Regulatory Scrutiny Drives IT Spending

By Theresa Carey  |  Posted 2004-06-29 Print this article Print

The TowerGroup issued a report examining the Top 10 technology priorities for investment management firms. While concerns over meeting a new spate of regulatory pressures is the industry's undisputed number one business driver, the a focus on the client

Increasing pressures from both regulators and clients will top the list of business concerns among US investment management firms over the coming year. New research from TowerGroup, an advisory research and consulting firm focused on the global financial services industry, identifies the Investment Management industrys Top 10 business drivers. The report also pinpoints the Top 10 areas of information technology (IT) that these drivers have made a priority. "The industry is in just the preliminary phases of what will likely become a sustained period of regulatory scrutiny," said Tim Lind, senior analyst in the Investment Management practice at TowerGroup and co-author of the research.

Lind continued, "Even despite inquiries into market timing, application of mutual fund breakpoints and allegations of late trading, the prevailing wisdom on regulatory initiatives had said, This too shall pass. Today, prevailing wisdom now holds, Regulatory scrutiny is here to stay."

Lind added that if its not the regulators breathing down the neck of asset mangers, it will be their clients. "The demands for transparency and the fear of risk to their reputations will drive the IT spending habits of buy-side firms for many years to come," he said.

The research indicated that in 2002-2003, the top two business drivers for Investment Management firms were, not surprisingly, cost containment and tactical spending. In other words, dont spend anything, but if you have to spend, spend only the minimum.

TowerGroup finds that regulatory scrutiny and a renewed focus on the client now take top billing, which will help contribute to a projected annual growth in IT spending of 7% within the asset management segment from 2004-2008.

In 2004-2005 as in 2002-2003, data management emerges as the number one technology implication for the buy side. What is changing is the attitude reflected in that focus. In late 2002-2003, centralizing the administration of data management was a tactical approach to reducing costs in the middle office. In 2004-2005, the industry is recognizing that effective data management is required to provide more effective performance analytics, client reporting, risk analysis and portfolio decisions.

TowerGroups research report, "Asset Managers Top 10 for 2004-2005: Top 10 Drivers and Technology Initiatives Facing the Industry," may be purchased by contacting the TowerGroup at 781-292-5200 or

Theresa is the Editor of's Finance Industry Center. She's been writing about financial technology issues since 1990 for a wide variety of publications, including PC Magazine, Newsweek, Fortune, and Fortune Small Business. She is also a Contributing Editor to Barron's and writes their 'Electronic Investor' column.

Theresa received a B.A. from the University of California, Berkeley, and a M.S. from the University of Santa Clara. She also has a private pilot's license. When she's not at her computer, she coaches a local high school volleyball team, plays softball and volleyball, and takes part in many Cal Alumni Band events. She lives in Northern California.


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