New Financial Service Landscape Brings New Challenges

By Dennis Sullivan
Chief Executive Officer

If 2008 is any example, 2009 promises to be a year of considerable change. Political change and economic change are perhaps obvious, but we can also expect change in the business community, education, and the environment. The Nolan Newsletter is also undergoing a change this year. Since 1988, Ben DiSylvester has provided industry insights, an objective perspective, and a unique outlook on the issues facing financial services organizations. Ben continues to offer his valuable insights in The Nolan Newsletter and beginning this quarter, his contributions will be the closing article in each edition. With this quarter, I begin authoring the opening article of The Nolan Newsletter. Much like Ben, I will bring my own unique perspectives and thoughts to each issue. I look forward to sharing my insights, and I welcome your feedback as well.

Saying that 2008 was an eventful year for the financial services industry would be an understatement. During the fourth quarter, we saw insurance giants suffer stock price drops of magnitudes never before seen. One-time market leaders teetered on the brink of bankruptcy, and banks and investment firms—long thought to be the backbone of our financial system—looked for government bailouts. We saw a stable and once stodgy industry hit by investment income turmoil, reserving challenges, and operating decisions foreign to many senior officers who had previously experienced only the relatively good times of the last thirty-plus years.

Someone once said that where there is chaos, there are opportunities. I think that is true.

Our financial services industries need a fresh look at their operating model, their financial model, and their pricing model. We got lazy! We settled for mediocrity in operations because our investment income was robust and our fees for services were going unchallenged by consumers. That has all changed now, and as an industry we have a chance to make a fresh start.

I understand that many of the fiscal challenges have little to do with running the day-to-day; however, it is now running the day-to-day effectively and efficiently that will help us out of this financial mess. The winning companies, those with strong fundamentals in place, will survive and prosper at the expense of those who can’t adapt to a more intensely competitive landscape, which is approaching. Market share will be at risk. Retaining current clients will require nimble operating models and new thinking on how to get the most from technology investments past and future. Meeting the needs of customers just became harder because they expect value for their dollar even more so than in the past.