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The Reality of Direct Business: Check & Application is NOT Free

The Reality of Direct Business: Check & Application is NOT Free

A new report from Aite Group examines the disparity between actual check & application costs and brokers' perceived costs, and outlines the case for automation from a cost-savings perspective.
By Adam Honoré

Boston, MA, January 3, 2007 – New research from Aite Group, LLC, shows that manual transaction processing costs associated with mutual funds and annuities are actually significantly higher than most brokers perceive them to be.

Nearly 41% of firms involved in manual direct processing estimate the cost per transaction at between US$0.00 and US$20.00, however, the reality is the conservative cost per manual mutual fund transaction is between US$26 and US$41, depending on the number of exceptions involved with the order. The conservative actual cost per manual annuities transaction is even higher at between US$59 and US$80 per transaction. Automated solutions can reduce transaction costs to about 20% of the check and application process.

The report breaks down the costs associated with manual direct processing at brokerage firms. It provides feedback from 16 Chief Operations Officers involved in the processing of direct business and examines the education gap in the market relating to available options for automation. It also provides detailed profiles of seven key automation vendors: Automatic Data Processing, Inc., Comprehensive Software Systems, Inc., EAI Information Systems, Blue Frog Solutions, Inc., Finetre Corporation, FIS, and Fetter Logic, Inc.

According to Adam Honoré, an analyst at Aite Group and author of the report, "Straight-Through-Processing (STP) has made significant in-roads at brokerage firms in recent years, but the mutual funds and annuities direct brokering businesses have been slow to automate." Honoré notes that Aite Group has identified an education gap in the market on the processing costs and available options for automation, and recognizes that a majority of brokers are willing to evaluate an off-the-shelf partner in an effort to reduce costs.

This 54-page Impact Report contains 37 figures and tables and 7 vendor profiles. Clients of Aite Group's Wealth Management service can download the report.