Solution Providers

National Financial has what it calls a Managed Accounts Solution for workstations; it lets FAs plan across a number of fee-based programs. The firm provides online and onsite training as well as marketing support to assist advisors in identifying clients best suited for the product.

Additionally, helping advisors expand and learn new competencies is "a very big focus" for National Financial, says Sandra Metraux, executive vice president-marketing, based in Boston. It's all part of supporting BDs' growth. The principal tack, she says, is offering new products and services, along with training and marketing support. For instance, to be rolled out later this year and integrated into advisor workstations is a new retirement-income planning tool.

No clearing firm has overlooked the move by FAs to a more holistic approach in serving clients. Pershing, for one, offers a series of workshops and conferences geared to advisor practices, such as what FAs can bring to the table when it comes to, say, trust or mortgage services. Pershing also holds larger get-togethers, like "Insite 2007," a conference in Hollywood, Fla., set for this June and keynoted by former U.S. Secretary of State Colin Powell.

LPL's strategy on the holistic front is to create platforms that allow advisors to offer such products as mutual funds and variable annuities, for which the firm provides plenty of administrative support, thus "allowing advisors to focus on the customer's needs in a broader sense," says Stearns.

Raymond James makes available to clients in-house experts in, for example, estate planning and annuities. This past January, it added a high-net-worth Wealth Services Group that helps model custom portfolios for clients with assets over $1 million.

Building Scale

Without a doubt, compliance and regulation are demanding more time and energy; and that's another area where clearing firms are trying to ease the burden for BDs. Pershing recently introduced a new report on a New York Stock Exchange rule dealing with non-advisory fee-based brokers. "It gives guidance as to what an account would have generated in commission revenues compared to what the account generated in fee revenues — to make certain the arrangement that the institution or advisor made is suitable and best for the individual," says Crowley.

A new array of data management tools from National Financial in tandem with Fetter Logic, a financial services information-systems provider, is designed to help manage risk, letting the advisor see client holdings even if they're not in the brokerage account. Instead, such assets might be purchased through a mutual fund company. National's compliance experts also conduct conference calls with as many as 200 broker-dealers at a time. Discussions focus on best practices "to make sure [BDs] know the most up-to-date regulations, and the do's and don'ts around them," says Metraux.

In the last decade, the past five years especially, the clearing industry has been subject to substantial consolidation. That isn't over.

"I think there'll be more consolidation in the next three to five years," predicts Crowley. This past February, Pershing acquired Lehman Brothers' Neuberger Berman correspondent clearing business.

National Financial's Metraux also sees more consolidation upcoming. "Absolutely," she says. As for NF, specifically, "we're always looking for new opportunities." Its most recent acquisition was Fiserv in 2005.

To be sure, as Kamra of First Clearing puts it: "Probably some other firms will throw in the towel. We continue to look for opportunities to acquire, but we'll always [focus on] quality — not just to get scale."

But in the midst of such contraction, there's a formidable new player: LPL jumped into the back-office fray big-time with its agreement last December to clear for AXA brokerage-division advisors. To date, LPL is the only independent broker-dealer among clearing companies.

"We'll see what this brings," says Pershing's Crowley. "It's too early to say how many of the new firms that are coming into our business may or may not impact us."

LPL is building a dedicated team to service the insurance company unit: 4,500 of AXA's 6,000 advisors are in the brokerage business, according to Stearns.

"We have a systems capacity up to about 40,000 advisors, so we're not worried about scalability," adds Stearns, who declined to comment on reports that LPL plans to go public in the near future.

As for adding more clearing customers, she says: "We think there are other institutions that could benefit from leveraging our expertise in the brokerage space. There are not hundreds — there are more like 10 — opportunities. Each one has a long planning cycle, and it's a big decision for them to make."

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Jane Wollman Rusoff is a Los Angeles-based contributing editor of Research and is the founder of Family Star Productions.