After five years of tough financial markets, slashed budgets and regulatory hailstorms, the US securities and investments industry is finally entrenched in a period of business and technology reinvestment, say research house Tower Group.
A series of new research reports from TowerGroup identify the Top Ten business drivers and technology priorities fueling each of the three US securities industry sectors in 2006: capital markets; investment management; and retail brokerage.
“In 2006, the major sectors of the US securities and investments industry will be united in their quest for revenue growth and their focus on re-investment in both business and technology priorities,” said Rob Hegarty, managing director of the TowerGroup Securities & Investments practice.
“Key to driving revenue growth will be an added emphasis on the ‘care and feeding’ of clients, whether institutional or retail. Also expect to see significant dollars invested in the core technology architectures and tools critical to putting firms out of harm’s way when the next wave of reputation risk and regulation hits the financial services markets,” he added.
Sector-specific highlights covered in the 2006 TowerGroup research series include:
Securities & Capital Markets:
– The three main business drivers for the securities and capital markets sector in 2006 will be: the search for revenue growth; responding to the changes in financial market structure; and dealing with the growing compliance burden.
– TowerGroup expects IT budgets at US brokerage firms to rise in 2006, for the third consecutive year of growth. However, technology priorities are shifting. Cost-cutting has finally been relegated to the back burner as brokerages move their focus to driving revenue and business investment.
– The mushrooming of the hedge fund sector and continuing activity in the derivatives market will both command significant attention from institutional brokers in the year to come.
Investment Management:
– As the regulatory “stick” begins to lose some of its punch, the investment management industry in 2006 will rally around proactive reputation risk management – as opposed to a reactive compliance response.
– As the industry looks to maximize revenue while rebuilding client trust, asset management firms will increasingly pursue alternative products, add non-traditional securities to traditional portfolios, and take their businesses global.
– Accomplishing key business goals in 2006 and beyond will drive asset management firms to make their first large-scale investment in core technology since the 1998-to-1999 period, when fears of Y2K pushed major replacements of legacy architectures.
Retail Brokerage & Investing:
– While rocked in recent years by regulatory scrutiny and rule-making, 2006 will find astute retail brokerage institutions beginning to transform “cultures of compliance” into brands noted for trusted advice – strongly positioning these firms for years to come.
– Institutions that excel at income generation have plum opportunities in 2006, embodied in several major demographic trends: baby boomers increased longevity; rising levels of wealth concentration; and the shift of retirement responsibility onto the individual.
– 2006 will see smart retail institutions seeking greater flexibility in core technology architectures, to enable them to respond more quickly and “personally” to an array of different kinds of investors – all with the aim of retaining customers and increasing advisor productivity.