If they had an extra $100,000 to invest in their businesses, most US broker-dealers would spend it on technology, according to a poll conducted by outsourced asset management and processing provider SEI.
The poll revealed that 62% of broker-dealers surveyed would invest additional money in technology automation and integration. Additionally, 27% stated that offering best-of-breed technology was a key selling point to advisors.
The informal survey was conducted at SEI's first annual summit for broker-dealers and involved 25 respondents from some of the largest US broker-dealer firms.
When asked how the industry differs today from five years ago respondents noted that advice, not commissionable products, is driving the industry; 67% stated that they were now more open to fee-based programs. Not surprisingly, broker-dealers also said increased regulatory scrutiny has significantly affected operations, along with a shifting focus from providing products to assuming more fiduciary responsibilities.
Looking ahead to 2102, further industry consolidation was a universal prediction, with fewer and larger players dominating the marketplace. Broker-dealers felt that as products become more commoditised, the industry will continue to move toward holistic planning and advice. Attendees also stated that increasing compliance complexity and market environments will drive greater need for stronger relationships with broker-dealers.
To avoid redundant due diligence efforts, working with fewer product providers is one way broker-dealers felt they could prepare for emerging industry opportunities. As the Moss Adams 2006 Financial Performance Study of Advisory Firms indicated, advisor firms can increase profitability by leveraging their broker-dealers. By helping advisors offload time-consuming administrative burdens, broker-dealers are well positioned for future growth, according to SEI.