Upgrades inch ahead in attempts to enhance service

2001 Brokerage Report Card
Technology: the source of complaints
 
Front office	1998	1999	2000	2001
 
Edward Jones	8.5	8.5	8.6	8.8
CIBC Wood Gundy	8.6	8.4	7.1	7.9
BMO Nesbitt Burns	7.2	7.3	7.6	7.8
Canaccord Capital	5.5	7.5	8.3	7.8
Nat’l Bank Financial	8.4	8.5	7.9	7.7
Raymond James*	6.5	7.2	7.4	7.3
Merrill Lynch	5.9	5.2	7.2	7.0
RBC Dominion	6.1	6.5	7.0	6.9
TD Evergreen	7.3	6.7	6.6	6.7
ScotiaMcLeod	8.4	6.1	6.7	6.7
 
Average	7.2	7.2	7.4	7.5

Back office	1998	1999	2000	2001
 
Edward Jones	8.1	8.7	8.8	8.7
Canaccord Capital	6.9	9.1	8.1	8.5
BMO Nesbitt Burns	8.4	8.7	6.4	8.3
Nat’l Bank Financial	8.6	8.9	7.8	7.6
Raymond James*	8.3	8.2	7.5	7.5
TD Evergreen	8.9	8.1	7.7	7.5
RBC Dominion	8.6	8.3	6.5	7.3
ScotiaMcLeod	7.9	8.2	6.7	7.3
Merrill Lynch	8.2	8.1	6.9	7.1
CIBC Wood Gundy	8.1	8.1	6.9	6.1
 
Average	8.2	8.4	7.3	7.6

Quote system	1998	1999	2000	2001
 
Edward Jones	9.2	9.3	8.9	9.0
Merrill Lynch	8.7	7.0	7.9	8.6
BMO Nesbitt Burns	8.2	8.4	8.0	8.1
TD Evergreen	8.5	7.7	8.0	8.1
Canaccord Capital	7.1	8.3	8.4	7.8
CIBC Wood Gundy	8.7	8.5	8.1	7.8
Nat’l Bank Financial	8.3	8.2	7.6	7.7
Raymond James*	8.6	8.5	8.0	7.3
RBC Dominion	7.4	7.9	6.5	7.3
ScotiaMcLeod	7.8	8.4	6.9	7.2
 
Average	8.3	8.2	7.8	7.9
*Raymond James acquired Goepel McDermid Inc. in autumn, 2000
SOURCE: INVESTMENT EXECUTIVE RESEARCH

Complaints about the reliability of data feeds, poor contact-management systems and a lack of integration among the different technologies that brokerage firms use highlight this year’s comments in our annual Brokerage Report Card.

On a positive note, the overall average for each category that was measured — front office, back office and quote feed — inched up marginally from last year, suggesting that some progress is being made on the technology front.

For the second year in a row, Edward Jones led the pack, with an average technology score of 8.8. in the three categories. It was the same score as last year, and ranked well above the company’s closest rivals, BMO Nesbitt Burns Inc. and Canaccord Capital Corp.

Edward Jones brokers continue to tout their software and quote systems. “It’s excellent,” notes one Ontario broker, while another says, “It couldn’t be better.”

Larry Stadnyk, a regional leader for Edward Jones who is responsible for 45 brokers on the east side of Toronto, says he is not surprised about the score. “There’s an immense effort put forth by Edward Jones to have the technology to meet our brokers’ needs and our clients’ expectations.”

For example, the company has an elaborate teleconferencing capability in which chief executives are interviewed by an Edward Jones analyst and this is broadcast to local offices. Clients are invited to sit in, and those who can’t attend can get a tape of the interview. Stadnyk says technology such as that helps brokers better serve their clients. That’s why the firm develops its own systems, including portfolio-management software and even educational-planning software that helps parents prepare for their kids’ education. “We make extensive use of in-house technology with clients,” says Stadnyk.

While Edward Jones ranked first overall, Nesbitt Burns saw the biggest move, jumping to 8.1 this year from an average score of 7.3 last year, which is attributable to improvements in the back office. Brokers gave back office a 8.3 rating this year, compared with 6.4 last year.

Canaccord fell to third largely because of dissatisfaction with its quote feed from Star Data Systems Inc., which was recently acquired by CGI Group Inc. One broker says, “[The] system goes down all the time and the quote messages aren’t constant. You get so you feel you can’t trust it because the messages aren’t consistent.”

That brought contrition from Ross Marsden, senior vice president of banking and investment business industries at CGI. During the period of the survey, the company was upgrading its network and dealing with decimalization when it encountered some “glitches” that affected clients in Western Canada.

“We took our eye off the ball,” he says. However, “we pulled up our socks,” worked with clients and pumped in $600,000 worth of resources. One client, he notes, even upgraded some of its own network because of the situation. “The problems we were experiencing are now behind us.” The changes pleased at least one Canaccord broker, who says the quote system is “much clearer and easier to use.”

Star Data was not alone in facing the wrath of brokers. Financially troubled Bridge Information Systems Inc. was slammed by brokers at RBC Dominion Securities Inc., who criticized the system’s reliability. “It was down a lot last year and we are still not out of the woods.” A Bridge spokesman said the company is puzzled by the comments, as reliability hasn’t been an issue.

One area that came under fire was contact-management systems, particularly Multiactive Software Inc.‘s Maximizer system. Brokers at Nesbitt and DS complained it was complicated and needed to be “a bit more user-friendly.” One broker at BMO says he has opted for software developed by a client, rather than use the firm’s technology.

Neil Beube isn’t surprised. The vice president of investment banking at Yorkton Securities Inc. recently went through the process of building a contact-management system after giving up on a program in favour of an offering from Pivotal Corp. “A good contact-management program is good for any business. It allows brokers to work with retail clients in a way the retail clients want to work with them.”

It’s an issue the industry is still grappling with, he says, noting he knows of at least six investment dealers looking for a contact-management solution. Many, he says, build systems themselves and make a huge investment. “They’re not getting the payback on that investment and many of them never get off the ground properly.”

Brokers also say that lack of integration among technology in the office remains an issue. One DS broker described his firm’s technology as a “patchwork quilt,” comprising two different databases — one to manage client accounts and another for order entry. “It’s crazy.”

John McLeod, president and CEO of Spectra Securities Software Inc., which makes wealth-management technology solutions for brokerages’ front offices, says he’s heard the gripes raised by brokers before. “Everyone is sick and tired of stand-alone contact-management systems,” he says. Savvy firms are working on “customer collaboration” and everybody is working on integrating their offerings. The key, he says, is for firms to “work with their advisors and merge their business acumen with the technology provider’s capability.”

Fritz McCormick, an analyst at Celent Communications in Boston, says brokers “are typically a tough sell and are only willing to use something that clearly helps them drive more business.” Combine that attitude with a “clunky back end” legacy system, and it doesn’t make for a happy marriage.

Over the years, firms have consistently scored in the middle ranks in the technology survey. So why can’t they get it right? Larry Tabb, group director for the securities and investment practice at The Tower Group in Needham, Mass., says a problem is that the retail broker side has only recently received the attention of the IT specialists. “Brokers themselves have been undersupported by technology,” he says, and most of the investment went into the institutional side. From the brokers’ perspective, the less the firm knew about the client, the greater the chance the client would follow them if they left. “To a large extent, they didn’t want technology support.”

The Internet, consolidation and the move to wealth management caught many firms flatfooted, and they are scrambling to get their systems up to speed, he says.