Leveraging Technology to Enhance Broker-Dealer Operations

During the session, I explored current trends and emerging tech with carrier-owned broker-dealers, delving into issues shaping broker-dealer operations

Recently, I hosted Datos Insights’ Broker-Dealer Technology Research Group. Joined by an array of carrier-owned broker-dealers, this session gave us the opportunity to dive into emergent issues, current trends, and emerging technologies impacting broker-dealer operations.

Account Opening Transformation

A major area of focus for carrier-owned broker-dealers has been improving and modernizing new account-opening processes. Many firms are exploring digital account-opening solutions to replace antiquated, paper-based systems. Goals include reducing operational inefficiencies, minimizing errors/delays, and providing a seamless user experience. As part of an effort to solve these problems, vendors are providing end-to-end digital workflows. Key challenges center around integrating external platforms and ensuring uniform processes when working with third-party asset managers.

Harnessing AI and Automation

We discussed firms’ efforts to adopt generative AI and automation tools to boost customer service and staff productivity. Use cases include leveraging chatbots for basic inquiries, applying natural language processing for document analysis, and using machine learning for predictive analytics.

However, prudent concerns exist around responsible AI adoption given the highly sensitive data within our industry. There is wariness about potential faulty recommendations without sufficient human validation. As such, measured adoption in the near term is most likely vs. wholesale replacement of staff.

Guidance around appropriate AI use for activities such as marketing and research has been provided to advisors by most firms, but ongoing supervision is difficult. Firms are analyzing activities to clamp down on unauthorized usage. The goal is for AI to enhance individual productivity rather than fully supplant roles, with workers shifting to higher-value analysis and judgment-oriented tasks. Striking the right balance between automation and human involvement is imperative. Ongoing governance and oversight will remain crucial to ensure consumer interests are protected as firms integrate AI.

Mitigating Vendor Contract Pressures

Vendor contract negotiations was another major topic discussed. Many vendors are imposing inflationary increases and trying to limit negotiation leverage. This is especially true for dominant solution providers, such as Broadridge, after recent acquisitions. Firms realize consolidating all use cases can help maximize negotiation power. But it remains an uphill battle, and we expect further vendor consolidation ahead. Creative partnerships may be needed to disrupt incumbent vendor dominance.

As always, it was insightful to hear how our peers are leveraging technology to bolster operations while balancing risk, efficiency, and user experiences. Our Broker-Dealer Research Group continually explores these and other critical issues. If you would like to join our discussions on the latest broker-dealer technology trends in the coming year, please visit our website or reach out to me at [email protected].