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Practice Management > Building Your Business

Pershing CEO on What's Up in Wealth Management

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BNY Mellon Pershing CEO Jim Crowley has been with the clearing and custodial firm since 1985, but he’s been in his new role for just two months — after taking the baton from Lisa Dolly, now chairperson of Pershing Group LLC. The executive recently took the time to share his insights on the industry and what lies ahead.

What’s your view of the wealth-management business today?

Looking at the landscape, it is quite dynamic and changing pretty dramatically — whether it’s a transaction, with two similar firms coming together to create more scale or one firm joining another to enter a new marketplace geography or business model.

There’s also the convergence of these business models. In much deeper ways than before, firms are really thinking about how they serve the advisors in their network and are shifting from a grid mentality to a fee-for-service approach to support their advisors — much like a custodian rather than a broker-dealer.

We believe the advisory movement is working across both the FINRA- and SEC-regulated regimes. We’re agnostic to whether the advisor sits in a corporate RIA affiliated with a broker-dealer or with a standalone, independent RIA firm.

We’re starting to hear firms refer to themselves not as broker-dealers but as financial-services firms or financial-planning firms. In fact, we see more and more firms becoming plan-led as opposed to investment-led in an effort to differentiate themselves in the marketplace and combat price or margin compression.

How do you view your clients within this changing landscape?

We have approximately 1,300 clients that we serve globally. Clients fall into three broad categories. We serve about 750 RIAs and roughly the same number of broker-dealer firms in our custody and clearing business — [some of which are dually registered]. With the clearing business, there’s another group of about 100 clients that are either hedge funds or ‘40 [Investment Company] Act fund managers [registered with the SEC].

The brokerage model is still a significant business here at Pershing and in the industry. With Reg BI [or the SEC’s Regulation Best Interest], these two businesses — the advisory business and the brokerage business — are starting to look more alike. The best interests of the client are being served better, and that’s what’s really important.

As a clearing and custodial firm, we have a very disciplined approach to the types of clients that we want to serve and support. For instance, if you’re looking at our custody business compared to any of our competitors, our average custodial advisory relationship is much, much larger.

When Advisor Solutions CEO Mark Tibergien speaks to the idea that we’re serving growth-minded, professionally managed advisory practices that serve clients with complex financial needs, you can see that in what our average advisory firm has as AUM relative to the average assets of clients with other custodial firms.

The same is true in the broker-dealer business, where we are being sought out by larger, more complex broker-dealer firms looking to partner with a clearing firm/custodian with a broad range of capabilities to serve the types of advisors and clients they have through more holistic technology solutions and product solutions — such as lending. This is really how we are distinguishing BNY Mellon Pershing in the marketplace.

Where do you see Pershing in terms of tech partnerships or integration?

Our mission and desire is to help our clients run their businesses more efficiently, so they can serve their clients more effectively, and so we are creating a noticeably superior experience for the client.

As for how we are building and designing a technology stack that addresses unique client needs, we are doing this via intelligent open architecture and via integrations with third-party providers that have substantial commercial backing — meaning substantial businesses, client rosters, revenues and balance sheets — and relevant and sustainable businesses to support our clients in a scalable way. About two-thirds of the firms that we work with integrate with third-party technology connections that we have.

We are also continuing to build our own technology stack, which roughly one-third of our clients use. And we still see a few clients continue to build their technology from the ground up.

More and more firms are looking for what we call enterprise technology solutions so they can migrate away from designing their own portfolio of solutions. They’re looking to simplify their technology stack and their investments in that stack to differentiate themselves. They are relying more heavily on enterprise solutions like ours that offer flexibility and good commercial terms to drive their scalability and create a powerful client experience.

How about new tech partnerships?

We are curious, and our curiosity leads us to remain open minded to alliances that we can establish, particularly with commercially stable firms, to do something unique. And if we can do that and create a strategic alliance with a third party that delivers fair value to them, creates fair value for BNY Mellon Pershing and creates fair value for our clients, we will do that all day long.

How is Pershing responding to industry consolidation and other trends, like the growth of RIAs?

Given the impact of regulation and technology and the experience needed to remain competitive and offer value, firms that don’t have scale and solid partnerships find it challenging to remain sustainable and relevant. There are investment requirements to support Reg BI, to support privacy and to support other things in the regulatory pipeline — such as state fiduciary standards and the [updates to FINRA’s] consolidated audit trail.

There’s a wide variety of regulatory matters and supervision that are really challenging middle-market firms that want to continue to thrive. Thus, these firms are exploring ways to find more value either through outsourcing more of the things that they otherwise would have done themselves, like clearing, or merging with a similar firm.

There are a lot of firms that were started by baby boomers who are getting to a point in their maturity cycle that they’re ready to transition to new owners. And mergers are sometimes a way to acquire that talent, to acquire that succession and to monetize for the founder.

As our clients’ businesses evolve and grow, we at Pershing continue to build solutions that will enable them to compete and thrive. Tapping into the resources of our parent, BNY Mellon, we are also constantly looking to bring to market differentiated offerings — such as bank custody and private lending — to meet client needs.

What is BNY Mellon Pershing doing with respect to diversity and inclusion?

At Pershing, we have a large representation of female leaders at the highest levels of the organization. In fact, diversity is a focus for our entire organization, starting all the way with [BNY Mellon] Chairman and CEO Charlie Scharf, who has made diversity and inclusion a priority for each of us.

Our commitment to diversity is proven by the number of female leaders at the most senior levels of our organization, including our Chief Legal Counsel Joan Schwartz; Maura Creekmore, who runs Global Client Relationships; Marcia Davis-DiLorenzo, who heads up Human Resources; Claire Santaniello, head of Operations; Karen Novak, head of operations for our Advisor Solutions business, and Christina Townsend, head of Advisor Platform strategy.

We strongly believe in driving a culture of diversity and inclusion — not just gender, but ethnic diversity as well — across our organization.

What are your other priorities as CEO of Pershing?

I want to make sure my team knows how much I care about them and how much I value the things they do. They are closer to the information that I need to be a good executive [than I am], so therefore I am dependent on them to help guide me in decision-making as a leader. “People first” is what I really plan to focus on.

It’s in my DNA to make certain that I always have my head up and that I am understanding what’s going on in the marketplace from our clients’ perspective and more broadly from an industry perspective.

At this year’s INSITE, [author and speaker] Simon Sinek talked about infinite thinking. What the competition is doing in the marketplace can be interesting; however, what we really need to be focused on is the long game, what our [advisor and firm] clients are interested in, what their [investor] clients are interested in, and what behavioral changes are taking place for which we need to plan and in which we need to invest so we can deliver a noticeably superior experience.

Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at [email protected].


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