February 10, 2020 | ARTICLE | BY KELLY LYNCH

It’s the exceptions that sometimes prove the rule. We were reminded of that truism during a recent conversation with a senior operations executive at a large broker-dealer. After months of internal technology work, this firm had succeeded in automating the existing “check & app” process for account opening with two of their most widely used mutual fund families.

High-fives all around and full speed ahead, right? Not quite.

Instead, they halted the project, explaining that, once they came up for air, one question was painfully obvious to everyone involved: “Can we really support the development and maintenance to repeat that effort for all of our fund families to get to the one consistent process we need?”

No matter how big or small they are, non-self-clearing B/Ds that want to automate all or part of the direct held mutual fund account opening process on their own are in a tough spot. The virtues of automation are no mystery—fewer NIGOs, less compliance risk, better reporting and, most important, a vastly improved client and rep experience. The investment can be huge, but it doesn’t need to be.

For smaller broker-dealer firms, total automation with the fund companies is usually not a realistic option. They simply don’t have the development firepower to automate and maintain their connection to the dozens of fund families that even the smallest advisors offer on their platforms. The best they can realistically hope to accomplish is incorporating off-the-shelf “smart-form” technology to reduce errors during the application process which doesn’t even take into account the nuanced differences in each fund family application. Beyond that point, once the client is invested directly at the fund family, they will largely be out of the picture and challenged to create comprehensive reporting for their own use and their clients’.

Larger B/Ds, like the one discussed at the beginning, theoretically have the means to automate, but it will be a long slog. Sure the team will be marginally more efficient on the 85th integration than they were on the first (if they all haven’t given notice by then!). But no two fund families are exactly alike in their new account application processes or connectivity protocols, so the benefits of repetition can only go so far. And it’s not just the operations professionals who will find it rough going during the transition; it’s also the customers whose experience will be uneven at best. “Why,” they can be forgiven for asking, “are you asking me to fill out this hard-copy form for my bond fund, what looks like an online PDF for my domestic equity fund, and a web page for my US stock fund?”

All of this argues for another way, and we would submit that the obvious answer is for B/Ds to aggregate all their funds on a single platform—one that is focused on mutual funds, already integrated with virtually all the major fund families, and can deliver them in a package that is tested and customer friendly.

  • For smaller B/Ds whose only viable option is sending customers a smart form, aggregation means they and their clients have access to a solution that is truly automated from top to bottom, not a half measure.
  • For larger B/Ds that have the “luxury” of creating it themselves—again, and again, and again—it means all the benefits of automation with a one-time platform adoption that will take about the same amount of time as onboarding a single fund family, an integration that can support every fund on the platform now and into the future.

A one-and-done solution versus 85 rinse & repeats: That’s not an exception that proves a rule. That’s just exceptional.