Brokerage Fees Case Study
Practice - Strategic Sourcing
Sector - Financial Services
Category - Brokerage Fees
Geography - Europe
Baseline - € 23m
Savings - € 3.2m (14%)
Our Client is a large European bank with multi-country presence. It had brokerage activities mainly in four financial centres across Northern Europe.
Within this, brokerage fees were incurred by four different, discrete parts of the Bank:
- Equity trading
- Equity derivatives trading
- Asset Management
- Private banking
The total annual spend on Brokerage Fees exceeded € 23m. No concerted management of this spend existed, either at country or division level, only ad-hoc local initiatives. In order to achieve the savings objectives, Triton Associates undertook the following preliminary steps:
- Calculated, by meticulous “bottom-up” aggregation of all transactions’ fees, the total spend by country and by division
- Obtained buy-in across all countries and divisions for re-tendering by establishing working groups in each key spend area, and constructing a detailed and credible approach
- by country
- by division
- by type of brokerage service (Over-the-counter (OTC) Brokers, Futures Brokers, Listed Brokers, Electronic Brokerage Systems)
To actually secure the savings, a pragmatic approach yielded satisfying results:
- Local tendering where spend was too fragmented and idiosyncratic to warrant centralised negotiation;
- Centralised tendering where there were – potentially or actually – common vendors in the different geographies
- Monetizing, to the degree possible the “soft dollars” that were part of the overall brokerage offering, but were by vendor design difficult to quantify
- Reducing overall number of brokers used by consolidating spend onto credible multi-country, multi-product vendors
Our achievements for the project included:
- Savings in excess of 14% on the overall spend
- Centralised management of spend to ensure compliance and allow for subsequent cost management initiatives
- Improved administration of Bank‘s brokerage costs by:
- rationalising the number of brokers used
- achieving where possible a common rate and rate structure by product across brokers
- building/reinforcing the internal systems to monitor and control the brokerage fees paid