Fiducitation: Opportunities for FSI in the
Current Market
Author: Shah Cheema
Date: November 6,
2001 © 2001 Fiducite.com, Inc.
Fiducitation: A
synthesis of public Internet resources on the topic.
Instructions: Use the Table of Contents to navigate the document. Each citation has up to four distinct parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source document) help you decide whether to view the document. The source document may be viewed by clicking on the Source URL or by opening the embedded Cached File. All information is attributed to its source.
Financial services opportunities arise from new
technologies, changing markets, globalization, new legislation or regulations,
changing customer needs, operational rationalization, and variations in the
competitive landscape. Each of these factors generally play out at the line of
business level, which we define as a related set of individual
products/services targeted at a discrete customer group. So, for example,
opportunities in the syndicated commercial loan business probably have little
bearing to those in credit card merchant acquisition, exchange-traded funds, or
the property-casualty insurance market, even though the same financial institution
may or may not compete in all of them.
Financial services consists of at least 150 distinct lines
of business, including various types of banking, brokerage, consumer credit,
investments, securities processing, life insurance, and P/C insurance. In each,
the opportunities may be different. For example, the WTC attack has already had
a very specific impact on the P/C industry as it grapples with the concept of
terrorist coverage. In anticipation of dramatic rate increases, capital
infusions and/or acquisition activity is high today, while these factors have
not affected the commercial banking industry.
In our opportunity survey below, we have attempted to
identify and isolate a limited number of quality documents that support 24
categories of opportunity. The list can never be comprehensive, of course, but
it can serve as a quick guide to further evaluation and analysis. The documents
generally address specific themes or opportunities arising from one of the
factors mentioned above. Because the documents come from diverse sources, they
all may have different points of view, but the reality is that too many writers
tend to be biased towards one or another opportunity. Thus, there is an
opportunity to investigate many ideas, but few writers attempt to rank all of
them comparatively.
Only some of these opportunities will have attractive
potential for a given institution, depending on its size, capital, regulators,
current lines of business, geographic spread, technological know-how, and
self-perceived competitive advantages. Moreover, even the largest institution
cannot simultaneously pursue all opportunities without diluting its efforts. An
assessment of what to research next requires this knowledge.
We have not broken out opportunities specifically by line of
business because of the time involved and the fact that there are so many lines
of business, only some of which would be germane to any specific institution.
In addition, there are many other documents on these 24 topics. We have
filtered the available universe to get at documents which are recent,
authoritative, discuss opportunities specifically instead of simply being
descriptive, which preferably are quantitative, and which do not duplicate each
other.
Many citations do estimate the size of the opportunity and
those sizes can be one input to opportunity prioritization. Obviously, other
factors are also important, such as the costs, the risk, the market, and the
life cycle status, especially where technology change is involved. Further,
other opportunities not listed here may be viewed as important to specific
institutions, based on their situation, and should be factored in on an
iterative basis.
Mutual Funds, Annuities & Other Brokerage Services
Customer Relationship Management
Globalization & International Markets
Check Imaging & Document Management
Internet Banking & Other Web-Based Financial Services
Electronic Authentication & Digital Signitures
Smart Cards, Speedpass Systems & Surrogate Card Numbers
Business-2-Business (B2B) Operations
Staff Training, Retention & Productivity
Behavioral Finance & Business Strategies
Author:
Total Net Assets of International
Exchange Traded Funds, 1993-2000 (billions of dollars)
Annotation: As
this chart shows, the ETF industry is undergoing incredible growth. The United
States, which has a seven-year head start on the Europeans, has dominated the
industry in assets as of 2000.
Clip:
Source: http://www.ici.org/pdf/etf_figure1.pdf
Cached File: 
Exchange Traded Fund Assets (June
- August 2001)
Clip:
|
Assets of ETF’s by Type ($millions) |
||||
|
|
|
August 2001 |
July 2001 |
June 2001 |
|
Domestic (Broad-based) |
63,248 |
67,028 |
66,921 |
|
|
Domestic (Sector/Industry) |
6,747 |
6,650 |
6,721 |
|
|
Total Domestic |
69,995 |
73,678 |
73,643 |
|
|
Global/International |
2,090 |
1,842 |
1,917 |
|
|
All |
72,085 |
75,520 |
75,560 |
|
|
Value of Shares Issued and Redeemed by All ETF’s ($millions) |
||||
|
|
August 2001 |
July 2001 |
June 2001 |
|
|
Gross Issuance |
5,420 |
5,615 |
7,235 |
|
|
Gross Redemptions |
2,740 |
3,037 |
3,807 |
|
|
Net Issuance |
2,680 |
2,578 |
3,428 |
|
|
Number of Exchange Traded Funds by Type |
||||
|
|
August 2001 |
July 2001 |
June 2001 |
|
|
Domestic (Broad-Based) |
33 |
33 |
30 |
|
|
Domestic (Sector/Industry) |
33 |
33 |
30 |
|
|
Total Domestic |
66 |
66 |
60 |
|
|
Global/International |
26 |
25 |
25 |
|
|
All |
92 |
91 |
85 |
|
Source: http://www.ici.org/facts_figures/etf_0801.html
Cached File: 
Trends In Mutual Fund Investing in US (June - July 2001)
Clip: The combined assets of the United States’ mutual funds decreased by 0.7 percent to $6.895 trillion in July, according to the Investment Company Institute's official survey of the mutual fund industry. Assets of stock funds declined by $87.11 billion in July.
Net Assets of Mutual Funds (billions of dollars)
|
|
July 01 |
June 01 |
% chg |
Dec 00 |
|
Stock Funds |
3,589.9 |
3,677.0R |
-2.4 |
3,962.3 |
|
Hybrid Funds |
352.4 |
350.6R |
0.5 |
349.7 |
|
Taxable Bond Funds |
590.3 |
574.6R |
2.7 |
530.1 |
|
Municipal Bond Funds |
292.5 |
286.7R |
2.0 |
277.9 |
|
Taxable Money Market Funds |
1,814.9 |
1,804.8R |
0.6 |
1,607.2 |
|
Tax-Free Money Market Funds |
254.7 |
247.8R |
2.8 |
238.1 |
|
Total |
6,894.7 |
6,941.5R |
-0.7 |
6,965.2 |
R=revised data
Source: http://www.ici.org/facts_figures/trends_0701.html Cached
File: 
ETF’s: The Growth Story of
2000 - 86% Growth (January 2001)
Annotation: Although this article by Financial
Research Corporation has outdated figures, it makes bold
statements
regarding the future of the ETF industry, including the one below.
Clip: Over the next five to seven years, FRC believes
that total ETF assets could reach as high as $500 billion. We expect that ETF’s
will be making headlines for many years to come.
Source: http://www.mfcafe.com/pantry/bps_012401.html
Cached File: 
2001 Consumer Investment Study
Annotation:
comment.
Clip: The 2001
Consumer Investment Study, released in August, 2001, is an
annual study that provides important industry benchmarks to allow banks to
compare their success in offering proprietary and non-proprietary mutual funds,
annuities and other brokerage services.
Source: http://www.cbanet.org/surveys/investments/invesurv.html
e-401(k)s Set to Grab $2 Trillion in Assets in 4 Years
Annotation: This forecast
comes from Pensions & Investments v29 no6 p 46 Mar 19, 2001
Clip: The electronic 401(k) plan, or e-401(k), could
disrupt the defined contribution industry and reach $2 trillion in assets by
2005, according to a study by Towers Perrin. E-401(k)s are developed and
serviced online. Some service providers offer more plentiful investment options
for e-401(k)s than those offered by traditional providers. According to Towers
Perrin, e-401(k) services include electronic business-to-business
clearinghouses that are designed to link plan sponsors who want 401(k) services
with providers of those services. The window of opportunity for new e-401(k)
providers is expected to close within five years.
Source: http://www.ifebp.org/prez29.asp
(Can be found half way down page)
Cached File: 
CRM: A Solution Evolution
Annotation:
comment.
Clip: "What people realized—I think it took them a while to realize—is that CRM isn't really a technical solution," Rubin says. "There's technology that's a part of it, but CRM has a lot more to do with behavior and marketing, and focus internally at the institution, and training of sales reps and customer service represen