Plan B

Nobody would dispute that it’s been a tough year. Tragedy, terrorism, and business downturns have taken their toll. Under conditions like these, it’s more important than ever to know what sort of support systems back up your business–and your business partners’ businesses. When it comes to broker/dealers, that means clearing firms. The sturdiness of their structure can make the difference between continuing to do business in times of unthinkable disaster or being shut down.

Last January, Alton Jones, chairman of the Global Customers Group of Pershing, had ambitious plans for 2001. While implementation of those plans has slowed a bit as business in general has slowed, another issue has become more important to Pershing’s customers: being able to go on with business under difficult circumstances.

Disaster planning has been implemented at Pershing for a long time. Jones points out that client Keefe, Bruyette & Woods went live doing business with Pershing on the day the World Trade Center was bombed the first time, in 1993. “They began using Pershing as their clearing firm in our offices,” says Jones, “and here we are again.” Clients are, in fact, still doing business in Pershing’s own offices in Jersey City and Florham Park, New Jersey. “There were a number of our customers located in the footprint of the twin towers and surrounding buildings,” Jones says. “We cleared out areas and put in desks so they could carry on with business. Two of them are still here.” Pershing’s offices not being located in Manhattan, they were spared on September 11.

“We’ve been creating backup scenarios all year,” he says, which is vital because “we’ve been such a large factor in the business for so long.” But this is where having offices in different locations has been a real blessing. “As business is done in one location,” says Jones, “it’s replicated in another in real time. A lot of large organizations, particularly banks, have sent in auditors to see how redundant we are. I’m proud to say that each auditor walks out saying we’re ahead of the curve.”

C. Michael Viviano, chairman and CEO of BNY Clearing Services in Milwaukee, says his firm has also addressed its current strategies on disaster planning. “We’ve forced ourselves to rethink geographic commitments, business and continuity commitments, and introduce scenarios that weren’t in our thinking for business recovery and business continuity.” This in-depth review of existing disaster recovery strategies was “unscheduled and unplanned.” After all, with the planning for Y2K having been done such a short time ago, companies had substantial and extensive disaster plans in place. September 11, however, taught us that we may not have thought of everything.

But disaster planning isn’t the only important issue for advisors when it comes to clearing firms. You need to know that sound planning extends throughout the business, and that mechanisms are in place to help you with all your business needs. Says Viviano, “We continue to make investments in the business. Bank of New York’s commitment to the transaction business, of which execution and clearing services are a part, is a core strategy. It’s not a secondary or excess capacity strategy.”