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The current credit crisis is motivating firms to do some "spring cleaning", evaluating their broker/dealers, clearing firms, custodians and prime brokers to ensure they are getting the best deal at the right price. Val Stevens, Director Business Development, shares his perspective on how Jeremiah Associates' clients have leveraged our knowledge to assist them through this process.

Many broker/dealers, hedge funds and other buy-side firms are re-evaluating the firms that provide their order execution, clearing, prime brokerage, securities lending and custody services.
This evaluation serves tactical and proactive purposes:
- ensure that the service providers are sound and focused on current and future risks
- evaluate a service provider’s performance, cost structure, reliability and flexibility.

As the industry braces for additional unsettling news, the need for safety becomes increasingly critical. In today’s high stakes environment, it is imperative that firms ensure that they receive high value for reasonable cost for their outsourced services.

The Key Question

From a strategic perspective, the critical question is, “in view of the increased risks, how do we best position our firm to ensure a secure and profitable future”? The appropriate response is:
- an ideal business services arrangement that delivers the most reliability, best value for the cost, flexibility and safety
- the service provider complies with existing regulations and delivers the benefits of current and future advances

Controlling One’s Own Destiny

To ensure that they are getting the best deal at the right price, firms are examining their needs relative to what their broker/dealers, clearing firms, custodians and prime brokers provide. Sufficient alternatives for each of these services exist, enabling firms to have more control of their own destiny. Some alternatives offer new optional services that may provide greater flexibility. The bottom line is that firms are seeking relationships with service providers that deliver what they need at an acceptable cost.

Change Does Not Come Easy

Notwithstanding the potential benefits, the challenge is in the research and analysis required to identify alternative service providers that can actually deliver the services needed. And the challenges don’t end there, as once a firm identifies promising alternatives they must perform an evaluation and cost comparison of each to justify the change. Once a decision is made, the implementation must be completed so that the firm can reap the projected benefits. Although onerous, the firms that fail to make this a priority may suffer negative consequences. The downside of inaction is a state of operational inertia, in which firms struggle to merely get through each day.

The Future Looks Bright Ahead

Although challenging, the time is ripe with opportunities for firms who choose to act. The first step is to understand current and future business requirements and pain-points before considering any change. The next step is to dedicate resources that understand the objectives, and have the access to decision makers who can bring about a successful conclusion.

Help Is Available

This white-paper encapsulates our view based upon actual client engagements. Since the onset of the credit crisis, clients have leveraged our knowledge of this space and service providers’ capabilities, to assist them through this process. We are interested in sharing this perspective with you, with an eye on identifying how your firm can use our experience to achieve your objectives.