Top Gun Broker-Dealer Tech Platforms

Iskowitz, Rajes And Our CEO Larry Roth Discuss How To Construct The Best Unique Broker-Dealer Platform

A panel of experts took the stage in Tampa, Florida, as part of the T3 Conference to address the topic: “Top Gun – Building A Maverick Broker-Dealer Tech Platform,” in which the group addressed the trend of broker-dealers creating tailored, unique technology platforms in order to differentiate themselves.

The panel, moderated by Craig Iskowitz, CEO and Founder of Ezra Group, included our CEO Larry Roth, who is also Managing Partner of RLR Strategic Partners, and John Rajes, SVP, Fintech Partnerships at LPL Financial. 

How To Start Building A Platform

Rajes stated that a firm should not build its own platform from scratch, and if the firm does attempt to do so, it should not try to build all the elements, given the complexities arising from advisors of different sizes with different types of practices, coupled with the evolution of the industry.

For a firm that is designing a platform, Rajes recommended an examination of three key factors in advance: what types of practices it will support, what types of processes will be included and how the firm will differentiate itself from the competition.

In further elaboration on the topic, Rajes noted that “from a design perspective, if you decompose a broker-dealer platform into products and features, you’ll find certain things are required for products and features to come to life on the platform.” Primary among them are functions that enable capabilities and functions that enable experiences, both of which must be designed well.

Fee-Based Services And Broker-Dealers

Roth discussed the combination of fee-based platforms with broker-dealers, noting that some firms, such as LPL and Commonwealth, have integrated these well, while others are “still trying to cobble it together.” Roth mentioned a third approach of building an RIA then outsourcing brokerage to a third party, stating that the two components often interact poorly, negatively impacting client services.

Roth noted that much consolidation has occurred in the industry without efforts to streamline user experience into a seamless environment. “If you’re in tech space and trying to help these firms, you came to the right place because they need a lot of help,” he added.

Iskowitz said that many firms that exist as the result of multiple acquisitions do not solve problems because it’s easier to continue with existing processes for a time, which “kicks the can down the road” as the problems grow. 

Data Analytics

Rajes described a situation he sees commonly, in which data is accumulated over time in platform parts that sometimes lack consistency. While this inconsistent data may not hamper execution on the platform, it can create holes in the data that hinder analytics. 

To improve this predicament, Rajes suggests separating operational data from data used in analytics and reporting, and to create additional layers of data for functions you want to perform that don’t compromise the underlying operational data.

Back Office And Operations

Roth, who led Advisor Group during the Global Financial Crisis, said the firm took advantage of that time to unify and streamline its back office operations, which yielded ongoing benefits. He noted that multiple back offices, which are common in many firms, create problems, such as excessive spending not related to income.  

Rajes stated that it is a mistake to forget about operations when designing a platform. “Operations and service functions are critical.” He suggested that firms not attempt operational workarounds, but instead apply full tech solutions.

Mistakes And Lessons

Iskowitz asked Rajes and Roth the largest mistake that either of them had made, or seen made, and lessons learned.

Rajes responded that a crucial mistake he has seen firms make is to approach the advisor experience from a one-size-fits-all perspective, which cannot work, especially as complexity grows in a firm.

Roth stated that he once believed that a two- or three-year plan would unfold in a defined environment with unchanged competitors, but both the environment and competitors change. While it’s not a lethal mistake, this belief can cause issues if plans are stretched out over time. A good plan must be pursued hastily before external changes occur, Roth says. 

Julius Buchanan, Managing Editor at Wealth Solutions Report, can be reached at jbuchanan@wealthsolutionsreport.com