Intranet Journal

Extranet Benefits in Financial Services
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Broker/Dealer XYZ, which services 1200 reps, was spending a small fortune on paper and postage. The company had at least one scheduled mailing every week which included commission statements, 12b1 statements, a monthly newsletter, and/or weekly updates. In addition, several packages were sent out each day - often for overnight delivery - to representatives requesting miscellaneous forms and product information. The price tag for all of these non-discretionary services tallied to a staggering $200,000+ each year. (Cost figures in this example were derived from a sample of actual Amicus Networks clients.) Remediation Despite XYZ's best efforts for quick turnaround, reps had to wait (at best) 24 hours for a response from the home office and, in some cases, information was quite stale by the time it arrived. All of this changed when XYZ deployed its extranet, providing representatives 24-hour access to the information, tools and materials they needed. Not only did the level of responsiveness and customer service improve, but XYZ was able to significantly cut its hard costs. The first step was to make all forms available online. With the exception of an initial mailing of one copy of each new form to the branch offices, XYZ eliminated its inventory of forms - and the associated printing and distribution costs. Now, reps log onto the extranet and print whatever forms they need with the click of a mouse. Since original forms (rather than photocopies) are required for most transactions, this feature becomes a significant time saver as well as a cost-cutter. An online inventory of forms also assures version control. Reps don't have to worry about whether they have the most recent version of a particular form on file; the online "inventory" is always up to date. At this writing most financial transactions still require a hard copy with the customer's signature. An important step toward achieving a paperless environment in the financial services industry is the ability to integrate digital signatures into the extranet; however, as yet, there are no electronic signature solutions that are accepted by regulators. Several digital signature technologies have been reviewed, ranging from signature pads (similar to what you may use at the grocery store) to software products using special "keys" which provide authentication. Signature pads are the easiest method, but the integration cost is high. Although there are no standards for digital signatures in the financial services industry today, industry watchers including Amicus Networks believe that, by year-end, the landscape will change as more firms continue moving from paper-based to electronic systems. In addition to forms, the XYZ extranet gives reps easy access to the support they need to do business: Product information Investment research Sales and marketing materials XYZ newsletters and updates Calendar of meetings and events Procedures and requirements "manuals" Continuing education Access to back office and field administration systems is another important role for the broker/dealer extranet. For an extranet to truly be useful, it can't stand alone from other corporate systems, but must be connected to any and all data sources relevant to the audience using the extranet. Making this connection between the extranet and the back-office systems does not have to be complex. It might simply include the replication of certain data files that can be accessed via a standard HTML-based query screen. An example of this would be a rep locator database. The ability to search corporate and legacy databases can enhance a rep's ability to service his investing clients. For instance, the ability to produce a single, consolidated statement of a client's investments can be a very big plus. Other back office features a broker/dealer can provide through its extranet include commission statements (both pending and paid), 12b1s (often called "trailer statements"), check and applications orders, and client management. Working More Effectively Joe Smith, an XYZ rep, logs onto the company's extranet daily, and sometimes several times a day. He regularly checks and sends email, and reviews the latest announcements from the home office. Twice each month, he checks his commission statement, which is posted the night before his check is direct-deposited into his bank account. The resource that Joe uses most often is the research feature. XYZ provides access to proprietary research on investment vehicles, real-time stock quotes, company profiles and more - all through a single location on its extranet. Joe saves time by not having to visit multiple sites. He also takes advantage of XYZ's sales presentations. When he is scheduled to meet with a new client or to discuss new investment vehicles with an existing client, Joe typically visits the "Sales and Marketing" section on XYZ's extranet. He can download polished, professional sales presentations along with well-designed leave-behind materials - all of which make the sale easier to close. Interaction with the Field A financial services extranet also provides a means of interaction between the home office and the field, and among field offices. These features can range from email and bulletin boards to chat and videoconferencing capabilities. Reps are able to locate and communicate with other reps that have expertise in areas that may be necessary to close new business. And, coupled with web-based audio and video technology, extranets can replace traditional conference calls and even site visits, at a fraction of the cost. Many firms are moving their business transactions online. Online trading has become common among the wire houses and is working its way into the independent broker/dealers. They are also beginning to accept online filing of forms, with hard copy follow-up as required for signatures. By eliminating the phone and fax from the trading function, reps are able to place trades at any moment. Compliance Tracking Extranets provide an important vehicle for facilitating regulatory compliance. Given the nature of regulations promulgated by the Securities Exchange Commission (SEC) and the National Association of Securities Dealers (NASD), broker/dealers are required to manage and monitor the business practices of their brokers and agents. With the tracking capabilities provided in most extranets, it is possible to monitor that any given broker has downloaded a particular procedures manual, registered for continuing education classes, or reviewed the latest client forms and applications. This makes the broker/dealer's auditing function easier when it comes time to meet with the auditors. Another important extranet function is to monitor communications between brokers and investors. The recently enacted NASD Notice 98-11 requires that broker/dealers review and monitor both incoming and outgoing email communications. The ability to identify messages that violate compliance rules is critical in this day of electronic communications. By flagging messages that contain troublesome words (such as "guarantee" or "promise," depending on how they are used), extranet administrators can identify and more closely review emails that potentially violate regulations. With the ability to filter and monitor all electronic communications, the extranet becomes a powerful tool for meeting all applicable NASD requirements. Conclusion In less than one year, extranets have changed the way that financial service companies do business. It was considered a luxury last year. This year, it's a necessity. A necessity because reps are looking for more timely communications and the ability to do business when and where they choose. Competition demands that customers receive greater service and greater value for their investment dollars, and extranets are fast becoming a "ticket to play" for the securities and insurance industry.

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