Asset Management

08:46 AM
Rob Hegarty, Managing Director TowerGroup--A Summary of a New Report on the Crisis
Rob Hegarty, Managing Director TowerGroup--A Summary of a New Report on the Crisis
Commentary
50%
50%

Technology Budgets to Decrease by 14-16%

TowerGroup's managing director Rob Hegarty predicts that technology budgets will decline sharply next year.

"The past six months have shown that the tipping point has passed and the stand-alone, 'bulge-bracket' brokerage firm is a thing of the past," said Rob Hegarty, managing director of TowerGroup's Securities & Investments practice. "TowerGroup believes that the large, universal banks acquiring these businesses are positioning themselves to become the wealth management firms of choice. As subsidiaries, these brokerage businesses may ultimately flourish. But it will be under the watchful eye of a more conservative and more risk-averse overseer."

TowerGroup expects that the demise of the stand-alone investment bank will lead to a sharp, long-term decline in the creation and use of structured products " leaving few firms with the size and risk appetite to take on such an industry. There is also the bigger question of whether the "financial supermarkets" is the wave of the future " again. TowerGroup believes that the large number of failed attempts at building a financial supermarket (e.g., Citigroup, UBS, Morgan Stanley, Credit Suisse) compared with the few successes (e.g., JPMorgan Chase) demonstrates that executing the supermarket strategy is difficult at best " irresponsible at worst.

TowerGroup also expects IT spending in the Securities and Investments sector to decline sharply from 2008 to 2009, led by a 14 to 16 percent decline in sell-side IT spending. The combined IT budgets for Lehman Brothers and Bear Stearns totaled nearly $2 billion annually " most of which is virtually disappearing overnight.

TowerGroup's Hegarty's new report, titled "Realigning an Industry: New Structure of Capital Markets After Demise of Lehman and Sale of Merrill," assesses the implications for the capital markets industry of the bankruptcy filing of Lehman Brothers and the acquisition of Merrill Lynch by Bank of America.

Comment  | 
Print  | 
More Insights
More Commentary
SEC Examinations: What to Expect When the SEC Is on It's Way
Theodore Eichenlaub highlights trends in SEC expectations and how to approach a risk assessment of your compliance program.
The Value of Predictive Analytics in Financial Services
Risk management and customer data are two key areas where data analytics is being applied in financial services.
Moving the Trader Closer to the Investment Process
The sell side can demonstrate more value by applying analytics to pre- and post-trading, and by educating buy-side clients about broker segmentation, trading behavior and algorithm shortcomings, and more.
Wirehouses May See More Independent BDs as Retention Packages Expire
Retention bonuses are expiring, leaving brokerages vulnerable to attrition. Is access to technology making it easier for brokers to go independent?
SCI: A Whale of a Regulation
The SEC's Reg SCI weights in at a whopping 742 pages. Here is what you need to know about the oversized regulation.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Top Quotes of the Week
Top Quotes of the Week
It wasn't all bad luck for the capital markets this week: Hedge funds had a decent first quarter despite a slowdown in jobs numbers, BlackRock might be heading into new territory as hedge fund managers take a hard look at their counterparties, and the head of the IMF didn't pull any punches when assessing today's global economy. At least we can admire the nice weather and some of the best quotes of the week.