Products, Technology, Service and Culture – Clearing Firm Decisions Impact Profits and People

By Oyster Consulting LLC

Office buildings project emerging from a computer CAD software for architectural design, showing constuction plans, blueprint and structure.

The economic impact to retail broker-dealers of their clearing strategy – self clearing vs. fully disclosed and choosing the best provider – is larger than ever.  In recent years, rapidly changing market factors, regulatory challenges, and technology have resulted in competitive challenges that require investments to stay ahead or even just keep up. The decision to invest in your platform or chose a different path can no longer be ignored or pushed to the future.

When Executive Committees at retail broker-dealers are asked, “What business are you in?” the majority will state, “Wealth Management and Advice”.  In fact, some will say they want to move away from the term broker-dealer entirely.  When asked what decisions they spend most of their time worrying about, executives will often say “Delivering technology to support their business, attracting new advisors, creating operational efficiencies, addressing the most recent regulatory mandate, or simply, ‘how do I pay for all of it?’”

The leaders of these firms fully understand the importance of their firm’s unique value to the Wealth Management space, but many question the costs and benefits of supporting and delivering an integrated platform solution, and of keeping up with advances in technology and evolving regulation.  Thriving in this environment requires keen expertise and a financial investment that only a larger scale provider can afford.

Your choice of clearing firm has never been more important. Whether you are looking to start a broker-dealer, change from self-clearing to fully-disclosed clearing, or exploring the offerings of other clearing service providers, the selection process can be daunting.

What You Should Do:

No matter what type of clearing option you choose, sufficient analysis and due diligence must be exercised in order to protect your firm and your clients. The process may not be quick, but doing it correctly can minimize your risk down the road.

  • For Self-Clearing Firms – Assess your firm’s strategic plan and financials to determine the appropriate clearing designation and identify the key drivers to consider in the clearing firm selection process
  • For Introducing Firms – Assess your strategic plan to ensure it’s a proper fit with your current clearing firm and complete a financial analysis of existing agreements (including an understanding of the clearing firm’s cost drivers)
  • Develop and distribute a Request for Information (“RFI”) and Request for Proposal (“RFP”) to Clearing Firms

How Oyster Can Help:

Oyster offers a proven methodology to gather information, perform the analysis and provide unbiased recommendations. We work as an advisor/practitioner (our team has been in your chair and the chair of the clearing firm) with all levels of your organization to capture the information needed to effectively evaluate the clearing decision, decide if the firm and their services are best suited for you, and ensure they align with your mission, service goals and budget.

Jim Allen, CEO of Hilliard Lyons states, “It was a pleasure to have Oyster on our side of the table.  Their team truly listened and worked within our culture to aid us in the right platform decision – not driving us or making our decision, just adding to our knowledge and providing objectivity to ensure the right decision was made.”

Oyster helps introducing firms understand how to get better value from current clearing partners, and help with the selection process if you should seek a new one. Oyster helps self-clearing firms determine how to address the technology requirements of Mobility, CRM’s, Advisory Tools, Cyber Security, and strategy. Oyster also helps clearing firms support their client’s needs.