing, clear through or piggyback arrangements, fully disclosed firms, large, medium, small on RIAs BDs, you name it. We’ve had some engagements over the last four to five years. Oftentimes larger firms are required by their parent firm or by the firm itself, and their vendor management processes or sourcing departments to do a full RFP with a full RFP, the shortest one that I’ve seen so far has been about six months. That’s an RFP process to gather requirements , assess 300-400 or even 500 lines of data at Oyster. We’ve created a more efficient process to do that evaluation. How we go about doing that is doing that current state assessment that we mentioned earlier, interviewing your key stakeholders, the key users of the platform, understanding what their needs are, what their pain points are, and then establishing a playbook, documenting a playbook which involves both the current state assessment and your requirements, which includes solutions to those pain points. And we provide that playbook to the clearing vendors that the most viable options to meet your needs. We provide that clarity , the playbook to those vendors. We allow anywhere between three to six weeks for the clearing vendors to come back with proposals, with solutions and an approach to meet your needs as well as updated pricing that will be more accurate and more reflective of your final state. That also saves time when it comes to negotiating pricing and coming back that vendors can make, take their best shot, sharpen their pencils earlier in the process and we’ll be more aware of this specific metrics, transaction volumes, AUM, growth strategy, and the opportunities to create a longer lasting partnership. Oyster’s also built credibility across the industry over the last four to five years with most of the major clearing firms. Our approach is client-based, where we do that current state assessment. We understand your firm before we start helping you through a decisioning process. We confirm all your firm profile data, which we’ve taken most of the major clearing firms’ questionnaires when they’re coming in to assess your business. We’ve taken those and combined them, and I consolidate into one, which also creates some efficiencies where you don’t have to fill out three or four of those as your firm as you go into this process. We have a pretty good idea which two or three or four firms are best suited to meet your firm’s needs. As I mentioned earlier, we bypass the RFP process. We save the clearing firms and the clients many, many months of unnecessary and wasted effort. Earlier I mentioned about establishing those decision criteria around those key requirements, your key pain points, what’s important to your firm to help you from grow going forward. Establishing those, documenting those and seeking agreement or consensus across your leadership team or your decisioning group, whether it’s 40 shareholders two key owners or a selection committee representing your firm’s leadership team, or even your advisors . It’s important that everybody agree on their decision criteria before going into that vendor assessment. Creating a scorecard, taking the decision criteria and those weightings , what’s important, what those priorities are, is important to , to establish side by side comparison, and really taking some of the subjectivity out of your evaluation of your vendor, of the vendors as it presented through their sales process. You can put some objectivity or put some numbers to the scoring, and you can rank the responses and the weightings so you can actually deduce and calculate scores to ensure that the vendors are meeting your functional needs. Once you’ve assured that t he c learing firms that you’re evaluating can meet your functional needs, that can support your business, which they all can to some degree and to most degrees to be honest, then the financial negotiation is then truly a financial negotiation. Because you’re not g oing t o have a functional gap. You’re not going to have concerns around the technology, around reporting around data and access to your data. Y ou’ll then be able to evaluate in a very objective way the contract terms, the pricing, and then come up with a solid decision. T hen you can have confidence in and you can rely on for the next three, four o r five, seven, or I’ve even seen contracts as long as 10 years.

Elizabeth Gatlin: 8:15

How else can Oyster support your clearing vendor decisions?

Pete McAteer: 8:20

Once you start getting data and proposals back from your clearing vendors, Oyster can help you weed through the responses and understand ground certain things. We have seen these presentations, we are experienced with these vendors. We have good solid trusting relationships with these vendors. However, Oyster remains objective. We represent our client first. The clearing vendors know that and respect that – they come to us. We have good solid relationships with them, but they understand that we are representing you as the client first. So decisioning, support, being objective to evaluate and ground any perceived or real gaps in the presentations is, is vitally important. One other thing that we also recommend is that during the sales process, you document the answers to your questions. You document their proposed solutions, and then as you’re getting into the negotiations, that you ground those and you hold those vendors accountable for their sales or their promises or their commitments that were made during the sales process. Another way we can help is through the contract negotiation or renegotiation of your existing contracts. By understanding the levers that are out there, understanding the options and the pricing arrangements that can be, that have been recently utilized in the industry, we can help you be more creative and meet your needs. And once you’ve made a decision to change clearing firms, we want to ensure that you are properly preparing yourself and that a contract that you are signing is also supportive of the transition. Transition is not a painless experience. We can help. Oyster can help make that the least painful possible or the most painless possible. Whichever way you want to look at that. By conversion planning, we can ensure that change management is taken into account. We can ensure change management, meaning communications training, transition support, post-conversion transition support, meaning onsite support for key branches or key advisors to ensure that the support model is there, the honeymoon’s not over. When the conversion happens, we want to ensure that your firm is properly supported for the first several weeks following conversion. So then dust settles and you convert to a business as usual, run the engine day-to-day operation, post-conversion that it’s seamless and that transition is fully supported by it, by the clearing vendor. As far as conversion support goes, Oyster can provide project management and a full service onsite , which we have done. We can also do “project management lite” where we’re supporting your leadership team or your conversion point of contact who is charged with leading your conversion effort. Generally it’s the Chief Operating Officer or a Chief Technology Officer that’s involved, oftentimes in smaller firms. The whole leadership team is heavily involved, integrally involved, in the conversion efforts so we can provide decisioning support. So when the clearing firms are asking for decisions to be made on how the system is to be, compare how the platform has to be configured (rules, engine setups , thresholds, alerts), all those types of things are important to the running of your firm and the day to day operations of your firm . We can be a good sounding board for those things. From a project management perspective, we can provide full service onsite project management support. We can also provide industry expertise, subject matter expertise on various areas of the business and wherever’s needed. I would call that firefighting when the issue comes up, when the decision comes up, when the risk presents itself. We have an opportunity to call on our bench here at Oyster Consulting, and we can bring someone or an industry expert, leading expert in the field, to come in and help.

Elizabeth Gatlin: 12:46

What things should you consider when selecting a clearing partner?

Pete McAteer: 12:50

There are several things I think are important. One is the firm culture or the fit. Another is a technology assessment on what technology gaps you may be currently experiencing. Another is predicting your future needs. And is there a technology roadmap to meet your needs? Is there change management support for training, communication, adding new products, growing your business and onboarding new advisers as they come on board? And then overall, you know , that everybody always talks about is the cost. So let me go back to talk about the firm culture. What are their values? How big are they? What is their business structure? What is your competition? Who are your peers? Clearing through is also important to see. Going to the size of the firm, it was often a discussion around small firms, small fish in the big pond, or being a bigger fish and a smaller pond. And it all depends on where you want to be and how you want to direct your future growth. Being a bigger fish in a smaller pond, you’ll have more influence on the technology roadmap and on the clearing vendor relationship itself. Being a smaller fish in a larger pond (when I say smaller fish, meaning a firm that’s more focused on advice, more focused on wealth management and doing the business of financial advice) it’s important to understand it’s the economics. These smaller firms do not have the resources to have a technology group, to have a large operations group, and have a large project management group, so it’s important to understand if your firm can take adn accept that clearing platform as it’s configured off the shelf, or if you require additional integration with other vendors or solution providers. And that, as I’ve mentioned before, is using APIs and configuring those APIs to more seamlessly integrate solutions onto your clearing platform. On the technology assessment, again, I mentioned many times about the functionality. Are you spending too much? Are there opportunities to fold in some of those vendor relationships with your clearing platform and leverage the clearing platform’s scale and their pricing with some of these solution providers? Some firms have found that they are under-investing in technology. In other words, they’re not allocating enough resources or funds to build out the technology that’s needed, or to acquire the technology that will make their firm be more efficient. We find this is often reflected in recruiting challenges and could also be reflected in some recent attrition. Predicting your future needs. I think it’s important that there is a technology roadmap that aligns with your growth roadmap , that there is a strong past history of growth in the technology platform as well as a commitment to enhancing or growing the technology platform with a roadmap that does have a track record of being delivered upon. It’s really important to have confidence in your clearing platform provider that they will deliver , the tools and are continuing to stay abreast and on top of the industry and the industry trends and changes. On the change management front, it’s vitally important as you go. If you’ve made the decision to change , or you’re really seriously considering changing, understanding the support that you’ll get relative to the communications, whether it’s regulatory or just do regular client communications or internal internal communications within your firm. Ensuring that your firm is comfortable with what’s coming that this is not just a tsunami that’s going to be a crashing them and smashing them against the rocks. Change can be managed and managed well. It’s never easy. Nobody likes to go through the change, but there are often many compelling reasons to make that change. The training support, the training materials, having live training, remote training, virtual training, recorded training that can be posted on your own internal learning management system or LMS. It’s really important to have that onsite support at the time of conversion and post-conversion. It’s also something we’re seeing more and more of on the cost. It’s really important. Bottom line costs to look at the total cost of ownership of your platform. What are those bottom line costs? What are the impacts to your, your P and L, and then what are the incentives as you’re negotiating your final contract and the terms of your contract. Are there technology credits? Are there transition credits? Are there ongoing growth incentives that are, that are figured into your contract? Understanding the terms of those incentives are really important to how you can achieve those and support those in the new world. Once your contract has been signed and executed and you’re functioning on that platform, 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 onboard to understand the rationale and the reasons for going through a clearing or 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’s also healthy, as we’ve said in earlier podcasts, that evaluating these other clearing vendors – it’s 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: 20:00

Well, Pete, thanks for sharing your thoughts with us about platform strategy and the services Oyster offers. 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 the 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 www.oysterllc.com.

About The Podcast Speaker
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.

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