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Pershing’s Harrison: More Acquisitions Likely Around Pershing X

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What You Need to Know

  • Pershing will likely make more acquisitions as part of the build, buy, partner strategy it's using for Pershing X.
  • BNY Mellon is making a multi-year investment in the new Pershing X business unit and advisor platform it's creating.
  • Finding and retaining talent is the top concern of advisory firms now, according to Pershing's Ben Harrison.

Following its recent purchase of the direct indexing solutions provider Optimal Asset Management, BNY Mellon Pershing will likely make further acquisitions as part of its Pershing X strategy, according to Ben Harrison, co-head of wealth solutions and managing director at BNY Mellon Pershing.

Pershing X is the new business unit that the company announced last year. The aim of the new division is to “design and build innovative solutions for the advisory industry” and “accelerate Pershing’s delivery of consumer-grade digital experiences to its clients, as well as the broader marketplace,” it said in October.

The company is funding Pershing X as a startup, and tools and technology are being developed for the platform, which Pershing plans to “get iterative feedback from clients” on, Harrison told ThinkAdvisor on Thursday at the firm’s annual Insite conference in Grapevine, Texas.

The Pershing X platform will not be revealed publicly in “one big bang,” according to Harrison. Instead, after the Minimum Viable Product (or prototype) version of it is introduced, the company will continue to “iterate and build tools over time” for it, Harrison said.

The MVP of Pershing X is on track to be rolled out later this year, Jim Crowley, CEO of BNY Mellon Pershing, had told ThinkAdvisor.

As part of the build, buy, partner strategy that the company is using for Pershing X, “we’re going to build where we have strong capability and [can provide] meaningful differentiation,” Harrison explained.

But “we’re going to partner with others if it’s not necessarily right in our sweet spot,” he said.

“And then there’s going to be acquisitions that we make along the way, too,” Harrison told ThinkAdvisor. Optimal Asset Management’s offerings will play a key role in the prototype “around direct indexing that is going to be a core component of the Pershing X platform,” he said.

“But I envision other acquisitions along the way as well,” Harrison said. He didn’t name other companies that Pershing may have its sights on. As for the timing of other acquisitions, he said only that they would be “down the road.”

A ‘Good Opportunity’

“Technology transformation” is an area that Pershing has “been very focused on,” according to Harrison. Over the past decade, there has been a “significant increase in wealth tech and fintech coming in and providing really unique tools for advisory firms to utilize,” he said.

But “where firms are struggling [is in] knitting all of those together and getting the full power from them,” he said.

“So we think that there’s a really good opportunity for us to have more of a unified way in which to deliver an advice platform and to help those tools talk to one another,” he told ThinkAdvisor, adding, “That’s very much a part of the Pershing X story.”

A Major Investment

From a technology investment standpoint, “Pershing X is the most significant enterprise investment that we are making across all the businesses at BNY Mellon,” Harrison pointed out, echoing a comment made earlier by Robin Vince, president and CEO-elect of BNY Mellon, in an Insite keynote.

Neither Vince nor Harrison specified how much the company is spending on Pershing or Pershing X. But “it’s a multi-year investment,” Harrison told ThinkAdvisor.

Advisory firms and advisors are “spending too much time on the mechanics of the business or the administration of the business,” Harrison said, pointing to data showing that 80% of an advisor’s day is spent on that, while only 20% is spent with clients.

“We’re looking to kind of flip that and give them the ability to leverage scale and [provide] a more elegant way in which to serve their clients utilizing technology and tools that we’re going to bring to market with Pershing X,” which the company is “putting alongside our core custodial business,” he said.

The Top Challenge

In talking to Pershing’s advisory-firm clients, talent retention, development and recruitment comes up “absolutely” as the “biggest challenge and opportunity,” Harrison said.

“There’s just not enough talent to fill all the jobs that everybody has posted,” he said. Pershing is approaching that challenge in various ways.

A key component of the Insite conference last week was “around the next-gen element” and bringing students to the conference in an effort to find and eventually develop more talent, he said.

“Some good prospects have been visiting with us” at Insite as well, he said. “There’s a lot going on, obviously, in the custodial marketplace. So this is a great opportunity to have some prospects visit with us too” and network with other advisors.

As of March 31, Pershing had about 1,200 clients, including about 1,000 wealth solutions (600 RIAs and 400 broker-dealers), according to the company. Pershing assets under custody were over $2 trillion globally as of the same date, it said.

Asset Trends

Overall, the trends “have been favorable” for Pershing, Harrison also said. “We’ve seen really very good growth” over the past couple of years in assets, he said, conceding that in the first half of 2020, when the pandemic hit, “we were kind of worried about what the outcome was going to be.”

But “we saw very strong growth in 2020 and then, in ’21, we saw $160 billion” in net new assets, he said. “That was a record year.”

However, “there’s definitely been tailwinds for advisory and for wealth [and], I think with the market implications right now, I would suspect [new assets are] going to slow a bit” but still be positive for 2022, he added.

Although market valuations are down, “fundamentally our business is very, very strong,” he said.

(Pictured: Ben Harrison, co-head of wealth solutions and managing director at BNY Mellon Pershing; Photo by Jeff Berman)