SIA SHOW: Keynote Panelists Debate the New Reality

Keynote panelists launched the SIA's Technology Management show, The New Reality, by reviewing the events of the last five years and trying to come up with a clear picture of the financial-services industry today.

Irving Weiser, chairman and chief executive officer, RBC Dain Rauscher, put it bluntly, "I don't think we have a clue as to what the New Reality is." He adds, "We won't know what it is for some time." The rate of change in the financial-services industry over the last five years has been greater than any period in history and, whenever there is change of this magnitude, it takes 10 to 20 years to shake out, he adds. Weiser attributes the change to the technology boom coupled with the vast new regulatory pressures.

Marc Lackritz, SIA president, reviewed some of the recent events that have changed the landscape in the last year alone. Citing the dot.com bust, the market decline, the Sept. 11 attacks, the economic recession, analyst conflicts and the Enron meltdown, he notes that these events have damaged the credibility and integrity of the markets.

Weiser adds that other events, such as the repeal of the Glass-Steagall Act and decimalization have had a forceful impact as well. Customers have to deal with much larger institutions as a result of the many bank/brokerage mergers made possible by changes in Glass-Steagall. In addition, institutions are dealing with a market where spreads are tighter than ever as a result of decimalization.

Weiser, Lackritz and Paul Ottelini, Intel president, a third keynote speaker, agreed that going forward there must be a back-to-basics mentality within the industry. Using technology to add value to customers is, and will be, the focus going forward. Over the last few years, the industry was forced to concentrate on technology projects that had nothing to do with the customers, such as Y2K and decimalization, causing customer service to suffer, Lackritz says.

Financial-services firms will have to focus on the customer -- providing everything better, faster and cheaper -- bringing more value to customers and making the institution more profitable. He defines the New Reality as one where institutions will have to manage technology better and more efficiently, have heightened awareness of the need for quality human resources and understand that public trust and confidence are more important than ever.

Weiser adds that equally important to focusing on public trust and confidence is adjusting to cultural differences between banks and brokerages, and redefining the role of research analysts. He says the bottom line is firms need to refocus on their clients.

John McKinley, executive vice president and head of global technology and services at Merrill Lynch, a fourth keynote speaker, had his own views on the New Reality. He says one thing is clear -- The industry needs to figure out how to reposition itself for the next stage of growth. Contrary to research quoted by both Lackritz and Weiser forecasting growth in spending, McKinley believes that a best-case scenario in 2003 is that technology spending will remain flat. He asked the audience, "Who in this room is growing their technology budgets by 8 percent (the growth figure quoted in previous presentations) this year?" No one raised their hand. As a result, he contends that the industry must figure out what the next growth stage is and how best to leverage the technology spend.

Ending his speech, Weiser quotes Charles Darwin, stating that those who embrace change will succeed. He adds, "Although the New Reality is yet defined, there is no doubt that huge opportunities exist."