Battle to lure advisers via technology heats up

Competition among clearing firms and custodians to woo advisers with technology ratcheted up a notch last week when National Financial Services LLC said that it had integrated the Thomson One wealth management platform into its Streetscape broker workstation. The move, at least in part, is intended as a way for broker-dealers using the clearing services of National Financial to attract wirehouse brokers, many of whom use the Thomson platform from New York-based Thomson Reuters. As representatives at New York-based National Financial pointed out, the platform also offers a wide range of fully compatible components, so affiliated broker-dealers need not integrate systems from multiple vendors. “Any NFS client that wants to attract from Merrill [Lynch & Co. Inc.] or Wachovia [Securities LLC, now Wells Fargo Advisors] has a major tool,” said Mark C. Healy, executive vice president of National Financial, referring to those among the firm's 300 broker-dealer clients that might wish to recruit breakaway brokers from firms using Thomson One. The clearing subsidiary of Boston-based Fidelity Investments isn't the only giant to dangle the lure of highly integrated technology in front of advisers. Just last month, Pershing LLC announced a new platform, NetX360, which combines its fee- and commission-based systems and paves the way for future collaboration with what the Jersey City, N.J.-based company said it expects to be dozens of third-party technology vendors. Similarly, because the new National Finanical integrated platform can handle both fee- and commission-based business, it will be attractive to hybrid advisers, according to John Fennelly, global managing director of wealth management at Thomson Reuters, whose team collaborated with National Financial to integrate Thomson One and Streetscape components. As a next step, Thomson Reuters is working with Salesforce.com Inc. of San Francisco, a well-known provider of web-based customer relationship management applications, to integrate its system with the Thomson One/Streetscape system. But though applauding National Financial, Pershing and others for their efforts, advisers said that technology itself — no matter how sophisticated, easy to use or economical — rarely is compelling enough to uproot them from their systems or business relationships. “It's just not a game changer,” said Jeffrey J. Phillips, chief investment officer of Rehmann Financial, a hybrid organization comprising 50% registered investment advisers and 50% registered reps and advising about $1 billion in assets. He said that though a superior platform would be one more reason to stay with a specific custodian, it wouldn't be enough of a catalyst to change custodians — “especially in this market environment.” Rehmann Financial of Troy, Mich., has invested considerable time, effort and money in setting up, integrating and customizing its Junxure CRM system from CRM Software Inc. of Palm Beach Gardens, Fla., and a financial planning application from Cheshire Software Inc. of Newton Highlands, Mass., Mr. Phillips said. The experience taught him that new clearing or custodial technology must take a back seat to other issues, he said. “Our immediate concern is where we can increase revenues or cut costs, such as Schwab's recent waiver of some trading costs and transfer fees,” Mr. Phillips said. Daniel Grossman, principal of Acorn Financial LLC in Nashua, N.H., said that Acorn, a hybrid financial planning firm, has been affiliated with Commonwealth Financial Network, a Waltham, Mass.-based independent broker-dealer, for five years. He said he would be very reluctant to move Acorn, with $125 million in assets, to another technology platform just yet, even if it brought down costs. “I can dial Commonwealth's 800 number, hit 2, tell them I'm having a technical problem, and they take it from there. My biggest fear about the institutional side is that I don't think they are there yet — although they've moved 60% of the way toward us in the last year,” Mr. Grossman said. Independent broker-dealers or hybrid firms aiming to attract breakaway brokers are more fertile business prospects for National Financial or Pershing than RIAs, analysts said, even if the breakaway population is now fairly small. Although it is true that one in four wirehouse brokers may be considering leaving his or her firm, only a small fraction of that number will end up pursuing the independent-adviser route, said Alois Pirker, research director with Aite Group LLC of Boston. “The tightly integrated approach [to technology] is definitely something that Thomson Reuters has learned from the Merrill and [Wells Fargo Advisors] examples,” he said, referring to the two firms that have used Thomson One for several years. “There might be 15,000 brokers scratching their heads, but most will go to their next-door neighbor,” Mr. Pirker said, referring to the movement of brokers from one wirehouse to another rather than to an independent firm or to the RIA channel. At the same time, he said, while the availability of Thomson One from National Financial might not be compelling enough to get brokers to leave their firm, it would be of great interest to those who already have made up their mind to leave. There probably will be more movement in the future, said Sean Cunniff, research director in the brokerage and wealth management practices at The Tower Group Inc. in Needham, Mass. According to his May report, “The Who, Why, Where and How of Breakaway Brokers,” an estimated 7,500 to 9,000 such brokers, with $500 billion to $800 billion in combined assets, would consider “leaving for venues that are more independent.” As a result, technology will remain a battleground because it is at the heart of adviser productivity, said Mike Thebado, an independent-wealth-management technology consultant in Wayne, Pa. “Withdrawal from the technology fray has become practically unthinkable for custodians and clearing firms,” he said. E-mail Davis D. Janowski at djanowski@investmentnews.com.