Finance Gets the Message

By Stan Gibson  |  Posted 2005-10-10

Finance Gets the Message

Without knowing it, UBS AG got the message a long time ago. Way back in 1995, Swiss Bank Corp., which would later merge to form UBS, began to adopt instant messaging technology, setting in place a road map of adoption that keeps the financial services company in the forefront of the IM pack. Now the company, which is based in Zurich and Basel, Switzerland, is preparing for a corporatewide upgrade that early next year will enhance IM services for nearly 20,000 internal and external users.

Once a novelty and always a favorite of young technophiles, not to mention the everlasting bane of the distraction-prone, IM has emerged as an essential application in the financial services industry, where brokers and underwriters have come to rely on the technology to stay in touch with customers and each other in an industry where information moves markets and timing is everything.

"Financial services is the industry that has the most leading-edge usage of IM, followed by insurance, technology services and business consulting," said Robert Mahowald, an analyst at market research company IDC, in Framingham, Mass. Small companies as well as large ones such as UBS are attracted to the technology. "The instant part of instant messaging is a very good draw for this industry. Everybody is working at light speed. Customers would much rather do IM than send an e-mail," said Galel Fajardo, CIO at Roth Capital Partners LLC, in Newport Beach, Calif. "We use BlackBerrys. But they still are not fast enough for our clients, who want instant communications."

Seeking to promote the adoption of standards and interoperability, several IT pros at financial services companies have banded together in a user group called the Financial Services Instant Messaging Association, or FIMA .

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While they encourage standards adoption among vendors, many of those same IT managers are seeking to exert greater control over IM deployments at their companies so that communications are reliable, secure and archived for compliance with Securities and Exchange Commission guidelines as well as laws such as the Sarbanes-Oxley Act.

"Chat today is where e-mail was 15 to 20 years ago," said Phil Freeborn, CIO at UBS Investment Bank, a unit of UBS. Freeborn and Amanda Jones, instant messaging business analyst at UBS IB, have been steering the 65 million messages per month that course through the UBS system in the direction of knowledge management, applying filtering technology and integrating IM with other applications. Jones is in charge of the pilot of Parlano Inc.s MindAlign 6.2, which is expected to lead to a complete rollout by early next year.

Freeborn traces UBS use of IM back to 1995, when Swiss Bank had a large installed base of NeXT Computer Inc. computers and developed its own chat program for them. When the bank migrated to Windows NT in 1997, it started using a new chat application it called Interchange. "Thats when it really took off," said Freeborn. Next came a client chat system for financial exchange, which gave clients access to the companys sales force and analysts. In 2000, the company realized its own creation had commercial applicability and spun off a unit with eight employees. The product was called MindAlign, and the company came to be called Parlano. UBS sold its investment in 2001.

UBS effort to turn its MindAlign IM system into a knowledge management tool centers on the softwares persistent group chat feature. "Its a great KM tool, and we may integrate with other KM tools and scrape information out of the tools. Group chat is itself a KM tool," said Freeborn in Stamford, Conn.

Messaging as knowledge management at UBS also relies on the use of filtering technology. "Users have so many channels—in some cases, 200—they cant keep track of them all," said Freeborn.

Jones explained that by creating a filter channel, a user can indicate by keyword the stocks he or she wants to watch in a single filter channel.

Next Page: Systems must meet compliance requirements.

Systems must meet compliance


Filtering technology can also be used to create an "auditorium mode channel" in which mass messages can be sent to a defined list of users.

One application is called "FX Buzz" and is for foreign exchange specialists. "They look at international information on the FX chat channel, and they can push that information to external chat channels," said Jones in New York.

In another implementation, UBS sends out the latest research on equities by its analysts via IM blasts. "You want to get those ideas out to encourage trading," said Freeborn.

One-to-one meetings are also important. "Chat made it possible to build a meeting. If a customer wants to talk to a salesman, they can use the chat function," said Freeborn.

The move to MindAlign 6.2 will include the implementation of presence technology, which lets one user know if another is actually present. Jones said she may integrate the customizable features with e-mail in the future.

Compliance is critical

Thanks in part to its genesis at a financial services company, Parlanos MindAlign software includes features such as a compliance server designed to meet the stringent regulatory requirements of finance. With precedent well-established that e-mail and IM archives must be produced upon demand by regulators, financial services companies have scrambled to put in place airtight message monitoring and archiving systems.

"Someone has to monitor the chat channels. This has a monitoring facility," said Freeborn. In addition, MindAlign lets an administrator see real user names along with screen IDs, which is critical in making sure only authorized users are on the system, he added.

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At Roth Capital Partners, CIO Fajardo also depends heavily on the archiving features of his implementation—from Akonix Systems Inc.s Akonix software—for compliance purposes. With 200 employees located mainly in several West Coast cities, Roth has 50 users on an IM system from Akonix.

Unlike UBS, which uses IM mainly for internal communications, Roth uses IM mainly to allow its brokers to communicate with customers. "You can use any client, basically. Our clients are on IM, and we wanted to have a secure way of communicating and be compliant," said Fajardo. Communications are primarily concerned with indications of interest in stocks, orders and order follow-up.

Whats next

Federation capabilities—the ability to interoperate seamlessly on a sophisticated level with other IM systems—will be available in Parlanos MindAlign 6.3, which was recently announced. For now, however, Freeborn is kicking the tires of the new release.

"Were intrigued by [federation]. But it poses certain challenges," Freeborn said. "We would want to avoid complete and open federation because there would be regulatory problems and it would be too intrusive on our desktops."

Freeborn said, however, that a controlled approach would hold promise. "We would expect to see limited federation in two to three years," he said. "The new [MindAlign] client is multidomain. Users will log in to one client but have access to multiple domains, such as AOL. We would be interested in pursuing trusted gateways with certain providers of chat."

Similarly, Freeborn is not planning to integrate VOIP (voice over IP) right away. "Its still immature, and we have to worry about security," he said. "We have a reputation to maintain, not just save money."

So far, MindAlign has been used by the investment bank at UBS, but the companys wealth management and global asset management units have strong interest as well.

"Many of our very sophisticated clients want to deal directly with investment products and chat with the trading desk. Federation capabilities, when deployed, should make IM a popular tool among wealth management clients. However, said Freeborn, wealth management advisers will also want to talk to trading desks to learn about products. "You can chat online to a person in Tokyo about Japanese equities," he said.

All these uses translate to continued proliferation of MindAlign technology at UBS. Freeborn said he expects the number of IM clients to increase to 45,000 over the next three years. But the rapid growth wont break the bank. "The infrastructure is not that expensive. The cost of the licenses is the big cost. How much the people use it is the value derived," said Freeborn. And at UBS, use it they do.

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