Commission Payout System Case Study

  

 

 

 

 

 

 

 

 

 

 

The Problem

The Commission Payout System was developed for the investment banking arm of a large global financial institution.  The investment banking arm had grown with the acquisition and amalgamation of a number of small boutique investment banks and retail investment firms.  The entire entity operated with a number of disparate platforms as each acquired entity operated on a different legacy platform.  These disparate systems had an enormous impact on the way investment advisors (IAs) on the retail side of the business were being paid.

The entire process to pay investment advisors involved 22 individuals from nine departments.  No department or individual wanted to take ownership of the deficient process.  On a daily basis IAs were calling the accounting department, management, operations or human resources to complain about missing trades, repeat trades, being underpaid, commission schedule problems or other payout issues.  Four separate platforms were used to collect trade data and a 3rd party data processor was used to calculate commissions on a daily basis.  Management found the 3rd party vendor to be very inflexible.  The vendor would not supply the investment bank with daily soft copy versions of processed data, so the investment bank had a full-time assistant stand at a fax machine and fax all hard-copy commission reports to the various branches.  The vendor, who was being paid $175,000 a year for the processing services, was not able to incorporate a complex set of rules that management required into the processor as part of a new compensation scheme. 

The Solution

The Commission Payout System was created to automate the entire process of calculating commissions and paying out investment advisors.  The previous day’s trades were taken from the data warehouse and uploaded into the system.  On a daily basis, the processor within the system calculated all commissions subject to all complex compensation scheme rules and thresholds and then created a series of commission reports by branch and by investment advisor.  These reports were automatically saved to a network location and emailed to the investment advisors and branch managers.  On a monthly basis, the commissions were consolidated and payroll was prepared by the system and mid-month advances were determined for all (IAs) and their sales assistants working in all branches nationally.  The entire system was operated by one individual in the accounting department.

Results and Benefits

The investment bank was able to reduce a large number of full-time equivalent headcount and sever ties with the 3rd party data processor.  The cost savings of automating the entire process adds several hundreds of thousands of dollars of value to the organization each year, and the software application had a payback period of less than six months and a high return on investment (ROI).  Cost and time savings as well as other benefits came in many forms as follows:

  • Eliminated need for expensive and rigid third party data processing

  • Time savings were so massive that six full time equivalent headcount were eliminated

  • Retired two unreliable legacy database systems

  • Increased quality of work life for employees involved in the process

  • Eliminated overtime costs

  • Dramatically increased data accuracy and integrity

  • Decreased employee turnover

  • Decreased training costs

  • Improved employee morale and motivation

  • Decreased confrontations between departments

  • Increased productivity

  • Elimination or errors

  • Automated daily reporting and payroll services

Visit our Commission Payout System demo page to see the software application in action.

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