IT spending on rise at financial services firms, survey shows

In an effort to connect better with customers, financial services companies of all stripes are spending more on information technology, according to one analyst.
APR 02, 2007
NEW YORK — In an effort to connect better with customers, financial services companies of all stripes are spending more on information technology, according to one analyst. Of 20 trading and brokerage companies recently surveyed in Europe and the United States, 35% said they planned to spend more on information technology this year, according to a survey released last Thursday from Datamonitor PLC of London. That represents a dramatic increase over the level in 2006, when just 5% said they anticipated increased spending, according to the survey. “Firms are looking to listen to the retail customer,” said Amit Shah, an analyst at Datamonitor. “They’re using technology for better customer satisfaction.” Trading and brokerage companies are investing in information and risk management systems to manage clients and their relationships with those clients, Mr. Shah said. Companies are trying to “understand what customers want and are being more innovative,” he said. Datamonitor’s survey, which is published every six months, tracks 100 companies in various sectors of the financial services industry. Along with trading and brokerage companies, those sectors include investment banks, investment and securities services firms, fund management companies, and hedge funds. The companies range in size. The smallest has about $5 million in revenue, and the largest generates more than $1 billion in sales. Of the firms surveyed, 60 are based in Europe, and 40 are based in the United States. No trading and brokerage companies surveyed this year said they planned to cut spending in technology. That is a clear shift from a year earlier, when 5% of such companies said they planned to reduce such spending. And fewer companies planned to stand pat when it came to investing in their technology and risk management systems, according to the survey. This year, 65% of the trading and brokerage companies said they would neither increase nor decrease their spending on information technology. In 2006, 75% of the companies in the survey from that sector said they would make no changes. Although First Clearing Correspondent Services plans to spend more on technology this year, the share of its annual budget that is allocated toward that will remain unchanged, said Atul Kamra, president of the Richmond, Va.-based company. “We are applying [information technology] capabilities in three areas,” he said. The first is around “work flow,” which could include giving branch offices rather than the home office in a brokerage system a better ability to do a transaction, Mr. Kamra said. The second is “content management,” he said. That could include using “prompts” for financial advisers to have more meaningful contact with their clients, Mr. Kamra said. A system of prompts simply acts to remind the adviser about a range of client information, from the personal, such as a grandchild’s birthday, to the range of assets a client feels comfortable having in an account, he said. Finally, First Clearing is using information technology “to extend the whole process,” with the intention of building a business relationship by giving its clients “what they want and what they ask for,” Mr. Kamra said. First Clearing is a division of Wachovia Corp. of Charlotte, N.C. It has 125 broker-dealers as clients and $767 billion in proprietary and non-proprietary assets.

Latest News

What wine culture can teach investors about decision-making
What wine culture can teach investors about decision-making

Choice anxiety, prestige bias, and the temptation to make selections based on outsourced confidence are just some of the parallels between investing and the world of wine tasting.

Merrill Lynch, BofA's brokerage arm, hit with $7.5M SEC fine over missed suspicious activity reports
Merrill Lynch, BofA's brokerage arm, hit with $7.5M SEC fine over missed suspicious activity reports

Regulators found Bank of America's monitoring software had a known flaw Merrill left uncorrected for years.

AI is changing how investors research, not who they trust
AI is changing how investors research, not who they trust

While AI has become a go-to research tool for affluent investors, new HSBC research suggests human advisors remain the deciding voice when investment decisions are made.

Supreme Court blocks Trump's bid to fire Fed Governor Lisa Cook
Supreme Court blocks Trump's bid to fire Fed Governor Lisa Cook

A 5-4 ruling preserves the Federal Reserve's independence for now, but the legal fight over presidential removal power is far from settled.

Morgan Stanley boosts returns on client cash, analyst says
Morgan Stanley boosts returns on client cash, analyst says

For years, large firms have been facing penalties and questions from regulators over interest rates for clients’ cash accounts.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.