While Broadridge Financial Solutions has been highly aggressive with acquisitions in recent years, the New York-based fintech firm also stands to be affected by the consolidation of its clients.
However, Timothy Gokey, its CEO, does not expect much impact to his firm from that consolidation, he said Tuesday at the Raymond James Institutional Investors Conference in Orlando, Florida.
For example, on the broker-dealer front, when it comes to Morgan Stanley’s planned acquisition of discount broker E-Trade for $13 billion, he said: “Both are important clients for us on the investor communications side,” which is the “biggest part of the business” for Broadridge, and “we see very little impact there,” he told attendees.
On the technology side of the business, E-Trade is a client of Broadridge’s, but Morgan Stanley is not, he said, predicting: “Whatever happens here is going to happen over time, so it’ll be a year before they close; then there’s a three-year integration plan, so it’ll be some time before anything happens.”
However, it “is a possibility” that Morgan Stanley could “choose to run separate platforms,” he said, conceding “we could lose E-Trade.” Even if that happens, “over any multi-year period, it’s not material to us,” he said.
There would also be a potential opportunity for Broadridge because Morgan Stanley’s platform has “been around for a long time,” so it might decide to “modernize” and turn to Broadridge, he said.
Meanwhile, when it comes to asset manager Franklin Resources buying Legg Mason in a deal valued at almost $4.5 billion, “There will be consolidation in asset management over time,” he said. However, “when two asset managers come together, it typically doesn’t have much impact on” Broadridge either, he noted. In the past, Invesco’s acquisition of OppenheimerFunds “had very little impact on us,” he pointed out.
One major reason why Broadridge is not much affected by the consolidation of asset managers is that the “main things we do for asset managers are around regulatory communications” only, he noted.
Broadridge has also benefited from at least some client consolidation in the past. One case in point, Gokey pointed out: “Coming out of the global financial crisis, there were nine major consolidation events and seven of those ended up being pickups for Broadridge.”
The company, meanwhile, sees a “very large, multi-decade market opportunity in front of us,” he said. If you look at the fintech services that Broadridge offers alone, “the market for those things is on the order of $40 billion,” he told attendees, adding: “There’s a lot of runway for us.”
Those opportunities are in “three primary growth platforms” for Broadridge: Governance, capital markets and wealth/investment management, he said, noting the firm has “strong market positions in each of those three areas, but with a lot of growth opportunity.”
In governance, Broadridge provides the “core infrastructure behind the voting for boards of directors elections” globally, he said, adding: “We do that for virtually every broker-dealer and that means we end up processing about 90%” of the votes in North America and about 50% globally.