When Every Penny Counts, Firms Must Operate Smarter Through Deeper Data Analysis

Today's economic environment has become increasingly difficult, forcing executives and managers to analyze expenditures and business practices with more scrutiny in an effort to remain profitable.

What has been commonly referred to as 'Project Lean' across most of the financial services industry, has been a multi-year effort to reduce costs while combating shrinking commissions and rising overhead. Those familiar with the process understand that all budgetary items from technology spend, resource requirements and even phone bills are being dissected for cost savings. But in order for a company to really control costs and operate at an effective profit margin, it is necessary to identify where the real cash-flow drain occurs. In a large and diverse broker-dealer, for instance, it is a very complex process to identify and manage the various cost centers and apply the appropriate controls.

In attempts to rein in spending and better manage their businesses, firms are doing more to try to understand as much about their operating expenses as possible. All too often, though, their methods come up short, producing inaccurate or outdated results while yielding unclear directives on how to reduce expenses. Without the right experience and knowledge in developing complex data management systems, firms may find themselves in a situation where they have actually increased cost with little benefit. Often, firms steer away from a solution because they cannot shoulder that potential cost.

In addition to the expense of creating and maintaining an effective cost identification and management solution, broker-dealers are faced with the issue of the integrity of its results. Most financial services firms today are engaged in multiple businesses across global markets and with a magnitude of clients and business partners. Each new profit conduit is also an opportunity to add expense.

In order to identify profitability and cost savings, firms must manage large and disparate data sets housing transaction details, market timing and circumstances, and relationship details. The task of collecting, mapping and then parsing multiple data sources for accuracy is a big challenge. Even if a company has the ability to manage the data sets, there is a level of sophistication and depth that few market participants have achieved to date.

It is becoming increasingly important for firms to have access to a solution that can deliver a complete overview of costs via an integrated model across accounting and the front office. It should allow for a deep dive into disparate data sets to better handle alpha and cost attribution, and help improve trading decisions based on real-time analytics and granular data. This system should also then deliver the right information to buy-side clients to efficiently measure performance.

With the right access to and view of cost-related data, firms can give themselves a competitive advantage and operate smarter in today's difficult markets where every penny counts.

Beau Alexander leads the equity product management team for SunGard's Valdi solution, determining the focus and direction of SunGard's equity product line. This strategic role concentrates on industry trends and upcoming opportunities that direct the software development lifecycle for SunGard's trading platforms. Alexander was previously a vice president of trading technology at Jefferies and Company.