{"id":1610,"date":"2020-01-16T07:00:19","date_gmt":"2020-01-16T07:00:19","guid":{"rendered":"https:\/\/resources.velox-global.com\/?p=1610"},"modified":"2020-06-20T10:26:58","modified_gmt":"2020-06-20T10:26:58","slug":"how-to-choose-a-clearing-firm-a-2020-guide-for-roboadvisors","status":"publish","type":"post","link":"https:\/\/resources.velox-global.com\/index.php\/how-to-choose-a-clearing-firm-a-2020-guide-for-roboadvisors\/","title":{"rendered":"How to Choose A Clearing Firm: A 2020 Guide for Roboadvisors"},"content":{"rendered":"\n

January 16, 2020 7:00 am by Walter Peczon<\/a><\/p>\n\n\n\n

On May 1st<\/sup>, 1975, the earth underneath 11 Wall Street shook. At\nfirst, tremors were expected leading up to this day, but no one expected a full\nquake.<\/p>\n\n\n\n

On May Day 1975, the Securities and Exchange Commission introduced extensive\nsecurities\nregulation reform<\/a> and abolished fixed trade commissions \u2014 widely\nconsidered the most comprehensive securities legislation in decades. For the\nfirst time in living memory, market competition would set trading fees.<\/p>\n\n\n\n

This move triggered the emergence of deep-discount brokerages, which viewed trading commissions as loss leaders while making money in other areas (order routing, customer balances, managed portfolios and more). Clients, inevitably, left pricier wirehouses in droves. <\/p>\n\n\n\n

Fast forward to this\npast decade, a new breed of firms has emerged, opening the wounds that were healing\nfrom the rise of deep-discount brokerages: zero commission robo-advisors.<\/p>\n\n\n\n

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Photo by Austin Distel<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n
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Zero commission robo-advisors\noffer passive investment strategies and leverage client data to develop free\ntrading, automated portfolio allocations, adopting user-friendly digital\ninterfaces that enabled clients to engage with their finances from anywhere, at\nany time. <\/p>\n\n\n\n

Pledging to further\ndemocratize index investing, robo-advisor juggernauts such as Robinhood were\namong the first to mobilize online trades by promising no commissions and no\naccount minimum deposits.<\/p>\n\n\n\n

Now, the securities\nindustry has caught its breath, wiped the sweat from its forehead, and is\nracing to adapt once again, including brokerage behemoths that are rethinking their legacy business\nmodels<\/a>.<\/p>\n\n\n\n

Unsurprisingly, \u201cMillennials\u201d and \u201cGen Z\u201d investors have been instrumental<\/a> in the growing popularity of\nrobo-advisors. And, despite the pessimists, robo-advisors have<\/em> been\nsuccessful in attracting retail assets away from incumbent players \u2014 one study<\/a>\nestimates that robo-advisors\u2019 assets under management will expand\nto $4.1 trillion in 2022, from an estimated $330 billion in 2017. <\/p>\n\n\n\n

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Photo on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n
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Instead of waiting on the sidelines as the\ndisruption happens around them, many advisors are now seizing the chance to\nattract next-generation investors and expand their geographic reach. These\nforward-looking advisors are now implementing\nrobo-advisory services\nfirmly underpinned by the human expertise that they have spent their career\nbuilding \u2013 expertise that many novice investors will likely consider valuable\nas their needs become more complex. <\/p>\n\n\n\n

So, you\u2019re launching a robo-advisor. What next?<\/strong><\/h2>\n\n\n\n

The decision to launch\na robo is undoubtedly an exciting one yet it represents just the first hurdle in\na series of vital choices. And, of the subsequent decisions you must make,\nselecting the right clearing firm for your clients\u2019 assets is arguably among\nthe most important. <\/p>\n\n\n\n

With that in mind, we\u2019ve\nput together a handy guide to some of the key factors you should consider as\nyou weigh your options: <\/p>\n\n\n\n

Technology<\/strong><\/h2>\n\n\n\n

It goes without saying, but a large part of\nthe reason that investors have thus far embraced robos is the convenience and\nuser experience that their technology affords. A worthy clearing firm should therefore\nbe equally tech-savvy, with robust front and back-office systems that are\nequipped to handle the high trading volumes associated with today\u2019s markets.\nFor robos in particular, it is important to ensure that a clearing partner\noffers flexible APIs that support integrations between various platforms and facilitate\nstreamlined business processes. <\/p>\n\n\n\n

Cybersecurity<\/strong><\/h2>\n\n\n\n

Data breaches and hacks stand to undermine clients\u2019\ntrust, and can even pose an existential threat to some\nsmall businesses<\/a>.  Financial services\nfirms continue to represent attractive targets for exploitative cyber-hackers\nand, as such, robos should take care to vet prospective clearing firms\u2019\ncybersecurity procedures. Talk to them about the specific protections they have\nin place to ensure that client and firm data is safeguarded. Do they have a\nformal contingency plan in the event that they fall victim to a cyberattack?\nWhat is the protocol for training new employees on security best practices? What\nkind of cybersecurity insurance policy does the firm in place? How often is\ndata backed up?<\/p>\n\n\n\n

Service<\/strong><\/h2>\n\n\n\n

The promise of automated, tech-driven customer\nservice might be appealing in some instances, but when it comes to ensuring\nthat your business is running smoothly, a chatbot isn\u2019t going to cut it. Launching\na robo is a big undertaking, and you\u2019ll want to ensure that your clearing firm\nunderstands\u2014and supports\u2014the needs of your firm. <\/p>\n\n\n\n

Will the clearing firm offer a dedicated\naccount representative\/team? What is the process for reaching them, and what\nkind of response time can you expect? What are their credentials and industry\nexperience?<\/em> Knowing that you have the right team in\nplace to support you can be a huge weight off your shoulders. <\/p>\n\n\n\n

Pricing <\/strong><\/h2>\n\n\n\n

Robo-advisors\u2019 client acquisition costs can be\nquite high and furthermore, these clients typically expect to pay lower costs\nthan they might elsewhere. This presents a new problem, with various robo-advisors\nattempting to gain market share while operating on razor-thin profit margins. <\/p>\n\n\n\n

For this reason, robos should be engaging in\ncandid conversations with prospective clearing firms about their pricing models\nand whether there\u2019s room to grow together \u2013 are they willing to be flexible on\nfee structures now, while your business is still in its nascent stages? It\u2019s\nalso important to be clear on what you are getting in return. A trustworthy clearing\npartner will work with you to limit execution costs, mitigate risk, support\ncompliance demands and enhance overall efficiency. <\/p>\n\n\n\n

*****<\/p>\n\n\n\n

\n\n\n\n
\"man-on-laptop-stocks-with-iphone-robo-advisor-velox-clearing\"
Photo by Austin Distel<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n
\n\n\n\n

The industry is at a digital threshold, with a\ncrop of new robos emerging to offer investors free brokerage, achieving scale\nvia differentiators such as algorithmic, TPAM, chat room and fractional share\ntrading. <\/p>\n\n\n\n

Innovation is non-negotiable in today\u2019s\nenvironment and, as you embark upon this new journey with your robo offering,\nit\u2019s important that you\u2019re able to focus on what you do best: serving your\nclients effectively. <\/p>\n\n\n\n

Ultimately, it\u2019s worth taking the time to\nensure that you identify a nimble and forward-looking clearing firm that can\nnavigate emerging trends while sharing in your values and your commitment to\nclients\u2019 needs. The right partner can make all the difference. <\/p>\n\n\n\n

About Velox Clearing<\/h3>\n\n\n\n

If you\u2019d like to further discuss what a clearing firm can do for your robo-advisor, then consider Velox Clearing as your future partner: www.velox-global.com\/Solutions<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

January 16, 2020 7:00 am by Walter Peczon On May 1st, 1975, the earth underneath 11 Wall Street shook. At first, tremors were expected leading up to this day, but no one expected a full quake. On May Day 1975, the Securities and Exchange Commission introduced extensive securities regulation reform and abolished fixed trade commissions […]<\/p>\n","protected":false},"author":3,"featured_media":1616,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"spay_email":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[13],"tags":[107,108,109],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/resources.velox-global.com\/wp-content\/uploads\/2020\/01\/austin-distel-stock-market-phone-with-laptop-unsplash.jpg?fit=6334%2C4223&ssl=1","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8AEHO-pY","jetpack-related-posts":[{"id":1582,"url":"https:\/\/resources.velox-global.com\/index.php\/velox-clearing-sponsors-94th-annual-mid-winter-meeting-for-sta-chicago\/","url_meta":{"origin":1610,"position":0},"title":"Velox Clearing Sponsors 94th Annual Mid-Winter Meeting for STA Chicago","date":"December 13, 2019","format":false,"excerpt":"Velox Clearing sponsors 94th Annual Mid-Winter Meeting for STA Chicago ANAHEIM, CA -- December 13, 2019 \u2013 STA Chicago (\u201cSecurity Traders Association of Chicago\u201d), a leading trade organization for individual professionals in the securities industry that works to improve the ethics, business standards and working environment for its members, announced\u2026","rel":"","context":"In "Blog"","img":{"alt_text":"apartment-apartment-building-architecture-building-323705-pexels","src":"https:\/\/i0.wp.com\/resources.velox-global.com\/wp-content\/uploads\/2019\/12\/apartment-apartment-building-architecture-building-323705.jpg?fit=1200%2C800&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1290,"url":"https:\/\/resources.velox-global.com\/index.php\/velox-clearing-launches-correspondent-clearing-and-prime-brokerage-services-publicly\/","url_meta":{"origin":1610,"position":1},"title":"Velox Clearing Launches Correspondent Clearing and Prime Brokerage Services Publicly","date":"October 18, 2019","format":false,"excerpt":"Tech-driven firm Velox Clearing to support back-office and cost efficiency; enhance service for small and mid-sized firms ANAHEIM, CALIF. 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