Within securities and capital markets, TowerGroup projects IT budgets to rise in 2006, with priorities shifting from cost-cutting to driving revenue and business investment. The growing hedge fund sector and continuing activity in the derivatives market will demand significant investment from institutional brokerage firms.
Investment-management firms will make their first large-scale core technology investments since the late 1990s. As the industry seeks to rebuild client trust following the mutual-fund trading scandals two years ago, its focus will turn to alternative products, adding nontraditional securities to traditional portfolios, and taking their businesses global.
In retail brokerage and investing, firms will be buoyed by baby boomers' increased longevity, rising levels of wealth concentration, and the shift of retirement responsibility onto the individual. Savvy retail firms will build greater flexibility into their core technology architectures, allowing them to respond more nimbly to an array of different kinds of investors--with the objective of customer retention and increased productivity of financial advisers.