Introducing Broker-Dealers Compete With Big Boys

While technology investments will remain smaller for introducing broker/dealers than for their competitors, they will grow in the near-term, according to a new report from Aite Group.

Since breakaway brokers began fleeing wirehouses, regional broker/dealers and independent firms have seen a wealth of talent from which to choose. While recruiting high-producing representatives is a top priority at many firms, many producers are used to having the best technology available, Aite research director Adam Honore' writes in the report.

How, then, do introducing brokerage firms with relatively miniscule technology budgets compete?

Three-quarters of IBD advisors prefer bundled technology to a-la-carte solutions, and a quarter of IBD firms plan to purchase additional technology from their clearing firm in 2010,enabling them to make the most of the technology available, Honore says.

While technology investments will remain smaller for IBDs for their competitors, they will grow in the near-term. Vendors that service the IBD space should be mindful of the unique needs of IBD firms in order to win their business.

"Introducing brokers' technology budgets are small," Honore says. "The entire industry will spend slightly more than US$470 million in 2010 - less than any one of the top wirehouses. Despite the low dollar amount, many of these firms can, and do, compete with the largest firms' platforms simply by being smart shoppers."

The report is based on Aite Group interviews with 15 senior executives at introducing brokerage firms and an Aite Group survey of 160 advisors affiliated with introducing brokerage firms, both conducted in October 2009.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio