Pershing Identifies Six Transformations Elite Broker-Dealers Use to Outperform Peers

Commitment to advisory services, sound recruitment strategies and organic growth are among keys to success in post-crisis world

Dec 09, 2013, 10:00 ET from BNY Mellon

JERSEY CITY, N.J., Dec. 9, 2013 /PRNewswire/ -- Pershing LLC, a BNY Mellon company, today released a study that shows how elite broker-dealers are outperforming their peers by focusing on six key differentiators. The study, "Broker-Dealer of the Future II: Six Stunning Transformations That Are Creating the Broker-Dealer of the Future," consists of six guidebooks that focus on the transformations broker-dealers are employing. These transformations address how firms can become more profitable by responding to innovations in technology, service methods and shifts in demographics.

According to the report, while profitability has improved since the financial crisis, all firms surveyed reported that they still face headwinds in this crucial area. This, combined with elevated recruitment costs, has left many firms challenged to create growing and sustainable businesses. Yet despite the limitations of today's business environment, Pershing's study shows the changes some broker-dealers have made to improve their profitability.

"Over the last five years, the primary focus of many firms was on survival. However, the next few years are going to be focused on how to position firms for future success—and there are a number of things to consider when doing so," says Jim Crowley, chief relationship officer at Pershing. "In a rapidly changing industry with rising operating, recruiting and compliance costs, it is essential for broker-dealers to stay relevant, deliver value to their clients and create a stable, yet fluid, business model that balances service offerings, profitability and growth strategies."

According to the report, profitability is more closely related to a firm's strategy than its size and capabilities. By transforming their business models, many broker-dealer firms may also increase their profits.

Pershing's qualitative and quantitative research identified six key transformations that will guide the broker-dealer of the future:

  • Identify ways your firm can avoid "commoditization": In the past, advisors affiliated with broker-dealers to satisfy a supervisory requirement and to have access to better technology. Since then, regulation and competition have made the requirement less relevant, while technology and the markets have commoditized solution access and, in some ways, broker-dealers. Three-quarters of advisors say that their broker-dealer is less than effective at communicating their value. The broker-dealer of the future uses everything at their disposal to retain talent and drive recruitment, while creating a richer value proposition for advisors.
  • Foster organic growth: Most broker-dealers devote their attention and budget to acquiring new talent. Yet organic growth may offer a return up to six times higher. Forward-thinking broker-dealers continually look for ways to enrich and maximize existing relationships.
  • Establish a sound economic model: Ballooning bonuses, higher compliance costs and growing technology investments are squeezing margins tighter. High payouts may not be sustainable, often hurt profitability, and may lead to spiraling increases as broker-dealers set out to recruit or retain advisors. As a result, the broker-dealer may be challenged with profitability, even if recruitment and retention efforts are successful.
  • Avoid the winner's curse of high-cost recruiting: Faced with a fiercely competitive market, a broker-dealer can spend seven years' worth of profitability to attract and bring in the best recruit. However, high-priced recruits tend to have shorter tenures—averaging only three to five years— so a myopic focus in this area can be costly.
  • Espouse advisory services: The broker-dealer of the future sees over the horizon, conducting itself more like a large RIA than a large broker-dealer. By offering advisory services as part of its organizational core, broker-dealers can build a profitable and integrated service model that blurs the historical line between brokerage and advisory businesses.
  • Demonstrate stability and longevity: Top advisors place a high value on stability and a sound risk culture and want to affiliate with broker-dealers who proudly demonstrate their commitment to these attributes. The broker-dealer of the future is a firm known as the financially sound and prudent firm.

To obtain a copy of "Broker-Dealer of the Future II: Six Stunning Transformations That Are Creating the Broker-Dealer of the Future" please visit

Pershing and its affiliates provide global financial business solutions to approximately 1,600 financial organizations, broker-dealers, registered investment advisory firms, advisors, fund managers and asset managers who represent over 5.6 million active accounts. Located in 23 offices worldwide, Pershing delivers dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence. Pershing is a member of every major U.S. securities exchange, and its international affiliates are members of the Deutsche Borse, Australian Stock Exchange, Irish Stock Exchange, London Stock Exchange and Toronto Stock Exchange. Pershing LLC (member FINRA/NYSE/SIPC) is a BNY Mellon company. Additional information is available on, or follow us on Twitter @Pershing.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle.  Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets.  As of September 30, 2013, BNY Mellon had $27.4 trillion in assets under custody and/or administration, and $1.5 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on, or follow us on Twitter @BNYMellon.

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