Broker-dealers that don’t have well-developed account opening processes are losing clients and depressing advisor satisfaction levels, a white paper released by Aite Group on Thursday found.
Quadron Data Solutions commissioned Aite Group to survey 515 advisors and 300 registered representatives at broker-dealers in the United States in March for the paper, “Account Opening Pain Points in the Front Office: Advisors in the Dark.”
The report found that between fully disclosed broker-dealers and self-clearing broker-dealers, self-clearing firms were more likely to have a mature account opening process. More than 60% of advisors at self-clearing firms said their account opening process tracks account and products approvals, compared with 45% of advisors at fully disclosed firms.
Among the reasons for inefficient account opening processes are advisors’ preferences and habits, the report found. For example, some advisors insist on purchasing mutual funds directly from product manufacturers even when they can purchase funds more efficiently through their broker-dealer workstation.
Despite its inefficiency, the paper asserted that “direct business is here to stay,” especially at fully disclosed firms, and urged brokerage firms to accept that fact. Half of advisors at fully disclosed firms said they preferred to open accounts through manufacturers and 40% said their clients preferred it. They cited lower account maintenance fees and better support as their reasons for the preference. Automating direct business functions, the paper said, will improve advisor satisfaction and lower operational and compliance costs.
By purchasing mutual funds, 529 plans and annuities through manufacturers, advisors are forced to wait on the manufacturers’ process, extending the time it takes to open an account. The paper found advisors take more than two days to complete a mutual fund purchase and more than four days to purchase a variable annuity. Less than 20% of advisors said they could complete a purchase for a variable annuity for their clients on the same day.