Getting the best prices on bonds the way that an institutional client can is a capability that a new cloud-based platform wants to offer independent advisors.
Outside a wirehouse, gaining access to a broad universe of bonds is challenging. Large institutions control or manage a majority of the individual securities, strongly influence bond prices, and hold trading insights within proprietary systems. Even custodians only offer a limited pools of bonds at set prices. These factors can inhibit an advisor’s ability to compare available bonds in the market, and can also limit pricing transparency.
Bond Navigator allows advisors to search a broad universe of bonds, conduct a thorough evaluation of its structural characteristics, and make pre-trade pricing comparisons so that they understand its true market value. RIAs can also select offerings they’re interested in and transact through the platform, which is supported by three desks (an advisor liaison desk, an institutional sales desk, and an institutional trading desk).
“Our client is the financial advisor, and we empower them to individually be competitive with the big shops,” says Gurinder Ahluwalia, CEO of 280CapMarkets, a Bay Area-based startup behind the official launch of Bond Navigator. “We deliver a bigger pool and pricing access to allow advisors to confidently build portfolios of individual bonds and compete for new client assets.”
The technology allows for advisors to better compete with banks and wires, he adds.
“We are focused on solving the challenges for those doing individual fixed income directly,” Ahluwalia says. “We fit into their practice by offering them the benefit of broad access to the fixed income market, the efficiency of being able to compare bond characteristics on a single screen, and the ability to grow their fixed income business by utilizing our three desks to augment their client service capabilities.”
By giving an RIA a much wider pool that what a custodian can offer, they can save anywhere from a quarter point to one whole point on a bond buy. Plus they have their own bond inventory so they can do swaps to drive prices down even further. They saved an RIA client 12 basis points on a 14-year bond recently that he would’ve otherwise had bought for more from a custodian.
"Many advisors are paying a point and a half in excess of what they should be paying," Ahluwalia says.
Though bond ETFs have suffered large outflows in the last few months, there is still demand for fixed income among managers as the Fed is expected to raise interest rates at least once this year.
“Best execution is a very real challenge for independent advisors,” says Brian Goldberg, managing director at Banyan Tree Asset Management. “Bond Navigator makes surveying the market and documenting trading information far easier and less time consuming.”
The platform joins a trend of digital tools developed to give advisors better insight into investment products. A number of custodians are now offering advisors the ability to create portfolio recommendations digitally without the time and expense of consulting with an expert.
Ahluwalia says advisors on BondNavigator interested in buying specific strategies of individual holdings already have access to SMAs in the marketplace that will assemble the portfolio and charge around 25 basis points for that service. “We provide access and a curated bond offering to fit the need of the advisor’s client as they put it forth to us,” he says, adding the platform’s liaison desk will provide advice to advisors looking to grow their fixed income business.
Ahluwalia acknowledges there may be some tech fatigue among advisors regularly pitched by a variety of practice management tools, but he says those that have been handling fixed income directly have been searching for a more transparent alternative.
“Oftentimes, they’re seeing a limited pool of offerings, and those offerings are not consistently priced in a competitive way,” he says. “So it’s hard to feel confident in best execution.”