Toomre Capital Markets LLC

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Finance-Magazine: Characteristics of Financial Service Firms of the Future

In the January 2006 issue of Finance-Magazine, Ms. Marie O’Connor of PricewaterhouseCoopers has written a wide ranging article about the future of the financial services industry over the course of the next three years. In the article entitled “Financial services firms of the future will be characterized by a pervasive customer-centric culture,” Ms. O’Connor suggests that the “successful financial institution of the future will be characterized by a pervasive customer-centric culture and three broad hallmarks: a focus on its areas of competitive advantage; adaptation to forces of fragmentation; and the flexibility to exploit new opportunities.”

She suggests that “scale will become less important than a focus on core competencies. Distinctions between banks, insurers and asset managers will come to mean less as organizations increasingly position themselves in niches that cut across sectors. Institutions will simplify their offerings and organization structure around the activities and markets in which they excel and exit the areas in which they don’t. The financial services industry of tomorrow will look like a jigsaw, with individual sectors, functions and institutions interlocking more and overlapping less than they do today.”

Ms. O’Connor continues with “There are five principal forces driving change: Demographics; the economic cycle; politics; regulation and reporting; and technology. These will continue to affect all financial institutions over the coming years. Some, such as regulatory change, are already having a significant impact on the industry and demand immediate attention. Arguably the most powerful force of all affecting the industry – population ageing – will have huge and far-reaching consequences but does not yet require a revolutionary response. But the successful institutions of the future will understand, adapt to and exploit all of these drivers of change.”

The statement originally drew this author’s attention was “Enterprise-wide risk management systems will mature and proliferate. Management will receive timelier, more accurate information on the performance of individual lines of business. Employees will be incentivised and assessed against measures of good governance.”

Toomre Capital Markets likewise strongly believes that real-time Enterprise Risk Management systems will mature and proliferate. Our monograph on “The Future of Real-Time Enterprise Risk Management” is expected to be released shortly. In the interim, please feel free to leave any comments or contact TCM directly at Info (at) Toomre.com.