The time is now for bank brokerage

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15 January 2016
William Trout
happy businessman and money on a white background. vector. flat illustration As a follow up to my last post, I want to provide a little context on the challenges facing bank brokerages. Banks and their brokerage arms represent a wild card in terms of the adoption of automated investments platforms. Still wedded to a product push mentality, they could benefit greatly by rolling out self-serve advisory options. On both the loan and deposit side of the balance sheet, banks have broad (but rarely deep) relationships with clients, whose investment needs they serve via rival trust, advisory, and brokerage channels. Historically, brokerage has lagged other bank channels in technology and service terms. Automated advisory (or robo) platforms offer an opportunity to escape this defensive posture and give bank and nonbank clients a reason to bring assets into the brokerage. A robo advisory offer also represents a forward-looking investment in infrastructure. An online advisory platform may neatly substitute for a burdensome legacy RIA, or serve as a template for creating a more customer-centric investments platform that integrates trust and brokerage functions. At a minimum, implementation of an automated investments platform should help reduce overhead, drive fee income, and serve as a sweetener for Millennials disinclined to do business with a bank. For bank brokerages, it’s time to drop outmoded segmentation strategies and a focus on high commission products in favor of a model aligned with client interests.

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