Top Trends in Banking, Securities and Asset Management for 2005

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Deloitte & Touche's annual Global Financial Services Industry Outlooks examine the trends that industry executives, investors and consumers can anticipate in 2005. Based on the firm's in-depth experience in the financial services industry, it expects these trends to include:

Banking: Getting Closer to the Retail Customer

In order to benefit from the retail market's growth opportunities and stable revenue streams, banks will need to learn from leading retailers how to use their branches to build relationships with customers and differentiate their brands. They will need to instill a retail mindset among branch employees, and provide training and incentives in the areas of customer service, financial advice and sales. Other major trends cited by the report include:

  • Cross-border mergers and acquisitions to fill gaps in products or geographic coverage
  • Increased use of analytical techniques such as predictive modeling to monitor credit quality and credit derivatives to hedge exposure
  • Using Basel II requirements as a catalyst to achieve competitive advantages by enhancing the quality of information and decision making

Securities: Organizing Around Client Needs

By organizing operations around client needs, rather than by product line and geography, a securities firm can achieve a comprehensive view of its relationship to each client, understand their financial needs, and offer the most appropriate solutions. This consolidation also allows firms to reduce client contact points and streamline back-office operations -- changes that Deloitte estimates can reduce operating costs by up to 10 percent. Other major
trends cited by the report include:

  • Regulatory investigations leading to more disclosure and greater transparency -- coupled with distinct changes to the role firms play in distributing mutual funds and variable annuities
  • A stricter operating environment for the industry, creating the need for a more comprehensive approach to regulatory compliance -- one that goes beyond reacting to individual regulations and offers firms substantial savings
  • Growth in prime brokerage services to match the expanding needs of hedge fund clients, with larger securities firms acquiring or building in-house hedge funds

Asset Management: "Alternatives" Becoming Mainstream

Hedge funds, exchange-related funds, private equity, real estate and funds of funds have become accepted assets in many portfolios. Once, having a solid line-up of mutual funds was enough, but investment management firms will need to be prepared to offer investors a wider variety of investment options if they are to retain their assets.

Other major trends cited by the report include:

  • While expanding their offerings in "alternative" investments, asset management firms are also "rationalizing" the rest of their product line, looking for optimal performance and fund size
  • Global regulatory scrutiny will continue; keeping pace is a challenge for most firms, but especially difficult for smaller organizations
  • The spotlight on sales practices is fundamentally altering the structure of the third party distribution model for funds.

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