You've got funds

It is amazing how much mindspace of an asset manager is taken up by Google and Microsoft. I'm not talking about the two companies stock's performances, although that, too, keeps asset managers busy - and mostly happy. I'm talking about G and M as metaphors for the future of the financial industry, and as potential key players shaping that future.
A couple of weeks ago ReedMidem's Thought Leadership Summit in Zurich gathered people from all walks of the asset management industry (fund designers and managers, distributors, researchers, marketers) from across Europe. During the day, thirty-plus of them participated in an interesting fast-scenario-planning exercise trying to figure out where the industry will be 7 years from now.
At the end of the day they were asked to come up with fake covers for newsmagazines that would be on newsstands then - basically, to summarize their scenarios into future news headlines. Five covers were produced, for four different (and more or less optimistic) scenarios, and out of the five, three mentioned Google and two Microsoft. The two companies were presented as having become big (or the biggest) players in at least one portion of the asset management industry, the one specialists call "distribution" (and which laymen call "selling"). "Google grabs the market - Top player for European cross-border distribution" said for example one headline. Behind the headlines were stories that envisioned Microsoft taking over Fidelity; M and G conquering a big portion of the Chinese savings market; or teaming up with existing big banks in a fund distribution deal.
Is this surprising? Not really: G and M are powerful metaphors and, because of their successful tentacularity, are feared as possible future competitors even in markets that they have not addressed yet (nor they have announced intentions to address). Asset managers look at them with a mix of admiration and awe.
In Europe the asset management industry is very fragmented, it's basically still a country-by-country kind of activity. It is growing fast though, and there is a continuing push for the creation of a single pan-European market (things move slowly in pan-European regulatory frameworks). Moreover, while so far most financial institutions tended to sell only their own "products" (funds etc), in an approach that may not always satisfy the  customers' need for performance, everybody seems to believe now that the future will be about "open architecture", whereby a bank or a financial advisor would sell "products" from a variety of "manufacturers", hence increasing competition and transparency in the market. All that would requires capacity to allow clients to access more information; to aggregate data and compare easily across different investment products; to establish regional and international "distribution" channels that are very efficient and cost-effective; to accelerate innovation.
And because all this will be very much technology-driven, particularly the Internet, and will require new ways of managing and innovating, the people in the room (and I guess many people in the financial sector in general) clearly felt that companies such as Google or Microsoft may be well-positioned to become significant players in this industry. Or at least provide the metaphors for the sector's own restructuring.

UPDATE (10 Feb 06) - Or could that be AmazonBay? Sean Park, head of Digital Markets at Dresdner Kleinwort Wasserstein, has made a little flash movie that puts forth a scenario of how eBay will enter the financial markets, merge with Amazon, and take over the industry - a scenario very similar to those discussed during the Thought Leadership Summit in Zurich. Erick Schonfeld at Business2.0 has commented on the movie and e-mailed with Sean. (Thanks Dimitar)

Comments

[anne ferrand]

Nice article - Thanks

[Dimitar Vesselinov]

Have you seen this Flash movie?

Financial Markets, 2015
http://business2.blogs.com/business2blog/2006/01/financial_marke.html
http://divedi.blogspot.com/2006/01/amazonbay-future-of-global-financial.html

[Francesco]

Bruno,

I attended FTZ' thought leadership forum on "The Road to Convergence" back in October last year.

It's fun to see how you can use the same "tools" (i.e. future magazine covers) in such disparate industries as telecom and asset management. And it's *amazing* to see that no matter what the industry, G and M always turn out to be the winners...

Ciao

[Francesco]

Actually, adding to my previous post:

If "leaders" in disparate industries come to think that the same 2 companies will lead their separate worlds in 7 years from now, it must mean that people simply have no clue about the future!

[Sean Park]

In AmazonBay, my intention in using names of companies like eBay and Google etc. was more metaphorical than literal, although I wouldn't rule them out completely either... I found it an easy shorthand for new disruptively innovative companies entering industries from previously non-intuitive directions. So first you have Google as a verb, now you have it as a metaphor! I suspect that others also use Google, Microsoft at the heart of their futurology not (only) literally but also in this symbolic fashion. Anyhow, hope you and you readers enjoyed the film and if you are interested in a bit more detailed background, you can read that here: http://www.parkparadigm.com/?p=13