While the impact of these changes will initially benefit front-line brokers and RIAs on the Pershing platform, this technology model will put pressure on competitors to try and meet or exceed what Pershing has to offer. NetX360 promises, among other things, a comprehensive, intuitive workstation that seamlessly integrates an expanding roster of quality third-party software as well as built-in, state-of-the-art compliance tools. In addition, the platform offers the ability to mine data for the benefit of all Pershing clients, as well as an opportunity to serve as an incubator for promising new technologies. What this means to you: the ability to operate more intelligently, more efficiently and less expensively, in an environment you can customize to meet your needs, while using your favorite software. You'll be able to access it via your smartphone, and Pershing is planning to release new apps for the iPhone and the BlackBerry shortly. In addition, Pershing's new technological ecosystem promises to foster further innovation through software incubation and data analytics. In a year or two, there may even be a NetX360 App Store.
ershing is not usually the first name that comes to mind when discussing broker-dealer technology. Perhaps that's because Pershing, based in Jersey City, NJ, is not your typical broker-dealer. The company's primary business has been to act as the broker-dealer's broker-dealer, providing a full operations platform to small and midsize broker-dealers.
Pershing is often overlooked when discussing RIA custodial technology as well. Although the company has long offered custodial services to RIAs, for years the RIA division labored in relative obscurity. Clearly, that is no longer the case. Pershing now aggressively markets its RIA arm, Pershing Advisor Solutions (PAS), run by industry veteran Mark Tibergien since October 2007. PAS now custodies approximately $60 billion, which puts the company in fourth place behind Schwab, Fidelity and TD Ameritrade. Overall, Pershing has approximately $715.8 billion in assets held in custody. Its parent company, The Bank of New York Mellon, has $19.5 trillion in assets under custody and administration.
MEET THE NEW WORKSTATION
Pershing's recently concluded INSITE Conference was the official debut of the new workstation, the successor to NetExchangePro, which is accessible to almost 100,000 registered reps and RIAs conducting business through Pershing. To take its workstation to the next level, Pershing surveyed and interviewed more than 700 RIAs and investment professionals, many of whom were not Pershing clients. In addition, Pershing made use of the feedback it received through the existing NetExchange system. More than 1,500 suggestions were considered.
In the end, Pershing delineated four major goals for NetX360, Kumar says:
- 1. Provide choice and integrate best-of-breed functionality through vendor partnerships;
- 2. Increase advisor efficiency and productivity;
- 3. Provide advisors with insights on growing their businesses and reducing expenses; and
- 4. Meet the compliance challenge.
Let's look at some examples of what Pershing has done specifically to address each of these goals.
CHOICE AND INTEGRATION
It is here that Pershing has an opportunity to separate itself from the pack and create the next model for broker-dealer and custodial technology. Many broker-dealers offer access to some third-party providers, and some broker-dealers even offer integration between the broker-dealer and the vendors, but such integrations are usually limited. For example, often broker-dealers offer a single software provider per software category. The advisor may have to sign on just once, but he or she won't necessarily be able to call up or enter information in multiple applications smoothly, in real time. Also, in some cases, pricing is an all-or-none proposition: If you want to use a portfolio-reporting package, for example, you must take it for all your clients. And pay accordingly.
On the RIA side, Fidelity's Wealth Central has been, to date, perhaps the most aggressive custodial attempt at integration, combining online customer relationship management (CRM) with portfolio management and accounting, financial planning software and soon, rebalancing software. The platform does offer near real-time data integration among the various programs and the Fidelity back office. But to date, advisors are limited to one software provider for each activity.
Kumar says his firm has loftier aspirations. "We intend to offer full data integration between Pershing and multiple third-party providers in all major software categories," he says. Pershing refused to provide a full list of integration partners since negotiations were ongoing, but it currently provides some level of connectivity with about 50 vendors. At the INSITE Conference, Pershing announced that Redtail (CRM) and MoneyGuidePro (financial planning) have agreed to provide full, bidirectional integration with NetX360. Industry sources confirm that negotiations are currently taking place with Black Diamond (portfolio management and reporting) as well. If Kumar's goal is achieved, other integrations are sure to follow.
Boutique advisory firms and smaller broker-dealers want integration, Kumar says, and they want the ability to pick and choose their software providers, but they do not have the scale or the infrastructure to achieve their goals. So Pershing is stepping in as an enabler. With NetX360, clients will be able to have third-party integration on demand, and the products will often be available at a better price than small firms can negotiate on their own. In addition, there will be no long-term contracts to sign. Furthermore, when appropriate, advisors can control access to third-party software through NetX360; so if a firm has 10 employees, but only two financial planners, the financial planning software can be enabled for the planners alone.
In some cases, advisors may want to use certain applications just for specific clients. For example, if a firm wants to use a basic, inexpensive portfolio-reporting package for small accounts and a more sophisticated one for large accounts, NetX360 should be able to run both programs. As the list of integrated providers grows, and as advisors take full advantage of all NetX360's customization features, there could be literally thousands of uniquely configured workstations, each with its own set of programs and functionality. In essence, NetX360 will allow Pershing to offer mass technology customization to its nearly 100,000 NetX360 users.
Pershing also has its own subsidiary, iNautix, which offers a number of useful applications to integrate into the NetX360 workstation. Currently, iNautix offers a document management solution that is well integrated with the Pershing back office. In the near future, the firm should be releasing a portfolio management and reporting product that integrates with NetX360 as well. iNautix also offers data warehousing and can help firms create their own warehouse if they choose. In addition, if a firm has an inhouse application that it would like to integrate seamlessly with the NetX360 workstation, iNautix can provide the tools and the expertise to get the job done.
Although the ability to integrate multiple leading third-party applications, iNautix applications and custom applications with NetX360 is well beyond what competitors are offering, Kumar thinks the concept can be taken further still. When he talks of opening the NetX360 platform to third-party applications, he draws an analogy with the Apple App Store. In essence, he suggests that Pershing can offer advisors an App Store for NetX360. If successfully implemented, a NetX360 App Store could turn out to be the most revolutionary element of this release.
Why? Because innovation often comes from small, entrepreneurial firms. In our industry, examples abound. Two of today's most highly regarded financial planning software firms, EISI and MoneyGuidePro, began as independent start-ups, as did many of the firms that provide portfolio management software and industry specific CRM software to RIAs today. And let's not forget Morningstar, which started in Joe Mansueto's apartment.
Two of the greatest challenges these firms faced early on were getting recognized and getting distribution. An App Store would address these challenges, providing access to NetX360's nearly 100,000 users. It would also provide immediate feedback to developers, so they could rapidly create and deploy enhancements.
By providing this access to developers, an App Store would serve as an incubator for new ideas, fostering innovation to the benefit of all involved. If it proves anywhere near as successful as the Apple App Store, it would be truly revolutionary.
It seems clear that Pershing is well on its way to meeting its choice and integration goals. In fact, it is highly likely that the NetX360 will exceed anything currently available to broker-dealers or RIAs in this regard.
EFFICIENCY AND PRODUCTIVITY
At a macro level, the most readily apparent difference between the current NetExchange Pro and NetX360 can be summed up in two words: comprehensive and integrated. Prior to the release of NetX360, some Pershing clients had to log on to multiple platforms to get their work done. For example, they would use NetExchangePro for trading, annuities and commission tracking. NetExchangeAdvisor was for managing fee-based accounts. It also supported trade away allocations, fixed income and other tasks. Those using managed accounts needed to access yet another Managed Accounts workstation. In addition, some users may have had to access other areas for prime brokerage tools, iNautix tools and third-party solutions. Now, in contrast to the multiple workstations of the past, NetX360 provides a single workstation with a single sign-on. The advisor will now have a holistic view of his or her whole business. Or, when dealing with a client or household, the advisor will have access to a consolidated view of the total relationship in a single place.
The workstation is divided into 10 sections: Home, Accounts, Trading, Service & Operations, Markets & Research, Tools, Resources, Reports & Documents, Admin and Help. While an in-depth analysis of each section is beyond the scope of this article, we will highlight specific capabilities related to efficiency and productivity now. We'll highlight some additional specifics as we discuss the other goals.
Like many applications, NetX360 will allow advisors to create their own home pages-aka dashboards-but this application goes much further than most. NetX360 allows you to create and name multiple customized pages, each made up of discrete views or elements, including data from third-party providers that integrate with the system (such as CRM software). So, for example, first thing in the morning, an advisor might create a page that contains today's appointments from his or her preferred CRM application, pending ACAT transfers, operational alerts, a list of top clients or accounts by assets and a list of unrealized gains and unrealized losses across the practice.
Once the morning review is completed, the advisor can choose to use a second page for the rest of the day. He or she can even create several pages around commonly performed tasks, so there might be one for equity trading and another for research, for example.
Navigation is intuitive. There is a context-sensitive navigation bar on the left of the screen. Elements are customizable, and they can be collapsed or expanded, much like the MS Outlook navigation bar. One element, for example, could be a list of client groups (A, B, C clients; households; participants in a small retirement plan). Within each group, of course, you can get more granular, with a list of clients and then the individual accounts in the group. When you view a client or an account, you'll see the dollar value of the relationship. When you click on an account, summary information relating to the client is displayed on the top of the screen. There are tabs under the summary information which give immediate access to subsets of account information (balances, holdings, etc.). Of course, you can drill down further (under holdings, for instance, you'd see positions, gain/loss, performance, etc.). The tabs and menus will change, depending on where you are in the workstation.
The menus are much more compact and smarter than in NetExchange Pro. Previously, all menu functions were displayed for all users, whether or not they were enabled. This made for long menus that were difficult to navigate. NetX360 provides dynamic menus linked to a user's log-in, displaying only those menus a user has permission to deploy. If, for instance, a staffer is not authorized to deal with international equity trading, that option will not appear on the drop-down menus. NetEx360 also makes use of hot keys and right-click functionality to compress menus further, making them easier to navigate.
In another nod to usability, tabs can be launched in new windows. For example, if you are looking at a report of trades for a specific account and you want to execute another trade for that account, you can bring up the trading screen in a separate window. If you use dual monitors, as many advisors now do, you can then simply drag the trade window to the second screen, so you can view the transaction list and the trade blotter side by side as you work. This feature works beautifully, and it is sure to be popular.
So far, we've highlighted a number of usability improvements, including customizable home pages, multitasking capabilities and improved menus. One other enhancement of note is the ability to choose between task-related navigation (the more traditional form of program navigation, which centers on performing a task) and relationship-based navigation (which gives you the tools to perform any task related to a specific client or household).
Finally, one small but important enhancement is the strategic use of fonts. Pershing's research revealed that advisors often seek out the same data points. For example, when they pull up an account summary page, the first thing they tend to look at is the total account value. Pershing decided to put the total (and other high-priority data points) in a larger typeface and sometimes a different color in order to help advisors immediately identify the information they're most likely to be seeking.
Pershing's third goal for NetX360 is to help advisors facilitate growth and reduce expenses. As we have already mentioned, NetX360 integrates the former functionality of NetExchangePro, NetExchangeAdvisor, Lockwood's Managed Account Workstation and other tools into a single integrated platform. As a result, advisors can now enjoy a single integrated set of workflows instead of multiple ones. Since all of the data, functionality and workflows will now reside on an integrated platform, advisors will have access to consolidated business analytics and consolidated reporting.
One obvious benefit of this consolidation is that it will save time when entering data (you only have to type it once) and when performing daily tasks (since workflows will be integrated). But there's much more. Entering data just once also cuts costs by reducing data entry errors and alleviating the need to synchronize data manually over multiple applications. More important, consolidated reporting allows management to analyze business operations firmwide more easily and identify problem areas and inefficiencies so they can be addressed in a timely fashion.
To facilitate growth, the system will allow firms to set up marketing rules. Advisors will be able to combine Pershing data with external sources of information to facilitate prospecting and wealth scoring. Through business analytics, firms can perform territory analysis and assess advisor productivity. These improvements should provide advisors with insights that will help them grow without incurring huge expenses.
Pershing is also looking into helping advisors track and analyze systemwide data-that is, look at all Pershing clients to derive best practices. NetX360 is technologically capable of tracking usage patterns among individual users, and this information could be used, in aggregate, to help improve the effectiveness of all NetX360 users. For example, Pershing could anonymously track usage to distinguish how top-performing firms differ from the rest. Are successful firms consistently viewing particular screens that others ignore? Are they using a specific set of third-party programs that differs from those used by the majority? By identifying and distributing this information to all NetX360 users, Pershing could help raise the bar across its whole user base, to the benefit of all. This idea is somewhat controversial, since all participants would need assurances that their privacy would be adequately protected, but the benefits could be substantial.
THE COMPLIANCE CHALLENGE
Compliance responsibilities are placing a growing burden on advisors' resources, and that burden is expected to grow over the next several years. NetX360 contains numerous tools to help broker-dealers and advisors responsibly address their compliance responsibilities efficiently and cost effectively. Expanded alerts can address order approvals, market data and asset movements. Users can customize alerts, including their delivery methods, to suit their needs, and entitlement management gives administrators granular control over what features each advisor can access. Pershing has expanded its relationship with Actimize, which now includes AML (anti-money laundering), Trade Surveillance and Sales Practice Monitoring. In addition, NetX360 offers licensing and registration tracking, auditable AML training, plus policy and procedure templates. (The compliance functions are from National Regulatory Services, a division of Financial Planning's parent company, SourceMedia.)
THE BOTTOM LINE
Based on our initial examination of NetX360, it appears that the workstation meets or exceeds all of the goals that Pershing set for it. That, in and of itself, is quite impressive. But NetX360 could turn out to be much more than an enhancement of Pershing's existing workstation. With an open architecture that allows for deep integration with third-party applications, NetX360 should enable cost-effective, mass-customized workstations on a scale unimaginable just a few short years ago. If the app store idea comes to fruition as envisioned by Kumar, it will likely unleash a wave of software innovation unprecedented in the financial services industry. Mining consolidated data, if done responsibly, could further enhance the overall value proposition of NetX360.
Although the theoretical and technological underpinnings are in place to make NetX360 a real game changer, it remains to be seen if Pershing can execute its plan to ensure that clients receive the maximum benefit from the technology. If Pershing succeeds, NetX360 could give the company a large technological lead over its competitors.
Joel P. Bruckenstein, CFP, is publisher of Virtual Office News.