For National Financial’s Sanjiv Mirchandani it was trial by fire.
In March 2009, Mirchandani, a longtime Fidelity Investments vet, was named president of the firm’s clearing arm. However, correspondents were worried the recent market meltdown could put their assets in harm’s way. Mirchandani spent a good part of his initial months reassuring clients that assets were intact and the firm was strong.
Three years after taking over National Financial, clients still want reassurance. That is one of the themes of a recent Q&A he participated in with CQ&D.
Mirchandani, in evaluating what correspondents want, believes that battle-scarred clients still want something very basic: They want to know their clearing broker is not going to fail. They want more information accessibility on assets.
CQ&D: Any new products and services on the horizon? I understand you’re working on providing correspondents with more access to your trust services?
Mr. Mirchandani: We’re providing trust capabilities for the first time this year to correspondent advisers. Formal rollout will be this summer.
CQ&D: How does this help the correspondent?
Mr. Mirchandani: We’ve previously offered that through some of our other (Fidelity) businesses, but now we’re offering it to our correspondents, which creates the ability to take on the personal trust assets of their clients, whether they are being managed by a trust department or being managed directly by the clients. We are now allowing them to manage these assets on the National Financial platform.
CQ&D: And this provides the correspondent with accounting capabilities?
Mr. Mirchandani: Our platform has been expanded to do the principal and interest reporting that’s required for trust services. So by doing it on the National Financial platform in a brokerage context, you can get the principal and accounting services and you can also get a broader range of investment products; it is a much more efficient way to do business for the wealth adviser.
CQ&D: You mentioned the mobile products correspondents now have. Your clients and their clients now want greater control and more assurance about their accounts?
Mr. Mirchandani: Advisers are facing pressures from the investors who, you know, in a post-crisis, post-Madoff world, want to visit their money more. So the end consumer wants access to their accounts. They don’t only want to go through the adviser.
CQ&D: What other products and services are correspondents looking for?
Mr. Mirchandani: They’re looking primarily for a great technology platform that allows them to be as productive as possible and drive the relationships with their clients. That’s their overall need.
CQ&D: What are they looking for in investment products?
Mr. Mirchandani: We have a partnership with Envestnet, where we offer their products in a way that’s integrated with our platform as a third-party asset management provider; and through that, they get a full range of managed products. They can manage their own accounts or get a variety of professional managed accounts.
CQ&D: What workstation changes are you making?
Mr. Mirchandani: Our entire workstation has been revamped. We call it the new Streetscape, and it has a whole range of capabilities around it; these include fee-based tools. We also have new house holding capabilities, where advisers can slice and dice their books in very efficient and helpful ways that help them to be more productive.
CQ&D: What about your statement and investor portal?
Mr. Mirchandani: We recently redid our statement and redid our investor portal, and we are launching an array of mobile capabilities for advisers so they will able to access all their client accounts in a mobile environment, whether it is an iPad or iPhone. In an increasingly mobile world, that is important as well.
CQ&D: You were speaking of the post-Madoff environment. How has the risk of clearing for other broker-dealers changed over the past year?
Mr. Mirchandani: I think everyone has to be vigilant about risk in this environment. We’re very vigilant on custody of assets, particularly on the retail side. We are actually responsible for the asset custody.
CQ&D: You’re making the case for the fully disclosed clearing broker?
Mr. Mirchandani: Yes, I think it is good because it separates the custody asset role from the advice role. I believe clients value that. I also believe clients want strong assets backing the broker. National Financial has $1.9 billion in assets. That’s in excess of regulatory capital minimum by $1.7 billion. People like that their assets and custody are kept separately.
CQ&D: Correspondents are more risk-averse today and you’re trying to reassure them that you are doing more on risk?
Mr. Mirchandani: Yes, it’s about the custody of certain products, it’s about the levels of trading relative to brokerage capital. So we, in partnership with our clients, work to ensure that risk management is a priority because it just has to be in this environment.
CQ&D: So you’re risk-averse about new business…
Mr. Mirchandani: We are mindful about the firms we feel comfortable with. Every firm we bring in, from a sales perspective, goes through a business acceptance process that is very rigorous. And oftentimes, it is not a fit and we’ll say that their business really isn’t part of our profile. So it really isn’t about maximizing revenue. We’re not a public company. We don’t have to do that.
CQ&D: Let’s say someone does fit your profile and moves to your platform. What is the biggest reason a brokerage dumps its clearing service?
Mr. Mirchandani: It can vary. But our wins tend to be those when the brokerage is often very frustrated with the quality of service they were receiving.
CQ&D: The correspondent believes his or her business has been taken for granted, but ultimately it isn’t technology, but the quality of service?
Mr. Mirchandani: The service. Service deeply matters. It’s hard to get that across to people because technology is tangible. Price is tangible. Service tends to be more intangible.
CQ&D: So personal service trumps most other factors in attracting and holding on to business?
Mr. Mirchandani: Yes. Indeed, when a crisis hits, and we’ve gone through a pretty bad one, and when money funds broke a buck, all kinds of other things happen, we will show up and be there for clients.
CQ&D: Could you give me a picture of an ideal National Financial client?
Mr. Mirchandani: We’re looking for high-quality firms that have a clear value proposition-firms that manage risk well and are well capitalized, have good brands and care about protecting them. It’s generally wealth management and retail brokerage, but we also have institutional firms.
CQ&D: But what about your effort to target more institutional business?
Mr. Mirchandani: Many of our retail clients are part of larger organizations, such as banks or insurance companies. Typically, they will have institutional divisions. And we have some well respected institutional firms that we serve as well, such as Cowen & Co. So we have both kinds of business.
CQ&D: Is the low-interest-rate environment continuing to hurt your business?
Mr. Mirchandani: It certainly is drag on revenues. That’s for sure.
CQ&D: And it has come at a time when trading volume has been down.
Mr. Mirchandani: Well, with the interest rate environment, I think everyone has internalized and accepted that it will be this way for a while, a few years at least. People have created more operational efficiencies. And I don’t know anyone who expects these conditions to change any time soon. But certainly it all puts pressure on margins.
CQ&D: And it has come at a time when trading volume has been down.
Mr. Mirchandani: Yes, I think the first quarter was not the most robust of quarters that we’ve seen in terms of trading volume. It was not terrible, but it certainly wasn’t off the charts.
CQ&D: Have you seen an uptick in brokerage firms mergers or acquisitions and consolidations?
Mr. Mirchandani: Yes, it’s happening. And certainly, because of the factors we have discussed, it will continue to put a lot of pressure on the firms to look for alternatives since the revenue pie is not growing. In fact, it is under pressure.
CQ&D: Mr. Mirchandani, thank you.
Mr. Mirchandani: You’re welcome.
