Effective channel blending in retail brokerage - Oracle

Effective channel blending in
retail brokerage
An Oracle White Paper
January 2009

Retail brokerage firms are finding creative
ways to incorporate additional channels into
the customer experience. Classic call centers
and online channels are being leveraged in
creative ways to provide additional value to
the customer while maintaining cost and
allowing sales personnel to focus on
revenue generation.
Effective channel blending in retail brokerage
With the rise in assets being funneled into fee-based accounts, retail brokerage
firms are attempting to strike a balance between the customer-centric demands of
the advice and guidance model and controlling operational cost. While some of the
larger full-service firms continue to funnel primary customer interactions through
their existing advisor channels, others are finding creative ways to incorporate
additional channels into the customer experience. Classic call centers and online
channels are being leveraged in creative ways to provide additional value to the
customer while maintaining cost and allowing sales personnel to focus on revenue
generation.
While High Net Worth (USD 1 million – USD 10 million) and Ultra High Net
Worth (>USD 10 million) investor pools have remained stable, Mass Retail
(

With product commoditization in active
trading, discount firms are leveraging
channels to service the traders on a per-
instrument basis. Some have dedicated
product specialists staffed in call centers. All
provide online training for new features and
products using webcasts and other online
training features.
reduce available profitability in advice-based investing, particularly in fee-structured
account models.
As discount brokerage firms move into the full-service arena, they are leveraging
cost control experience into channel structures to effectively service Mass Retail and
Mass Affluent markets. For instance, Charles Schwab opens 34% of their accounts
in the branch. Branches all support electronic signature captures so the paperwork
can start electronic and stay electronic. Once the initial account is established, each
branch is supported by one of four regional operational centers who are responsible
for following through on the account creation. Throughout each step in the process,
all information is available to call center personnel, financial advisors, and the
customer (via online channel). Once the account is created, Schwab’s online channel
becomes the predominant source of trading activity, accounting for over 90% of all
trading.
With product commoditization in active trading, discount firms are leveraging
channels to service the traders on a per-instrument basis. Some have dedicated
product specialists staffed in call centers. All provide online training for new
features and products using webcasts and other online training features.
(see Figure 2 on page 2).
Figure 2: Ameritrade online education
Source: ameritrade.com
Effective channel blending in retail brokerage
Page 3

While discount firms are adding brick and mortar retail operations for relationshipbased
investing, their approach to advice and guidance is often a little different
from a full-service firm. Ameritrade created Amerivest, Schwab has their Schwab
Portfolios program, and E*Trade offers advice and guidance from their Investment
Specialist Group (see Figure 3 on page 3). The advice and guidance functionality
for each exposes more directly to the retail investor and is augmented by both the
call centers and branch locations. Advisors are not necessarily the direct conduits
for fund selections and performance reporting like they would tend to be in a
full-service firm.
This approach provides retail customers with more generic advice and guidance
tools without the dependence on recurring human interaction. Most firms pre-select
a group of funds to offer and load those fund selections into models based on
pre-defined investment objectives and risk tolerance.
Vendors are also playing an important role in expanding channel opportunities.
SunGard WealthStation offers three levels of planning product, all synchronized to
the same data, to enable distribution of financial planning responsibilities:
• Advisor Series. This is the high end set of planning functionality suitable for
people working with high net worth clients.
Figure 3: E*Trade Sample Portfolio Report
Source: etrade.com
Effective channel blending in retail brokerage
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• Planning Series. Suitable for mid-tier managers looking for some
sophistication but faster to execute.
• Foundation Series. Suitable for call center representatives and clients.
WealthStation also supports online collaboration between financial advisors and
their clients; though no current customer has opted to leverage that capability.
Scivantage Professional offers customers up-to-date internet technologies for
collaboration between financial advisors, their firms, and their customers. Blogging
offers private and public areas for notes, communications and files that can be shared
across the firm or with clients.
Correspondent clearing firms are starting to provide tools to facilitate interactions
between advisors and clients. For instance, National Financial Services’ Streetscape
allows retail clients to work with advisors sharing data through financial calculators.
While some channels are being strengthened for service, others are being mitigated
due to cost. Investors are being offered the opportunity to receive electronic
correspondence in lieu of paper. This is particularly true in statements and confirms.
Providing this functionality saves the paper and postage, but it also encourages
online usage. Establishing a service pattern through online channels reduces direct
service calls through call centers or branch relationships.
As additional retail firms look to transition into the advice and guidance, fee-driven
investment model, capitalizing on the experience of those who have effectively
created operationally efficient channels will be critical in bottom-line revenue.
The ability to leverage vendors, correspondent clearing firms, and internal channel
structures effectively is essential to being competitive in the retail landscape. Branch
locations, call centers and/or middle office support desks, and online investments
should be treated the same way as revenue strategies: Diversify and balance so a
predominant channel does not prohibit customer acquisition and retention in a
firm’s effort to aggregate assets under management.
Effective channel blending in retail brokerage
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Effective channel blending in retail brokerage
January 2009
Author: Adam Honore
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
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