A Case Study for Independent Broker-Dealers

The Situation

As a commission-based broker-dealer, we saw a lot of volatility in our monthly revenue stream. It made it hard to predict next month’s revenue inflows and required our firm to continue to come up with new products for our advisors to sell. When looking at the ongoing M&A in the industry, we also realized the unpredictability made it more difficult to put a higher valuation on our firm and more difficult to transition to new management if we ever wanted to sell.  We were looking for a way to change this while still maintaining control over the system.

How SMArtX Provides a Better Solution

The transition from a commission to a fee-based business is not an easy one.  SMArtX works with broker-dealers to help them transform their business in many ways:

• We establish a fee structure within their SMArtX enterprise platform to capture a steady revenue stream on all assets on the platform. This provides a repeatable revenue stream that can be easily forecast and valued.

• SMArtX provides an outsourced TAMP function that steadies any change in management control with a known process that continues to operate without any effect from personnel changes.

• The SMArtX platform continues to expand with new investment strategies, and even private placement offerings*, across traditional, alternative, and direct index strategies.

• SMArtX’s UMA technology keeps the control of the platform in the hands of the broker-dealer. This means restricting the use of investment tools like margin, limiting access to certain strategies, and creating a custom master universe of securities for advisors to run their own investment portfolios.

• The broker-dealer was able to create and distribute their own internal products directly to their advisors through the platform.

• The broker-dealer was able to white-label the entire platform so it looked like an internal system.

• The underlying technology is a modern turnkey asset management platform designed to streamline the investment management process and automate systems to reduce the administrative burden of running managed accounts.

The Results

SMArtX enabled our firm to standard our revenue stream, making it much easier to plan for our future.  With a predictable revenue stream, it is much easier to scale the business and make commitments in staff size, physical space, technology spends, and the overall growth of our firm.  Furthermore, we were able to show interested parties a highly repeatable process to that ensured the continuation of our business model which increased the value of our firm.  The easiest part was we had to do very little to make this happen.  SMArtX’s on-boarding team transferred existing allocations into the appropriate investment sleeves and set up our enterprise to meet the specifications of our compliance and senior management team.

There is a Better Solution

*All securities offered through HedgeCo Securities, an affiliated Broker-Dealer.