Bank of New York Mellon’s Pershing operation remains the clearing industry’s top dog in the number of correspondent clearing firms it works with and overall assets it handles.
But Fidelity Investments’ National Financial unit is catching up in workstation usefulness.
Those are some of the conclusions of a new report by industry consultant Aite Group, “A Correspondent Clearing Update: Broker Workstation Assessment.”
The report, in asking correspondents what firm they use to clear, found Pershing with a two to one lead over National Financial (36% to 18%) and a three to one lead over J.P. Morgan Clearing Corp, (36% to 12%), according to Aite. (See chart).
But National Financial and others is making progress in providing a useful broker workstation, according to the survey, which was last taken four years ago.
“Since 2008, the functionality of National Financial’s Streetscape broker workstation has caught up with that of Pershing’s NetX360,” according to the report. National Financial’s workstation had top ratings in document management, market data, cash processing, client online services and mobile access, the survey said.
The report, which surveyed hundreds of clients, also said that JPMCC’s work station, BearVIEW, was the most improved broker workstation.
Clearing firms’ workstations were assessed in a dozen categories in the survey. These included mobile access, client online services, account opening, document management, cash processing as well as compliance and risk management.
In the 2012 survey, Aite spoke to hundreds of financial professionals who use four big retail clearing brokerages: Pershing, National Financial, J.P. Morgan Chase Clearing (JPMCC) and RBC Correspondent Services, all of which have been trying to make institutional inroads.
National Financial’s client base has substantially changed, Aite said, over the four years since the last report.
Its full-service business declined 10 percent, mainly due to the loss of Bank of America and J.P. Morgan Chase as clients. J.P. Morgan Chase had been using National Financial until it acquired Bear Stearns’ clearing division during the credit crisis.
So National Financial’s the number of correspondents is down slightly, 300 from 308. And its number of active broker workstations declined (40 from 58) as it did its assets under management ($521 billion from $407 billion). But its independent business has doubled, Aite said, which also said respondents commended its workstation because it is effectively serving the adviser community.
Over the next year and a half, Aite said, National Financial plans to expand its Unified Professional Workstation, which was built to service both fee and commission business. It will expand its mobile access for advisors and iPhone, Android and Black Berry users. Next year, it will incorporate correspondents own private branding on mobile applications.
Meanwhile, Pershing serves some 850 correspondents. That’s up by about 30 and its assets under management have increased from $780 billion to about $1 trillion. Today, two-thirds of its business is with full service and institutional clients, Aite notes Pershing is making inroads in institutional, adding five percent more institutional business since 2008.
What’s next for Pershing?
Pershing plans to re-engineer its managed investments menu over the next year and a half. It is also planning more mobile functions. These will include workflow order approvals directly from the mobile device.
It will rebuild its investor platform, NetExchange Client. This will include new navigation options focusing on straight through processing, self-service tools and an e-vault for document storage.
J.P. Morgan Clearing Corp (JPMCC), whose broker workstation, BearVIEW was launched in February 2007, was overhauled and relaunched as MORCOM late last year by J.P. Morgan Chase.
“JPMCC’s considerable spending on and upgrade of Bear Stearns’ BearView platform resulted in a substantially improved workstation,” according to the report. JPMCC workstation has made “considerable gains” in improving compliance and risk management, document management and account opening,” says Greg Cherry, one of the authors of the report.
What’s in the workstation?
BearView is emphasizing order routing and overnight batch delivery services. Still, Aite said it continues to devote considerable resources to retail business.
What’s ahead?
JPMCC expects to add new performance reporting features next year. It will also add new electronic signatures, bar coding and the automatic matching of images.
JPMCC has some 225 correspondents and doesn’t disclose its assets under management.
A smaller player is RBC Correspondent Services (RBC CS). It has some 180 correspondents and $35 billion in assets under management. That includes the recently acquired clearing and custody business of Mesirow Financial, which includes some 50 correspondents. Aite calls RBC “a niche player with large firm capabilities.”
In part, this is because RBC CS is another clearing broker that has been making an attempt to capture more institutional business. Today, its mix is 90 percent full service advisor firms and 10 percent institutional business. The latter comes from the advisors who need access to institutional products.
RBC CS has two workstations, BETALink, an RBC internal system bought from Thomson Reuters and customized, and RBC WealthStation, a SunGard platform. For its backoffice vendor, RBC CS has been using Broadridge since 2008. It also uses SunGard’s Preotegent Surveillance system to help correspondents with trade oversight.
What does RBC CS plan to do over the next year?
It will combine portfolio review into a new platform that will include a performance reporting system. It is planning to expand its offering of fee-based products. RBC CS will offer to rewrite the client website. This will include customization options for firms, including private marketing banners and financial advisor personalization and photographs.
Electronic signature capability and handling documents is a common theme of all four of these clearing brokerages. For instance, National Financial is testing it. Pershing and RBC CC have it and JPMCC is targeting a 2013 launch. All four are stressing document management capabilities, with National Financial and Pershing the leaders.
Why?
“The reason is to provide clients with a more seamless experience in the account opening and overall document handling and document management experience,” Cherry says. He adds that because of the increased use of mobile devices such as the iPAD and integrating presentations.
How should be these clearing brokerages improve?
Integration with third party applications is important with all firms. National Financial clients want more support for direct business such as mutual funds and annuities. Integration of back and front offices are key, the report said.
RBC CS is conducting a firm wide customer relationship management (CRM) project. “The project,” according to the report, “focuses on creating a comprehensive view of clients and prospects and enabling efficient and proactive interaction with these parties.”
“Given the overall importance of CRM systems for example,” Cherry says, “having this solution should be well integrated into the front and back office helps advisors more easily manage their day to day business.”
