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Portfolio > ETFs > Broad Market

To Market! To Market!

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Some people define genius as having original, unique thoughts. I think of geniuses as people who look at the same information as everyone else, but do so with a different perspective that allows them to draw unique conclusions from that data. By that definition, Ron Fiske, a Pershing managing director responsible for product management and distribution, should be a member of Mensa. At the 2006 Insite conference, I heard Fiske define the behemoth Merrill Lynch not with the expected descriptions as a great marketing engine or as the home of an elite corps of brokers, but as a loan machine. A very significant part of Merrill’s business, Fiske said in June 2006, was lending money to investors so they could purchase securities. Maybe, he suggested, Pershing and its customers should be in that business, too.

Pershing is the largest clearing firm in the business, but the range of products and services it offers to all its customers goes far beyond the quotidian routine of settling trades.

At this year’s Insite conference, Fiske rattled off no fewer than 13 new products and services introduced by Pershing over the prior 12 months–including a major effort in response to the court decision voiding the Merrill Lynch rule to help its correspondent B/Ds switch their fee-based brokerage accounts to managed accounts. Then Fiske energetically recited the list of enhancements scheduled for this year, including a new technology outsourcing firm called iNautix (see sidebar). Fiske, Pershing CIO Suresh Kumar, and Managing Director Marc Butler spoke to IA at the conference in early June.

You’ve got such a long list of products you’ve introduced or plan to. How do you determine which to offer?

We try to run it–to as great an extent as possible–as a customer-centric organization and let our customers vote. You have to be careful when you’re running a democracy, though, that it’s not the loudest voice at the right time [that gets listened to]. You can’t preclude that from happening, but you’ll see products and capabilities where a consensus builds among customers and across market segments. You keep the feedback loop tight, and we assiduously seek feedback, feedback, feedback. We conduct a series of 24 professional seminars around the world, and we get thousands of questionnaires back from investment professionals about what type of products we offer, what they’re interested in, and where we should go.

In addition to our senior executive retreats and meeting senior executives so you get a top-down view, you get a bottom-up view from investment professionals, and you get an overall market view–all of that is brought into the calculus of defining what we do.

We also try to be good partners. For example: HSAs–build versus buy? You have to ask what the upfront investment is in remediating our system to do it. Can we get to market faster through a partnership? I’m a big fan of speed to market and being nimble. We often think of partnerships as great ways to get into a market quickly.

You refer to your customers as investment professionals–who are they?

Pure RIAs, the dually registered who practice in both ends of the pool, and Series 7 investment professionals–the traditional broker. You’ve got to find a product set and suite that resonates across that entire spectrum. That’s easy to say and hard to do. Not everyone works that way, but I’ll give you a product that does: donor advised funds.

Many people have charitable impulses and [advisors] want to be able to serve that. Nobody was pounding the table on it, but we viewed it as a transformational product that can change the nature of the dialogue that people have with customers.

That assumes that those investment professionals are interested in building a more comprehensive relationship with their clients.

You hit the nail right on the head. You’ll note that we say we build this broad capability that allows you to create the business model you want to create. So a person could, through the trust reporting capabilities that we’ll launch this year, and the investment management capabilities, and the lending capabilities, craft themselves as a virtual private bank. If you take our product as a spectrum, many investment professionals pick certain capabilities, combine them in ways that we work with them to do, then craft a unique business model.

We offer such a wide and broad spectrum because we have to. We view our collective competitive imperative as competing against large organizations that spend lots of money in this area.

Like your reference to Merrill as such a big lender?

Absolutely. We watch them very carefully, because Merrill is an organization that we respect tremendously. It’s important for us to be highly cognizant of what the competition is doing, and we define competition broadly: Private banking. Where is that heading? Asset management? Traditional wirehouse? You have to take a look at various markets and where they’re heading and come up with a product combination that makes the most sense and will resonate in various market sectors.

Those products and services are available for RIAs and the broker/dealers?

Every market segment. We’re interoperable. We’re the product group for PAS, and for Pershing. What you do is build up the value chain by leveraging the foundation that people like Suresh (CIO Kumar) and Marc (Butler) have built on transaction processing, on technology, on clearance and settlement, and on trading, and build, in effect, a pyramid up. The notion of being able to compete with clients at every rung up the ladder into the tens of millions of dollars–you can’t just say it, you have to do it. You have to provide products and services and partnerships that allow you to do that. Here at Pershing we may not necessarily have all the bandwidth you need to go after a specific eight-figure prospect–what are all the forces that you would need to bring to bear to convert someone like that? That’s where having an open architecture, having partnerships, gets to be extraordinarily beneficial.

Editor-In-Chief James J. Green can be reached at [email protected].


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