Lack of continuity plan may put advisers at risk

NEW YORK — Business continuity management and planning were central themes of a presentation delivered at the third annual Gartner Financial Services Technology Summit here last week.

NEW YORK — Business continuity management and planning were central themes of a presentation delivered at the third annual Gartner Financial Services Technology Summit here last week.
Richard Hunter’s presentation, “IT Risk: Turning Business Threats Into Competitive Advantage,” suggested that financial advisers ask their firm’s broker-dealer and custodial representatives whether they have a continuity plan in place, and find out how well it works. Advisers should also find out how recently a test of the plan drill was conducted and what the results were, said Mr. Hunter, who is a Gartner fellow and a vice president at Gartner Inc., a Stamford, Conn.-based research firm.
His presentation was based on a book of the same name that he co-wrote, which was published this year by Harvard Business School Press.
Recent technology breakdowns at both Linsco/Private Ledger Corp. of Boston and San Diego, and TD Ameritrade Institutional of Jersey City, N.J., have made tech concerns imperative for adviser firms, Mr. Hunter said. In an interview following his presentation, he pointed to the case of a technology failure in December 2004 at regional air carrier Comair of Cincinnati, which is a subsidiary of Atlanta-based Delta Air Lines Inc. Mr. Hunter noted that Comair’s chief information officer didn’t take the blame.
“The CIO had put forth recommendations to replace the crew-scheduling system that failed a total of five times, and each time, it had been denied and the system put back in service,” Mr. Hunter said. Ultimately, the company’s president was ousted over the failure.
The lesson, Mr. Hunter said, is clear: All companies should embrace a risk-aware culture.
Generation gap
In another presentation, “Can Wall Street Jump the Generation Gap?” David Schehr, a research director at Gartner, said that the financial services industry should take note of what Generation X and Y investors are doing.
He cited the results of a Gartner survey in which pre-baby boomer, baby boomer, and Generation X and Y respondents were asked the question, “Have you banked online in the past three months?” Just 37% of pre-baby boomers and 55% of baby boomers responded yes, compared with a total of 73% of Gen Xers and Yers.
Websites that make use of mash-ups, online services such as netvibes.com and pageflakes.com that combine a mix of public and private data to help their members make decisions, are something to pay close attention to, Mr. Schehr said. Young investors particularly are growing weary of the more static content of the traditional financial media such as those available from Barron’s and The Wall Street Journal, he said.
Cutting IT costs
While the summit focused largely on the big picture of technology across the financial services industry, several presentations decried the lack of flexibility at large brokerage firms, banking institutions and insurance companies, and the way they do business.
Another theme was the notion that decision makers at large financial services companies need to embrace technology that will simplify a company’s infrastructure and reduce information technology redundancy, particularly as many of these firms plan to cut rather than increase their technology budgets.
“By 2012, 10 out of the largest 20 financial services companies want to cut their IT budgets, as a percentage of revenue, by 50%,” said Frank Schlier, an analyst for Gartner who focuses on emerging trends, and business and industry strategies.
Defending SOX
Meanwhile, one of the authors of the Sarbanes-Oxley Act of 2002 said that the financial services industry has accomplished and overcome a great deal since the legislation was signed into law.
“The world is following our lead,” said former Rep. Michael Oxley, R-Ohio, during the keynote speech at the summit. Mr. Oxley, who is also the former chairman of the House Financial Services Committee, pointed to burgeoning stock markets in such countries as Kenya, and the 47 Chinese company stocks that trade on The Nasdaq Stock Market Inc. in New York.
“[The legislation] has allowed everyone to be treated fairly, fairness to the investor under the law and fairness when it comes to corporate governance,” he said.