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Chris Psaltos
Chris Psaltos
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Playing Catch Up: Banks & Brokerages Battle for the Self-Directed Investor

Investors want easy-to-use interfaces, customized views, and dynamic content. Moving this kind of data to the front-end is a big ask for legacy back-office databases.

In the race for the nearly 40 million self-directed US-based investors (according to Celent, 2012), banks and traditional, full-service brokerage firms have given up ground since the financial crisis to online brokerage firms, such as E*TRADE, Charles Schwab and TD Ameritrade.  Capitalizing on the latest technological advances and a move toward self-directed online investing, online brokerage firms have excelled in catering to investors of all generations, and some are now providing retail banking services such as seamless money transfers, bill pay, and deposits.

For banks in particular, the reason for this emerging gap is a result of many factors. Industry consolidation, regulatory restraints, profitability challenges, and a focus more toward product innovation and technology spending on core banking services and away from brokerage and investment services have all played a role. While the latter has enabled banks to provide market-leading core banking services, it has hindered these institutions’ abilities to cross-sell loyal customers to investment and wealth management services -- especially considering the large client base from which to draw from. There are, of course, several banks that have recognized this and are setting an example for which others to follow, including Merrill Edge, US Bank, and Capital One’s Sharebuilder.

The keys to success
One of the key components to the successes of the aforementioned banks and many online brokers is creating a positive user experience. Utilizing a combination of easy-to-use interfaces, innovative account integration and personalization, and the ability to provide scalable services at low cost, these firms have built platforms investors have gravitated to. To construct a platform with these key features, three elements must be addressed: data enrichment, data visualization, and performance.

Data enrichment: The first step to enhancing the user experience is having on-demand access to both the users’ account data as well as market and reference data. Having the most viable data significantly enhances the investment decision-making process and overall confidence in the platform.

Data visualization: Tools for data visualization are important differentiators when appealing to today’s investors. Not only does the information need to be actionable, but it needs to be visually appealing. In an age of running apps on iPads and other devices, presentation is key.

Performance: The aforementioned components are rendered useless if the platform cannot perform. Malfunctioning page loads, slow response times and processing errors are all crucial elements that must run seamlessly to keep customers engaged. The importance of ensuring flawless performance is heightened when considering the massive amounts of data and data processing that must take place in fractions of a second.

Combining all of these elements into a slick, easy-to-use platform can seem daunting, especially if considering building a platform from the ground up as opposed to an out-of-the-box solution. Fortunately for banks and brokerages, advances in technology have enabled a way to quickly catch up with the offerings of full service, online brokerages.

Modernizing your infrastructure
One of the primary challenges banks or brokers need to overcome when considering a self-directed investment platform is the availability and infrastructure surrounding the data used to support the platform.. Specifically, the physical location of the required data and the ability for the front-end to quickly and easily consume this data presents a challenge when building a robust system with dynamic content. Within the framework of the more traditional “back office” model, every time an investor requires new data it must access a third party, back office database. A call is made to retrieve the data which costs valuable time and money. Considering that most investors have account data split amongst several accounts and possibly across many business lines and vendors, this process can quickly become complex. Reducing the inefficiencies of accessing data thus becomes paramount to ensure performance, and empowers investors to have a more data enriched experience without the cost and latency of traditional infrastructures.

One way in which banks and brokerages are overcoming this challenge is by using a solution that offers the technology to provide on-demand access to account and market data that typically resides in the back office. Having a local data store that sits between the site application and the back office significantly reduces the dependency on API-based access to the back office, which in turn ensures faster load times and seamless processing. Incorporating this into a self-directed platform gives users a more efficient way to manage their portfolios, access financial research, and execute trades via a single, easy-to-use application.

For organizations looking to attract and retain customers through an online brokerage offering, they should be looking towards products and solutions that minimize dependency on data that is stored remotely and must be accessed through legacy infrastructure. Leveraging these products that embrace the latest technology trends allows firms the ammunition they need to compete with these established online brokerages in delivering a more personalized, enhanced online investing experience at a fraction of the cost.

Chris Psaltos has been with Scivantage for over seven years and is currently responsible for the full suite of Wealth Management products including: Scivantage Professional™, Scivantage Investor™ and Investor Mobile product lines. Chris has over 20 years of ... View Full Bio
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