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Who's Checkingthe Broker's Check?

You just got a payment for $2,121,371.48 from a major mutual fund manufacturer. The size is nice. But how do you know if it's correct?

You may have been the broker but do you have to line-item detail to be able to check each individual sale involved - or the fee arrangement under which it was sold?

Maybe. But probably not. Which is why Broadridge Financial Solutions has adapted its Salesvision suite of online services for helping fund companies track the distribution of their funds to the needs of the brokers who sell them.

The broker adaptations come in three modules, a Revenue Manager, a Sales Manager and a Compliance Manager in a SalesVision Distribution Manager platform.

Transaction and position detail in different fund products are pulled together from a variety of sources. The firm's back office brokerage platform, trust or plan platforms or direct fund account holdings all can be funnels, for example.

This information can all be aggregated. Then, the broker can check not just whether the sales comply with federal law or company policy, or whether its sales are a significant portion of the overall sales of a fund in a given territory, but, most importantly, perhaps, whether that revenue check is calculated correctly.

The aim of the Web-based SalesVision engine is "to essentially turn enterprise data into an actionable asset,'' for the distributors of fund products, according to Tom Quercia, senior vice president of business development in the Broadridge Mutual Fund Solutions Group.

The process, he hopes, will create a "standardized industry data 'hub,'' that can streamline "the way manufacturers and distributors do business with one another."

The broker dealers involved can use the detailed data supplied by the Broadridge system to calculate fee-based arrangements across multiple business lines within their organizations.

In effect, the SalesVision Distribution Manager platform improves the accuracy of revenue calculations, streamlines collections of payments from fund companies and helps a broker not just track but forecast income by fund family, share class and fund product.

"The key differentiator here is our ability to house all of those different arrangements and agreements in one place in a rules-based engine,'' says Quercia. "And most importantly we provide the ability to calculate direct and indirect revenue derived from those holdings and transactions down to the account and the product-within-account level.''

That means all possible pieces of revenue can be aggregaged from all forms of sales and the correct compensation calculated, before an invoice is sent out or when a payment comes in.

The careful reconstruction of compensation is critical because different types of brokers have different arrangements with mutual fund purveyors. Large wirehouses have 'omnibus' relationships, with widely varying fee arrangements. Discount brokers traffic to a great degree in no-load products with no transaction fees.

Independent bank and insurance broker dealers utilize clearing brokers or go direct to mutual funds via check and application to administer their sales. All of those types of firms can benefit from these three modular solutions.

And they may have sales coming in through different forms of distribution: advisory services, trust services and retirement plan administration.

This means the broker-dealer can calculate with precision if it is getting paid what it is supposed to get paid. The rules-based engine can look up the fee arrangement for the product or products involved, the channel of distribution and work out the bottom line. If there are discrepancies,

The system, at this point, does not let the broker-dealer compare the level of compensation it is getting to peers' pay. Other firms' fee arrangements are not aggregated and normalized, for comparison.

But, a related Salesvision product from the Access Data unit of Broadridge that is called Market Intelligence shows what is possible. That product is constantly updated on the positions held by wirehouses, independent brokers and registered investment advisers for fund companies.

If, for instance, you want to see how a particular firm is doing, a dashboard or a report can tell you the number of shares of a particular type of fund, say a large-cap blend, is held by that firm, what the total position amounts to in dollars, how many shares of that kind of fund are held by all firms and what the overall holdings are, industry-wide. The firm's holdings are divided into the industry's holdings, on screen, automatically, and additional columns display the market shares.

So it is here, in Sales Manager. A broker can see if the $1 million worth of shares in the Total Return Fund that it sold in the Pennsylvania-Ohio Region-if that's a region-is 10% of the $10 million of sales of the fund in the last two months. Or less. Or more.

The detail allows an advisor, rep or other individual to see what's going on across business channels and react accordingly. Take action on actionable information.

The Compliance Manager, in turn, helps the broker monitor and report on fee disclosures, on Rule 22c-2 compliance and manage other regulatory risks. The manager also helps brokers transfer data as needed to the fund companies themselves and surveil product sales efforts and individual advisor activities.

"For example, if you had a policy that you don't sell or hold B-Shares, you can see that activity with the click of a mouse,'' says Quercia.