Now that Lou Dobbs and other T.V. talking heads have mellowed on the outsourcing hysteria circa 2004, a sober look at the strategy, especially when it comes to the broker-dealer back office, is yielding positive results in efficiencies and cost containment.
TrustFort, a Woburn, Mass.-based provider of technology and back office solutions, is one company taking full advantage of the phenomenon. Founded in 2003, it specializes in working with independent broker-dealers to provide turnkey portfolio accounting systems and service teams.
TrustFort’s competitive advantage in an increasingly crowded space is its flexibility and customization capabilities, Atindra Barua (left) told AdvisorOne in a phone interview on Tuesday.
“Most of our competitors offer a standardized solution, rather than what we call a focused solution,” Barua said. “They bundle their offerings; we break out different pieces to fit a particular firm’s needs.”
And because of their offshore back-office operations, they cost less than competitors, he adds, savings they pass on to customers.
“We recently did an analysis for a client of ours and here’s the answer,” he said. “For corporate actions processing and reconciliation, the client uses a combined team with people from our team working closely with their own staff. The cost of processing a single corporate action event by their internal staff is $184 while their cost with us is $29 per corporate action event. That is combination of both productivity and cost difference.”
Another differentiator is the firm’s performance reporting engine, specifically its ability to track different lots at different periods of time.
“Consider the case where a company has spun off another company,” Barua explained. “With solutions like [our competitors], the security level performance covering the two securities over the spin-off event will yield different results for accounts over the same window of time, depending on when the cost of the security in the account. That is blatantly incorrect. [Our competitors] also do not calculate security level performance correctly when you have buys and sells of the same security on the same day, which happens frequently when you have corporate actions.”
The company counts Orion Advisor Services and Commonwealth Financial Network as recent clients. Its competitors, according to Barua, include Black Diamond Performance Reporting, Advent Software, Albridge Solutions and Morningstar Advisor.
“The problem with them, and the opportunity for us, is that they are all ‘off the shelf’ and you have to take what they give,” he said. “With our integrated solution, it’s customized within an existing structure. You don’t have to take all the pieces from us, just what you need.”