For years now, the clearing space has been shrinking in participants. Consolidation has been the theme. But on Monday, a new full-service clearing business for retail broker-dealers enters the arena.
The ambitious “next-generation” platform is from DST, a leading provider to the asset management, brokerage, retirement and health care markets. Heading the business is RBC’s former director of correspondent and advisor services Craig Gordon, who departed the firm in January after running its clearing arm for nine years.
In an exclusive interview with ThinkAdvisor, Gordon, a 27-year veteran of the clearing space, discussed his new venture to be introduced this week at SIFMA’s Operations Conference in Boca Raton, Florida.
Gordon has been with DST developing its brand-new clearing platform and hiring staff since January.
“Our goal is to be a top-tier clearing firm for retail financial institutions and financial advisors, to compete with the largest clearing firms in the business,” says Gordon, citing Pershing and National Financial, Nos. 1 and 2, respectively.
DST is a large global public company with deep financial pockets and 12,000 employees. In entering the clearing fray, it is leveraging its core competency, technology processing, together with expertise in the traditional brokerage business.
The firm is the world’s largest provider of third-party mutual fund recordkeeping services. Headquartered in Kanas City, Missouri, it has been in the financial services arena for more than 45 years.
DST’s intention is to “transform the clearing business model,” Gordon says. “We’re going to build a clearing business that’s focused on the way financial advisors need to work with their customers in the decades ahead. We’re looking forward to providing what advisors want and need to be efficient, and to electronically minimize physical paper and multiple processes so that they’re more productive and have better tools with which to grow their businesses.”
The new platform will serve U.S. BDs only; and for now, DST is staying out of the institutional market. It will provide custody services for RIAs through its BD clients, though working direct with investment advisors is “certainly on our radar down the road,” says Gordon, who, at RBC had responsibility for both BD clearing and RIA custody services.
DST is offering big value, says Gordon, based in Minneapolis, as before. “We think we will be able to deliver a tremendous amount of capabilities at a very reasonable cost and serve customers in a way other clearing firms have been unable to.”
As for reaching out for clients, he has been talking with BDs who clear through others as well as self-clearers seeking clearing firms.
“So we’re hoping to disrupt the marketplace a little,” Gordon says. “I really see a growing demand by independent broker-dealers for more from their clearing firms – more integrated technology, more efficiency in processing – in other words, the next-generation clearing platform. Over the last few years, many clearing firms have become smaller and smaller because the core competencies of the large global banks [that own them] are not technology and processing efficiencies.”