For banks and broker-dealers, the global geopolitical environment remains highly uncertain. Interest and currency fluctuations and trade tariffs pose a real threat to growth. The Big Four tech companies are venturing into financial services, which will present challenges to existing business models as well as financial services firms’ ability to attract and retain talent.

Meanwhile, the increasing regulatory and compliance burden will continue. Brokerage and other client fee revenue streams are declining or disappearing, so market consolidation will likely continue and accelerate (consider the recent acquisition of TD Ameritrade by Charles Schwab). The growth of the leveraged loan market – which is expected to surpass $1T in 2020– is driving demand for digital automation. And amid all of this, global investment management revenues continue to decline, and the sell side is becoming a smaller piece of the overall industry.

It’s easy to say that if you want to compete more effectively, you need to invest in advanced technology and digital to deliver a superior user experience. That’s proven by our Readiness Report, which shows that sell-side firms that prioritize investments in digital expertise grow nearly twice as fast as their peers.

But everyone is now in the race to own the client relationship and create a single platform in which they sell their services. And let’s be realistic. The equity markets have baked high earnings expectations into stock valuations, and cost pressure in general remains high. Any investment has to be funded through savings and cost efficiencies that have been achieved elsewhere.

So where should you focus if you want to take pole position?

1. Data management.
   Recognize the value of your data, make it easy to access, and identify how you can monetize it by creating intellectual property. For example, your internal historical pricing data for non-exchange listed instruments has value to other market participants.
2. Talent.
   You need the best people and the latest skills to build that superior user experience – and keep your competitors at bay.
3. Advanced technology.
   Stay in tune with technologies like robotics, machine learning and automation to both differentiate yourself and drive cost out of the business. Secure cloud and managed services are now a prerequisite to expedite go-to-market and drive down the total cost of ownership. Digital is also critical; improving the user experience requires mobile access and an open platform architecture that can integrate with third-party components and APIs.
4. Partnerships.
   Assess where you can build strategic partnerships with your key software and services providers to drive platform change, innovation and cost efficiencies.
5. Acquisitions.
   Stay on top of potential opportunities for inorganic growth. Consider acquiring disruptive new-market entrants or achieving efficiencies and scale by consolidating with competitors.
6. Modernization.
   In the absence of internal IT budgets to invest in new platforms, look at where your existing service providers can help you modernize. For example, in the cleared derivatives space, many firms ask their technology providers to manage the entire IT and operations. This drives a modernization effort to bring efficiencies and innovation to both parties.

In 2020’s uncertain macro climate, you can counter all of the market pressure, but only if you can deliver that superior customer experience. When investment dollars are scarce, look for automation, outsourcing and partnerships to give you the modern technology platform, data and talent you need to beat the competition.