Merrill Lynch and Thomson Financial team up to build new Wealth Management Platform to combine market data, financial planning tools and CRM onto one platform.
Thomson Financial has beat out rival data providers Reuters and Bloomberg for the contract to build a new wealth-management technology platform for Merrill Lynch's Financial Advisors and their clients. The new platform will be based on Thomson's Thomson ONE open application framework with Thomson content and will integrate third-party applications, data, risk analytics, portfolio analysis, CRM tools as well as Merrill's proprietary content, data and applications.
The contract, which could be worth at least $1 billion over five years, involves deployment of the new platform on 25,000 or more terminals at Merrill, according to published reports. However, Lou Eccleston, president of sales and trading at Thomson Financial, notes that the pricing has not been finalized and there is no dollar figure as of yet.
The new platform will replace Merrill's internal data network, which relied heavily on Thomson's ILX information service. As part of the deal, Thomson will also be charged with the oversight, maintenance, monitoring and integration of Merrill Online, the Web site for Merrill's financial advisors.
According to a Merrill Lynch spokesperson, many factors went into the decision to go with Thomson on the project, including functionality, commitment to the market segment, willingness to serve as a strategic partner, ease of use, flexibility and cost. But while cost was a factor, this person says it was not the most important. "We intend to deliver a world-class platform to our Financial Advisors and provide a differentiated experience for our clients," says the spokesperson.
Larry Tabb, vice president of the securities and investment practice at TowerGroup, says that this concept of outsourcing broker workstations is catching on. "It's certainly a trend we're seeing as the big brokers don't necessarily want to make the investment to build this themselves and they don't really see the smaller vendors as attractive for mass roll outs," he says. "The larger market data providers want to revitalize their market space by not just putting quotes out there but by getting more in depth and putting out the next level of advisor workstation."
Thomson's Eccleston says that while market data is still a necessity, the data itself has become a commodity and market data vendors are now concentrating on the value-add components to providing the data such as integration with other applications to make the users job easier. He adds that the major work on the Merrill project will involve this integration with third party and internal applications and content.
Eccleston says that Thomson will have teams dedicated to the Merrill project on a partnership basis, with Merrill people at Thomson and Thomson people at Merrill branches around the world on a regular basis.
Tabb says that Merrill's policy for the last couple of years has been moving to more vendor-based products as the firm looks to get away from the costly, time consuming tasks of developing, maintaining and upgrading internal technology. Eccleston says that this type of outsourcing agreement is an example of the ways financial firms are reducing expenses and increasing functionality.
Merrill's spokesperson agrees, saying that the decision to outsource will allow the financial-services giant to "focus on its core competency of providing intelligent and timely financial advice to clients."
"Broker workstations are becoming much more popular as the broker moves away from being a broker to an advisor," says Tabb. "Brokers are having to do less with more and they need to be more sophisticated and they need more tools to understand the client base and manage a wider client base."
Tabb adds that Thomson has been acquiring many different properties over the past couple of years and has been moving towards a strategy of delivering them through a consistent infrastructure. "Thomson has a wider variety of properties to integrate together and to a certain extent that's probably what Merrill liked," says Tabb.
As for Reuters, Tabb says that the market data provider has been having some problems as the broker/dealer market is changing. As the equity market declines, Tabb says that financial-services firms are reducing costs and reducing the number of traders, which means less market data for certain customers. In addition, with the proliferation of electronic trading venues and their desire to disseminate information as widely as possible to attract users, there is more competition in the business of data delivery.
"It's a tough market and to a large extent they've got to re-energize their business by catering more to the buy side and to the hedge funds, which are becoming more sophisticated in their market data needs," says Tabb. This also leads to more of a need for the advisor workstation as brokers are becoming more of financial advisors and must concentrate on financial planning and portfolio management in terms of rates of return.
While the contract is expected to be finalized by Thanksgiving, Eccleston says that the development process has already begun and the goal is to have products ready for use at Merrill in 6 to 8 months. Merrill's spokesperson says that the domestic rollout will begin in 2003 and an international rollout will take place in 2004.