Next week Tabb Group and Firm58 are hosting a webinar (Tuesday, September 21 @ 1pm ET) discussing the new brokerage relationship and the importance of capturing the right costs/fees and measuring client profitability, accurately.
For many years it’s been standard practice for brokerages to charge their trading customers some average mil rate and hope this covers the cost of doing business across all clients, even if some are unprofitable and others are unfairly overcharged as a result. This has left a brokerage’s revenue “unprotected.” As a result, profitable clients leave for better business relationships and unprofitable clients demand more services…at a loss.
Further, as clients have become more sophisticated and request arrangements like “cost-plus” billing, or do business with a bank across multiple asset classes, this method of average costing is misleading banks as to the profitability of a client, and regularly results in the distribution of even more services to underperforming, or unprofitable clients. In today’s economic and political environment, this is a recipe for business disaster. Leading firms are already addressing these issues.
When you compare these costs today, the 2nd or 3rd largest expense in any financial institution is its Brokerage, Clearing & Execution (BCE). In addition, the explosion of new markets (or trading venues) and the complexity of calculating fees or commissions, including commissions for adding liquidity, has made the effort to accurately capture and apply these costs across multiple client accounts almost impossible.
The webinar highlights the problems for firms ignoring the warning signs. Competition is eating away at firms that cannot accurately calculate and manage the cost of their trading clients. The webinar will also offer suggestions to address this critical need.
Not surprisingly, Firm58 is helping many firms with the technology behind this complex problem. Firm58 can help firms manage their costs more accurately and Protect their Revenue streams more proactively, thus enhancing their competitive positions in any market.