Last week I wrote “The End of the Market Data Desktop”. Since that posting I received more than a handful of emails from friends, colleagues and clients telling me that I am crazy and that there is no way that financial professionals can do without market data, analytical tools, dashboards, streaming quotes, etc…
I Feel the Need
Let me first say that I was referring mainly to retail broker dealers and wealth management professionals in my post and I was definitely not making reference to institutional brokers/ traders, algo / black box guys, or any other financial professional that takes security positions or makes markets at the smallest fraction of a percent. The reason for my posting was mainly to say that wealth management professionals need new tools that help them build deeper relationships with their clients as they continue to offset the analytical work to their portfolio managers.
I think there is tremendous upside in building next generation relationship tools for the wealth management professional. Rather than security dashboards and scrolling news, perhaps it makes sense to have a dashboard aggregating everything about a client. Does it make sense in this social media world to aggregate items such as Facebook and or LinkedIn updates, changes in credit ratings, money in motion events, news about the client, their portfolio or their interests, twitter posts, blog updates, etc…? After all isn’t sales knowing about your client and understanding their needs?
The second part of my posting was related to communication tools. How does a wealth manager communicate with their client regularly? Few do the obvious – talk. In the age of social media perhaps wealth managers can do better by having a communication platform that allows instant communication in a one-to-many platform, all wrapped around a compliant rich framework. How great would it be if wealth managers were able to Tweet, update LinkedIn, Facebook, their blog, their website all with a single platform? What about knowing how many of their clients are reading their weekly or monthly newsletter or perhaps worse, those who do not. Social media is opening a new world for sell-side financial professionals and financial technology firms need to address these needs if they want to maintain their market share of the wealth manager desktop.
– Need for Speed
I thought that while I am at it, perhaps it makes sense to address the trading needs of the wealth management professional, particularly those who service the Family Office and Ultra-High Net Worth individual.
Yesterday, Scott Patterson of the Wall Street Journal wrote an insightful article “Fast Traders Face Off with Big Investors Over ‘Gaming’”. In this article Patterson recognized that high-frequency traders who tend to trade on algorithmic triggers are front running traditional traders, those who are not using algorithmic models and who are not dialed in directly with the exchanges. So, this brings me to the second part of observation.
Today, low latency trading systems are typically used by the buyside investment management firms and or hedge funds and are not used by traditional traders or portfolio managers who tend to support wealth management practices — atleast not the smaller shops. So my speculation is that at some point low latency trading systems will have to be built and or purchased from technology firms who support retail brokerages and wealth managers. I would imagine that at some point wealth management firms will be fed up with the idea of losing out to algo traders who are making a killing on very small movements in spreads and execution timing differences. Are we getting closer to the time when LPL, RayJay, TD, RBC, Pershing and others offer ultra low latency execution?
Overall it seems as though the wealth management technology vendors will continue to go through major changes – with one change coming in the form of building relationship tools and other ensuring that their back end trading and execution systems are more closely competitive with those systems supported by ultra low latency execution.
