SUMMARY

Many financial services institutions partner with a third party broker-dealer for their clearing needs (also known as third party marketing firms). These institutions can offer investment services to their customers with less overhead and headache. However, for some institutions, the solutions provided by these third-party broker-dealers may not meet all of their needs, especially for businesses with complex incentive compensation models.

BUSINESS CHALLENGE

A financial institution required a robust compensation processing system for their investment services business. The institution clears through third-party broker-dealer, LPL Financial. Although satisfied with their partnership with LPL, the primary platform provided by LPL lacked the sophistication to meet the needs of their growing business. Over the years, it became increasingly difficult to use an internal system of spreadsheets and in-house databases to process LPL data and direct business. An inordinate amount of manual work was conducted each day. Furthermore, the financial institution was unable to pay transaction-based grids and needed a more robust incentive compensation management tool. Homegrown technologies are difficult to adapt and build growth strategies around. Consequently, they saw the need to implement a comprehensive automated system to process sales commissions based on electronic transmissions from custodians and product providers.

TERRAPIN SOLUTION

The institution brought in Terrapin to supplement LPL’s services and technology. Terrapin’s business automation solution, provides the institution with data aggregation, incentive compensation management, and sales reporting.

With Terrapin the institution is able to:
  • Aggregate and process revenue data automatically on a daily basis.
  • Create transactions which enforce business logic.
  • Automate the reporting of revenue and fees to the general ledger.
  • View reports on sales performance by branch and rep, and sales to goal.
  • Calculate manager, sales rep, and platform commissions.
  • Monitor commissions receivable, checking for pending trades.
  • Track gross vs. net commissions.
  • Use audit logs to view instances of manual intervention on transactions.
  • Upload additional compensation related data, such as referral fees and insurance revenue.

BUSINESS RESULTS

By automating and streamlining numerous processes, the institution experienced a significant reduction of manual work. Where payroll calculation used to take days, it’s now accomplished instantly and accurately at the push of a button.

The potential for human error was significantly reduced. Previously, errors were hard to track and lead to office-wide confusion. Terrapin’s platform provides a single source for data aggregation, making errors easy to track and solve. Additionally, audit logs keep track of changes such as reassigned commissions or corrected transaction amounts. 

The back-office can easily create and update complex compensation models. These features enable the institution to adequately incentivize their advisors, which in turn help retain top performers and keep a competitive edge.

The institution relies on Terrapin to help them grow their business and comply with regulatory demands. As they gear up for their next phase of growth, the institution is confident that Terrapin’s software and services will continue to play a significant role in their strategy.

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