New research from TowerGroup asserts that these challenges may change not just the way retail brokerage firms conduct their day-to-day business, but may begin to re-define the industry as a whole. Looking ahead at 2004, TowerGroup identifies seven top business and technology drivers fueling this broad transformation: -- Crisis in Consumer Confidence -- Consumer confidence remains a critical challenge for the retail brokerage industry. Retail brokers must do a better job of responding with a shift in strategy that places renewed emphasis on maintaining customer relationships rather than selling proprietary products. -- Compliance Adds an Additional Toll to the Cost of Doing Business - Retail brokers are coming to terms with the impact of new rules, regulations and external scrutiny. For compliance with regulations on the indexing, archival and retrieval of electronic messages alone, TowerGroup estimates costs ranging from US$100,000 for a firm with less than 100 employees, to US$16 million for a national wirehouse supporting 20,000 to 40,000 employees. -- Return of Online Trading: New Tools for New Traders -- TowerGroup finds that retail traders who use analysis technologies like advanced filtering techniques or idea-generation software trade 40% more on average. Since these traders generate more than 80% of online trading revenues, leveraging technology to encourage active retail traders can clearly add to a broker/dealers bottom line. -- Tools & Technologies to Empower Advisors -- Advisors are competing for more sophisticated clients, while firms seek new efficiencies in areas like paperless account opening, electronic statement delivery and broad-based financial planning tools. These and similar forces are driving firms away from packaged, enterprise-level advisor workstations -- toward modular workstation solutions supported by common communications and development standards. -- Preparing to Retire to Retail and the Impending Transfer of Wealth - Current and near-future retirees face a unique situation of having to manage and maintain the largest concentration of wealth in US history. As accumulation and growth shifts to preservation and income, trusts and trust accounting systems, asset management tools and risk management strategies will help distinguish firms competing for trusted assets. -- Re-Defining the Value Chain / Re-Focusing Core Competencies - Maybe easier said than done, retail brokers must make drastic changes to respond to the dramatically different consumer environment. No longer will it be acceptable to create products that serve firms and distributors while not meeting the expanded needs of an educated, wary and regulator-assisted public. -- Personal Financial Planning and Wealth Management - In 2004, TowerGroup expects to see renewed vigor in wealth management, but with a shift in perspective. Firms will begin to take a new view of technologys role, as they realize that process as much as technology must be transformed to implement a holistic wealth management platform across silos both inside and outside an organization.
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