From the January 2008 issue of Investment Advisor • Subscribe!

Clearly Profitable

It's an evolution revolution at the big clearing firms

Their customers say, and have become much more of a partner with their correspondent broker/dealers than simply executors of trading and settlement.

Independent B/D executives have said that what's important to them in their clearing partner is responsiveness, service, great platforms--especially those for fee-based services, systems that are flexible, the technical ability to put information at reps' fingertips out in the field, and data, not only from products that clear directly through the clearing partner, but also those, such as mutual funds and annuity sub-accounts, that clear away. That data can make the difference between staying in compliance and being in violation, so it's of critical importance.

The leading clearing firms continue to grow ever larger, along with their customers, and that's no surprise. From recruiting and retention of high value producers to training, and from compliance counsel to middle office outsourcing, the clearing firms are insinuating themselves into much more of the daily business of their B/D correspondents than ever before. For the correspondent B/Ds that are their customers, this isn't such a bad deal. With the major clearing firms taking on a business consulting role, adding to existing platforms, helping with technology solutions, and providing more services, all designed to help their customers, the B/Ds--and their reps--grow, because, if the correspondent B/Ds thrive, the clearing firms will, too. This is a business where scale is everything.

The types of initiatives are very broad. For example, Pershing recently gave its broker/dealer and registered investment advisor customers access to the 10b5-1 Trading Plan service from Restricted Stock Systems, Inc., programs that help them manage planned sales of corporate insiders' stock. National Financial recently launched its National Financial Broker/Dealer Recruiting Program, which offers free, customized marketing collateral materials, transition guidance, and training; and access to health benefits trough a third party, in which premiums are paid for by the independent representative.

The big three, Pershing, National Financial, and First Clearing all are owned by firms with deep pockets: Pershing is a part of The Bank of New York Mellon Corporation, National Financial is a Fidelity Investments subsidiary, and First Clearing is owned by Wachovia Corporation. They are adding capabilities and creating alliances to enable their correspondents to transact global business more easily, helping independent broker/dealer reps grow their practices into businesses, and also staying on the cutting edge of technology--something that benefits the correspondents as well as the clearing firms in terms of efficiency and ease.


E-mail Senior Editor Kathleen M. McBride at kmcbride@investmentadvisor.com.

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