3 Secrets to a Better Advisor Trading Experience

02.03.20

Introduction

We have seen an explosion of articles about how firms need to improve their client experience (C/X) – why it’s so important and how companies can’t survive without it and why we need to be more like Amazon or Apple in how we treat our clients.

For many broker-dealers, IBDs, roll-ups and outsourced trading firms in Wealth Management, the client is the advisor and what matters is the advisor experience (A/X). A/X is a measure of advisors’ overall sentiment through every interaction that they have with a broker-dealer or RIA technology platform. How advisors interact with systems and processes and how efficient they are at doing their jobs needs just as much analysis and improvement as the client experience, if not more!

Most fee-based advisors believe that their value is best expressed via Rep-as-PM (RPM) programs where they are responsible for building, managing and trading their clients’ portfolios. The money flows are following this, as Cerulli[1] has reported that RPM assets increased 34% in the past two years to over $1.5 trillion.

At the same time that more advisors are handling more investment tasks, we’re seeing broker-dealers and RIAs increasing their outsourcing of trading. While the amount of outsourced assets is estimated to reach $4 trillion this year[2], what companies are discovering in using TAMPs is that they are giving up control over critical aspects of their A/X, especially for RPM advisors.

Since outsourced solutions have to build scale in order to be profitable, they often handle trading operations for dozens of firms and are not able to spend the time needed to customize services for any single one. RPM advisors are left with less ability to influence the very trading that they believe is their primary value added.

There is an alternative for companies that want to improve their A/X for trading. It is the recent development of Order Management System (OMS) application programming interfaces (APIs). Wealth management firms now have the option of branding and skinning their own trading platform in a matter of months to regain control over their trading A/X.

But there is more to order management than just adding a company’s logo to a screen – OMS as a Service allows for far more control over the trading experience. To help attract and retain advisors, firms should review the following tips for improving their trading A/X.

Tips for Improving Your Advisor Trading Experience

The following tips describe best practices for planning and implementing a better trading A/X.

  • Create an Advisor Journey Map – This is an outline of the steps advisors go through when interacting with their trading system. It is essential to include both pre- and post-trade aspects and think about the various touch points and how they affect advisor workflows. The most efficient firms are able to improve their value added by customizing their trading A/X. Given the significant amount of time many advisors spend entering trades and executing investment strategies, taking a proactive approach to mapping the steps in the process is crucial to A/X optimization.
  • Advisor Experience Audit – The audit is an examination of advisor trading from different angles to ensure that all stakeholder input is considered. This includes algorithmic trading, thinly traded securities or heavy use of mutual fund orders. The trading landscape these days is multifaceted – financialization of a wide variety of assets has expanded the universe of traded securities even as the number of stocks traded on the major exchanges has declined due to mergers and privatizations. Performing an audit helps ensure that the procedures put in place to accommodate diverse product and process requirements don’t detract from the advisor experience.
  • Dedicated Focus from Senior Management – The trading A/X is not going to change overnight, so it is important for management to demonstrate their clear focus and support for the initiative. Too many projects fail due to internal resistance that can only be overcome when senior management runs interference. Some other helpful actions would be requiring regular updates from project leaders and encouraging cross-functional cooperation from the rest of the organization.

What is OMS as a Service?

OMS as a Service provides full trading functionality via the software offering of a trading platform vendor. These platforms offer the following benefits:

  • All the functionality of an OMS is accessible via APIs, which can be integrated into other wealth management systems. This allows a broker-dealer to customize the trading software within its own platform.
  • Enable firms to retain control over the look and feel of their trading processes. Rather than merely adding their logo to the interface, the higher level of customization associated with OMS as a Service offers firms much greater control over the appearance and layout of trading functionality.
  • Provide flexibility to deliver trading functionality into any application in a firm’s infrastructure, such as rebalancing, financial planning or CRM. This can help reduce advisor frustration caused by difficulty experienced in moving from planning and analysis functionality to the trading system.
  • Offer the ability to upgrade trading applications on the schedule of the independent broker-dealer or outsource trading provider rather than that of the vendor. This assists the firm in responding to advisor requests for upgraded trading functionality on a timely basis.

Why OMS as a Service Beats Hiring a TAMP or Building an OMS

Leveraging OMS APIs provides firms with greater control over the trading A/X and is not constrained by the vendor’s pre-defined processes. The products they offer and the trading strategies they implement serve as points of demarcation between wealth management firms. Because of these differences, OMS as a Service offers an alternative to TAMPs that can better accommodate RPM offerings.

Another plus of OMS as a Service is complete control over future UI upgrades to avoid the impact of unscheduled upgrades on advisors’ workflows. With more and more advisors working remotely, scheduling upgrades can be a tricky business. By retaining control of this process, firms can ensure that any upgrades are performed at the time that works best for the firm.

Additionally, a new OMS can be rolled out quickly using an OMS API. In some cases, this can be done in less than 2 months, enabling firms to quickly update their trading capabilities rather than undergo a long, grueling planning and implementation process to build their own OMS. Once an OMS API has been adopted, additional, more complex functionality can be rolled out in future phases as needed. It’s not a one-size-fits-all solution like a monolithic TAMP.

Most companies do not have access to the necessary domain expertise to build an OMS, especially with all of the connectivity required to external trading venues and support for advanced trading features. Use of OMS as a Service removes the need to establish this expertise within a firm, with all the associated expense and staff time it would require.

Leveraging OMS as a Service provides the benefit of access to a mature product that has survived the stress testing of operating in the marketplace, which typically weeds out poor products/solutions. While the control offered from constructing an inhouse trading platform can appear attractive, the availability of mature systems that have survived under fire for years offers a less risky alternative, especially when combined with APIs that enable use of the software in a highly customized form.

Differentiation Via Superior A/X

The modern trading landscape is highly complex, requiring systems to offer a wide range of functionality and asset class support to deliver the flexibility that advisors demand today. This flexibility is a core component of the advisor trading experience that the best wealth management firms know they have to deliver.

These firms are providing greater control over their trading A/X by implementing OMS as a Service. This offering allows customization of each point of the trading process. With firms across the industry fighting to attract and retain the best advisors, the ability to differentiate themselves through a customized RPM platform with a superior A/X by OMS powered as a Service is a key factor in accomplishing this.

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[1] Cerulli MMI Advisory Solutions Quarterly 4Q’18
[2] Ramping Up TAMPs for 2019 and Beyond, WealthAdvisor