Broadridge Financial Solutions won the best outsourcing category at this year’s Sell-Side Technology Awards, retaining its crown in what is an intensely competitive and hugely lucrative industry. Victor Anderson speaks to Michael Alexander, president of Broadridge Wealth and Capital Markets Solutions, about the details of Broadridge’s outsourcing offering, the business processes sell-side firms are willing to hand over to the Lake Success, NY-based firm, and trends he sees emerging over the next 12 months.
Waters: For the benefit of Waters’ readers, can you provide an overview of Broadridge’s outsourcing strategy and the various services it offers sell-side firms?
Michael Alexander, president of Broadridge Wealth and Capital Markets Solutions: We have three corporate strategies: big data, digitalization and mutualization. Our managed service is part of bringing those three focal points to life. We call it a managed service because what makes us unique in the marketplace is that we have our own end-to-end technology from the front to the back office, and then we couple a labor service on top of that. That model allows us to make investments that enable our clients to get value they wouldn’t be able to obtain elsewhere.
One of the terms that we focus on is what we call “network value.” Think of it like this: We have a community and in some cases extremely large market share in terms of volume—70 to 80 percent. There are things firms can do on their own within their four walls, but when you factor in our community, we can make changes and innovations that they could never do on their own. We call that network value. Our strategy around those three areas is to leverage the network value we have.
The services we offer are front-to-back-office, and increasingly—this is one of the trends we’re seeing—our clients are going beyond operations. We focus primarily on sell-side firms, although we also have some asset managers that use the service and that part of our business is growing. Our services range from operations and compliance to regulatory accounting and tax and performance reporting—almost everything after the trade has been done.
Waters: Are there any areas (processes) that sell-side firms tend not to want to outsource? What do they want to maintain control over?
Alexander: This is changing, but historically for the most part, our clients would keep things that are client-facing; they keep things that provide them with their core differentiation. There are also a few things from a regulatory perspective that they have to keep. For example, they have to supervise our activities—we can give them the tools and the information to perform this supervision, but ultimately it’s their accountability.
Waters: To what extent does Broadridge do total outsourcing lift-outs, or are outsourcing arrangements/relationships most often managed on a function-by-function basis?
Alexander: We’re really client-driven—we’ll do whatever the client wants. Some want an entire end-to-end service, while others want a point solution. Typically, if they do one service, they’ll expand and do others later on. One thing that differentiates us from other outsourcing providers is that we have a US-based operation located within a FINRA registered broker-dealer. It’s a unique proposition in that we have a tremendous amount of subject matter expertise that our competitors don’t, in addition to our technology. Often, we hire staff from our clients, which adds to our subject matter expertise. This is also a win for them because they save on severance and they maintain relationship continuity, and often it’s their best people. So we end up having an operation that is the best of the best.
Waters: Have you noticed any outsourcing trends over the past 12 months in terms of drivers and business processes that sell-side firms are looking to hand over to Broadridge?
Alexander: People are trying to make sense of data—there’s a lot of data out there, which they need to aggregate for insight and predictability. Firms often get a lot of false positives in their exception processing—they get a lot of items for attention—where they have to find a needle in a haystack. One of the trends is to help them solve that need as well as how to make sense of their data. The other is that they are increasingly comfortable with mutualization or outsourcing, and we’re seeing more comfort around outsourcing more complex tasks. Most importantly, firms have done a great job taking out costs and embracing emerging technologies like artificial intelligence (AI) and blockchain. They are looking for a provider that can provide them with thought leadership where they can mutualize these investments and leverage these new technologies and realize service, risk and cost benefits that they couldn’t do on their own.
Waters: What’s in store for the next 12 months in terms of new offerings or enhancements of existing ones?
Alexander: We’re going to leverage these new technologies (AI and blockchain). From an AI perspective, we’re going to help clients transform their business and create new service and business support models by leveraging our network for the benefit of the community.
Bill Murphy, CTO of Blackstone, once again joins the podcast to discuss the private equity firm's new offices, designed to house its innovations team.Subscribe to Weekly Wrap emails