Recently in Financial services Category

Gideon Gartner has just posted a great article titled Advisory Industry, a future redesign: the “Payment” Model, in which he draws on investment banking research pricing as a model for IT analysts and their clients. Gideon writes:

So in the Wall Street model The buy-side “analysts” will work closely with their most helpful and favorite sell side analysts, and buy-side “portfolio managers” will work with sell-side salespeople who funnel ideas and information from their research departments to the buy-side clients. During the year, when investment issues arise (many dozens of times each day), the BofA money managers and staff analysts will call several(!) appropriate sell-side analysts, and may even effectively triangulate among them until a level of understanding an issue, or a decision to buy or sell stocks or other investing instruments with traders, can be reached.

Not until the end of the year do the buy side money managers and analysts “vote” for those individual sell-side analysts and salespeople who were most helpful and influential during the past twelve months; and when this process is completed and the numbers added up, the decision is made as to the percentage of trading volume (e.g. money) to be generated for each of the brokerage firms for the next year! Thus the compensation will vary somewhat each year based upon trading volumes and perceived relative performance. Most important perhaps, new sell-side firms and analysts are added to the list since innovative and effective research and interactions will be recognized! (the sell-side firm will have sent all its research, and its analysts will accept phone calls hoping or expecting that content and interactions will be recognized and therefore compensated for their value).

He wraps up:

I recently read the entertaining science fiction novel The Unincorporated Man by brothers Dani and Eytan Kollin. The premise is that several hundred years in the future everyone is incorporated at birth, with the government owning 5% and parents 20%. People trade equity in themselves for their education and development, then spend their life trying to earn back majority ownership so they can control their lives. Into this world an entrepreneur of today who underwent cryogenic freezing is revived, and refuses to cede ownership of himself.

This is not a new idea. In 1995 aspiring British actress Caroline Ilana, trying to fund her attendance at acting school, established a corporation with herself as the sole asset, giving shareholders 10% of her earnings. Andrew Lloyd Webber, Ben Elton, Julie Christie and many other celebrities she approached bought shares.

In their 1998 book Blur, Stan Davis and Chris Meyer wrote about the blurring line between being a laborer and a capitalist, resulting in the securitization of individuals.

Earlier this week I did the opening keynote at the AMP Hillross annual convention, with the title of Embracing the Future. Hillross, one of the most upmarket of the wealth management networks, is seeking to lead the rest of the market by shifting to a pure fee-for-advice model, and rapidly developing a true professional culture. My keynote was designed to bring home the necessity of individual and firm leadership at this key juncture in industry structure.

One of the central themes of my talk was the increasing importance of reputation for professionals. Clearly reputation has always been critical for any professional, and there are some parts of professional services markets where reputation is already highly visible, such as prominent M&A lawyers, who are identified by numerous client surveys. While clients of other professional services (for example audit or management consulting) tend to be more focused on engaging firms rather than individuals, there is a fundamental shift from corporate to individual reputation under way.

I am running a two-day executive program on Relationship Management for Financial Services in Kuala Lumpur on 28-29 January, organized by IBN International. The workshop will be attended by executives from a variety of local and global financial institutions in South-East Asia.

Over the last few years I have spent less time on these issues as I've broadened my scope to look at the future of business, however much of my earlier career was in financial services, working at Merrill Lynch and Thomson Financial, and my focus was for a number of years on high-value client relationships, best expressed in my book Developing Knowledge-Based Client Relationships. As such , in the late 1990s and the first years of the following decade I did considerable work with major financial institutions on enhancing their client relationship capabilities.

Increasingly, the key client programs applied in corporate and insitutional banking and the CRM initiatives implemented in retail and private banking are coming together. The shift to online and data-driven relationships has facilitated that shift.

To help explain some of the key drivers of CRM programs from a "knowledge-based" perspective, I have created a Knowledge-Based CRM Framework which I will use in the executive program in KL. This will complement my existing content and frameworks on high-value relationships, which are summarized in Chapter 6 of Developing Knowledge-Based Client Relationships. Hopefully the framework below is largely self-explanatory, however I will try to find the time at a later stage to explain the framework in more detail.

Click on the image to download Knowledge-based CRM Framework

There's a great article in the latest issue of B&T Today on how Westpac, one of Australia's big four banks, is approaching working with its advertising and creative agencies. Here are a few choice excerpts from the article, which is well worth a read in its entirety.

Jee Moon, director of brand and marketing at Westpac [said] that an agency roster based on co-creation, not simply collaboration, is key to establishing and maintaining a strong brand identity.

She added the “one stop shop”, integrated agency model in Australia had “never materialised” and that a rostered agency model based on co-creation in which agencies do not simply coexist but coproduce was key to developing and maintaining a strong brand positioning.

“At Westpac we have moved from a contractual agency model, which we had with the Red House when there was little to bind the agencies together apart from a piece of paper, to a system of collaboration where our partners work together as a community of experts, and are currently striving for a true, co-creation model,” Jee said of her agency partners The Campaign Palace, Yello and Lavender.

For my keynote at the Vision 2020 Financial Services conference last month in Mumbai I prepared some 'quick and dirty' scenarios for the global financial services industry landscape in 2020 from a technology perspective. Below is an overview of the content I used in my presentation. The complete slide deck from my keynote is also available, though it needs the explanation as below.

WARNING: These are scenarios prepared for a presentation, so they are far from rigorous or comprehensive. True scenarios should have fully developed storylines that evoke the richness of how the scenario unfolds and could actually happen. To be truly valuable, scenarios need to be created for a specific organization or strategic decisions - generic scenarios are of limited value. Always work with someone highly experienced in the field - most consultants that claim to do scenario planning are making it up. The Driving Forces and Critical Uncertainties identified below are highly summarized, and would be presented and aggregated very differently in a real scenario project. OK warning over, on with the content...

Scenario planning
Scenario planning recognizes that beyond a certain degree of uncertainty forecasting is of limited value (or can even be detrimental to good decisions). The process of creating a set of relevant, plausible, and complementary scenarios (more than the scenarios themselves) can be invaluable in creating and implementing effective, responsive strategies.

The heart of the scenario planning process is distinguishing between Driving Forces (consistent long-term trends) and Critical Uncertainties (unpredictable elements). Once these are identified, they are brought together to create a set of scenarios that reflect both what you know and what you don't know about how the environment will change.

The image below shows a sanitized version of the process for a scenario planning project I ran for a major financial institution. This was quite a streamlined process relative to a comprehensive scenario planning project, however was designed to bring the insights directly into the existing group and divisional strategy process.

Below are the scenarios in detail:

• Driving Forces: Global Financial Services


• Critical Uncertainties: Global Financial Services


• Scenario Framework for Global Financial Services


• Four Scenarios for Global Financial Services

DRIVING FORCES: GLOBAL FINANCIAL SERVICES

1. Economic shift

Economic power is shifting to the major developing countries. The BRIC countries (Brazil, Russia, India, China) together host close to half the world's population, and their pace of economic development means that before long there will be multiple economic superpowers. In addition, global economic growth is shifting to the virtual, and developing countries will gradually wean themselves from primary and secondary industries to be significantly based on knowledge-based services.

I have written and been quoted many times before on the rise of a new layer of capital markets and the segmentation of venture capital. Venture capital certainly will continue to play an important role in years to come, but many major variations on the current model will emerge. One of the most important drivers of change is the far lower capital-intensity of web and technology businesses. With powerful development platforms, ready access to global talent, and speed to market being of the essence, many ventures can get going with minimal capital. The proliferation of less-capitalized companies has been a feature of the entrepreneurial landscape over the last year, supported by a slow drying up of capital from venture firms.

In today’s New York Times an article titled A New Kind of Venture Capitalist Makes Small Bets on Young Firms focuses on Union Square Ventures and in particular Fred Wilson, the new superstar of web VCs. The piece starts out by describing how Etsy, now the leading crafts marketplace, was delighted in Union Square Ventures to find a VC firm willing to take just a 5 percent stake in the company. Most VC firms demand at least 20%, and usually seek strong or dominant influence on the company’s strategy.

I'm writing at the Vision 2020 Financial Services Sector conference in Mumbai where I'm giving the keynote speech. I'll post a review of my presentation later, and here will post notes from the interesting speakers and my conversations on the day, combined with my own reflections.

[UPDATE:] The complete write-up of my presentation Strategy for the Future of Global Financial Services is now up.

The conference is organized by NDTV Convergence and Wipro. NDTV runs all of the online operations of NDTV, a diversified media company centered on its business TV channel. Wipro is one of the top three IT services companies in India - for each of Wipro, TCS, and Infosys financial services is their largest client sector.

Public sector banks and transformation to a true market economy
India has 23 public sector banks, which means they are owned at least 51% by the government. In most cases these are listed companies with a wide variety of investors. While it is now well over a decade since India began its transition from a largely nationalized economy, there is still a long way to go. There is unlikely to be large scale privatization for the foreseeable future, and in many sectors other than banking there remains major shifts required to move to open market attitudes and competitiveness.

At the 2020 Vision Financial Services conference yesterday I promised I'd have the full content of my presentation here up within days. But my schedule means I probably won't be able to get it up for a week or so, so for now I'll just put up the slides. The usual warnings apply - my presentation slides are not meant to be meaningful by themselves, but to accompany my speech, so unless you were there, I suggest you wait until I do the full write up of the presentation.

[UPDATE:] The complete write-up of my presentation Strategy for the Future of Global Financial Services is now up.

It's an extremely busy two weeks. On top of many client deadlines I have four speaking engagements in Australia and one in India this week and next. I'm about to hop on a plane to Mumbai and will be there for 24 hours - unfortunately this time I have to get back as soon as possible though I have a long term plan to do a longer trip around the tech centers in India to speak and find out the best of what's happening.

The event I'm speaking at has already got quite a lot of attention - see one of a series of press releases that have got on the web below, also from Dishtracking, Indian Television, India Infoonline etc.

At the seminar I will be coming back to one of my key themes - the future of financial services. I have developed a scenario framework for the event that I'll share later on this blog. If we're looking out to 2020, then we do need to take a scenario approach, as there are massive uncertainties ranging across geopolitics, the economy, industry structure, volatility, and how technology is applied. I will be extremely interested to hear what financial services leaders in Mumbai are saying, as the sector underpins how India is participating in the global economy. More on this later.

NDTV Convergence and Wipro announce the launch of Vision 2020- Financial Services Sector
India Infoline News Service

‘Mr. Ross Dawson’, internationally renowned keynote speaker and authority on business strategy will be in India to speak at ’Vision 2020- Financial Services Sector’- a thought leadership seminar by NDTV Convergence and Wipro Infotech, the India and Middle East arm of Wipro Ltd. Ross is the CEO of international consulting firm, Advanced Human Technologies, and Chairman of Future Exploration Network, a global events and strategy company.

The seminar will feature eminent speakers from the industry who will be sharing their perspectives on topics like the future of private and retail banking, mergers and acquisitions, and competition and challenges in the financial sector in the Year 2020.

It has been several years now since I have been to India, where I last ran some executive workshops on high-value relationships for some of India’s largest companies. I will be back in Mumbai next week to deliver the keynote address on The Future of Global Financial Services at the Vision 2020 Financial Services conference, run by Wipro and NDTV Profit, the Indian business news channel. The speaker line-up includes the top executives of many of India’s major banks. I am the only international speaker.

The event is highly focused on the future, creating a vision of what the financial services sector will look like in 2020, and in particular the relationship between banks and their customers in a world transformed by economic growth, social change, and technology.

The overview of my keynote on the future of global financial services is:

The US Securities and Exchange Commission (SEC) has announced new guidelines (available in the next week or two) that will recognize the role of blogs in disclosing investor-sensitive information to the public.

Back in 2005 I wrote an update on the situation at the time on investor relations and blogging, and in 2006 I delivered the keynote at the Australian Investor Relations Association on the Future of Investor Relations, and wrote about SUN Microsystem’s CEO Jonathan Schwartz’s initiatives for blogging to be a recognized form of investor disclosure.

The SEC appears to be moving ahead at a swift pace, despite cries from some, particularly in the news release business, that the old system shouldn’t be changed. In fact the comments below from SEC Chairman Christopher Cox come from a podcast, transcribed by IRWebReport:

I have long been interested in how collaboration technologies are applied in financial services, having come from a career largely at Merrill Lynch and Thomson Financial, and spent much time consulting to the instittutional financial services sector.

A few years ago now I ran the Collaboration in Financial Services conferences in New York and London, and wrote a white paper on How Collaborative Technologies are Transforming Financial Services. Since then I’ve been heavily involved in the Web 2.0 and Enterprise 2.0 spaces, and I’m finding that these are extremely relevant to the financial services sector.

I will be doing the opening keynote at this year's annual Financial Services Technology forum on Enterprise & Web 2.0 for Financial Services in Sydney on 29 May. In my presentation I will look at the big picture of the history and relevance of these technologies in the sector, and drawing on my recent work helping organizations with the governance issues of Enterprise 2.0.

Financial services are certainly very diverse, however many of the sectors within it handily illustrate the themes I have been discussing for some time: there is a deep layer of highly process-driven work, supplemented by a layer of connecting expertise to make highly time-sensitive decisions. Enterprise 2.0 technologies and approaches are outstanding in supporting the latter, which is where there is the most potential for competitive differentiation - which can be very fleeting in the world of money.

I’ll provide more details later on what I cover in my keynote.

There are countless guides to venture capital for budding entrepreneurs on the web. Marc Andreesen, the founder of the seminal VC success story Netscape and the recently launched Ning (an extremely interesting social networking platform), among many other ventures, has provided his own guide in a three part series:
Part 1: VC basics and what they look for
Part 2: Going deeper, including comparing VC firms
Part 3: Long-term perspectives, including why VCs continue to be successful today

The most interesting by far is Part 3, looking at long-term cyclicality in the industry, and how venture capital has become accepted as an asset class for professional investors. Over the last couple of decades I’ve spent in and around the capital markets, I’ve seen a number of “new” asset classes struggle for acceptance among institutional investors. Portfolio theory shows that if the investment performance of different asset classes are not fully correlated, you can get better returns for a given risk by including additional asset classes. As such, investors actively want to bring in new asset classes into their portfolios, but there are all sorts of hurdles to cross. High-yield debt, emerging markets debt, venture capital, hedge funds, and other investment vehicles have all gone through a process of being examined by trustees and committees, recommendations provided by asset consultants, eventual approval for small investments by innovative investors, and then larger allocations across most institutional investors. In the US, university endowments have substantially outperformed mutual funds and other institutional investors over the last decade or so, partly through being ahead of the pack in taking on new asset classes such as venture capital.

Om Malik has a very interesting article on how pre-paid mobile minutes are effectively becoming a currency across Africa. I visited South Africa three times late last year while helping a large African media conglomerate to develop its long-term strategy. At the time I wrote about how mobiles are allowing Africa to leapfrog the fixed internet, and also about the potential and challenges of South Africa.

The majority of services in Africa are shifting to mobile phone interfaces, as close to a majority of people now have mobile phones – these are no longer luxuries for most people – while there are few other interfaces available for commerce. Even landline phones are often not available, let alone fixed internet or other interactive devices. As a result, mobile banking and a vast array of mobile services are taking off fast.

One of the greatest values of anything prepaid is that it can be exchanged. When local currencies have problems with inflation, availability of currency, institutional trust and so on, alternatives swiftly come to the fore. I certainly find it interesting that talk of e-cash, all the rage in the late 1990s, has now largely disappeared. One of the major uncertainties in the future is whether we ever finally get rid of the bits of paper and metal in our wallets that we exchange for goods and services. This is a major inefficiency in our lives. It would be so much easier to swipe or approve something. While there are potential privacy issues, it is possible to create completely untraceable e-cash. The primary reason e-cash went no further was that there were major vested interests stamping on the various alternative standards being proposed. It’s possible that something will emerge that people start using of their own accord, just as is happening with mobile airtime in Africa. Yet there are better ways of doing it. I think that within a decade e-cash will be firmly back on the agenda.