Introduction: Increased customer value and higher margins, a tough challenge

In tandem with declining commissions and greater competition in the investment business, securities companies and financial institutions (SCFI) focusing on retail customers has ended up in a difficult position. SCFI commonly enters into partnerships with banks, which in turn gives them access to their IT systems where end users can be managed and where business can be done on exchanges or other venues.

The trouble with these setups is the fact that the end customer quickly associates with the partner bank instead of the SCFI. Since the end customer logs on to the website of the partner bank the customer gets more exposure to the bank than to the SCFI. Even if the customer is inactive logins occur in order to monitor holdings or download reports. Since information is getting more readily available to the end customer the need for a personal broker contact is less important. As a result the end customer gets less and less exposure to the SCFI and instead starts buying products from the partner bank.

Incorrect focus

The SCFI should instead focus on setting up their own online environment where end customer pages are delivered together with partner pages for resellers and administrative systems for staff. These three page types can be categorized as front office, middle office and back office.

Until recently a SCFI who wanted to set up this structure would have to establish an IT-department of their own to work with consultants from the system vendor. For a SCFI with customer skills and sales expertise this quickly would become a very expensive project which is difficult to manage and generates a lot of maintenance.

These “on-premises”-solutions makes it hard for the SCFI to move quickly and created hurdles for upgrading their systems.

A solution in the cloud

How can then a SCFI create more customer value and increase customer loyalty by building their brand and offer an IT-solution with front, middle and back end? The solution is to strategically use new cloud based technology called Software as a Service (SaaS).

Below we will look closer at how a SCFI can use a cloud solution to create an online bank without the need of an in-house IT-department or incurring any radical cost increase.

Which services does a SCFI need?

In this example we will show how the securities firm XYZ set up their IT-structure to manage trading of stocks and mutual funds on behalf of their customers as well as a solution for portfolio management.

Back end

To begin with the back end has to be configured correctly in order to establish relationships with external partners. The securities company XYZ will offer trading of stocks and mutual funds which means that agreements have to be made with execution venues. For stock trading a relationship is created with Broker A and for mutual funds a relationship is set up with Mutual Fund Marketplace A which both are supported by the securities system. The securities company now only has to click a button to submit orders for execution.

The securities system also handles settlement by mirroring the transactions which occur on the various settlement accounts where securities are delivered. In conjunction with trades information is stored to support TRS-reporting (transaction reporting for financial regulators) and at the same time documentation for tax reporting.

Financial products which the securities company is going to offer should be configured in the back end together with enablement of various quote feeds.

Middle end

Within the middle end management of sales, monitoring and allocation takes place.

Partner site/CRM

The associated resellers of the securities company can sign on to this site in order to monitor and manage their customers and take care of their business. Resellers are able to use various sales tools which streamline customer communication. Some of the functions are:

  • Currency exchange, withdrawals, account access and rights
  • Place and manage orders
  • Communicate using messaging, e-mail and regular mail to send reports, business proposals and much more
  • Log events like meetings and phone calls with associated documentation
  • Manage ”sub-resellers” together with filtering of which products the sub-resellers can offer
  • Conduct batch orders with or without customer verification (depending on power of attorney level), follow up on pending orders
  • Watch lists with market news and quotes in order to monitor customer interests and future events like product expirations where funds might be released
  • Global search among customer information, holdings and much more
  • Sorting and filtering together with reports of customer performance
  • Reseller and advisory dashboards
  • Task management on behalf of resellers and sub-resellers
  • Customized content for resellers which can be created by administrators or users within the hierarchy

Broker site

The securities company XYZ has two brokers which staffs the trading desk and can access a view which displays the current activity together with various interfaces for placing orders.

Money manager site

The securities company XYZ has five money managers which are associated with the company who each manage their own model portfolios. By signing into the securities system the managers can monitor and conduct allocations on behalf of their portfolios. The managers can also handle fees and reconciliations. The securities system works as a distribution platform where managers can send reports and comments to their customers.

Front end

The front end is the part which drives the business forward. In this case the securities company XYZ has a sales oriented storefront in the form of a website where the company’s products are marketed. They also have an investment site which requires login where the customers can monitor their holdings and make trades on their own. The customer also uses this site to approve business proposals which their advisor generates.

Within the front end section there are white labels present. A white label is an investment site which is customized for a certain reseller and reflects their brand. The customers who are associated with the reseller can log on to the white label site. This feature enables the security company to offer their resellers a unique selling point where the reseller can develop and build their own brands under the umbrella of the securities company.

About Bricknode

Bricknode develops and maintains a complete cloud based securities system based on the concept Software as a Service (SaaS). Using Bricknode Financial Systems security companies can offer complete online banking through relatively small investments and costs. Read more about Bricknode and Bricknode Financial Systems at

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