If investment banks are to achieve pre-crisis return on equity values, firms must cease the desire to be completely self-sufficient and embrace the rapidly evolving market dynamics. Firms should therefore adopt the ‘investment bank of the future’ concept: an ecosystem-integrated model where being able to monetize insights from data sources is the key differentiator.
The post-crisis period has been characterized by changing market structures, increased capital requirements, structural pressures on costs and unfavorable market conditions. All these factors have ensured return on equity and margins have not reached pre-crisis heights. We do not foresee such levels returning, unless investment banks adopt an ambitious strategy that radically changes their cost base, operating model, and methods of generating revenue.
That’s why we believe that the time is now for firms to cross the rubicon and commence the journey towards a fundamentally new business model. Such a new business model must embody the opportunities within the market:
Our view of the investment bank of the future is one which follows the ‘connected flow’ model – moving capacity and processes to an ecosystem of providers – and the optimization of data to generate differentiated insights for monetization.
By constructing a vision of the future, firms can work towards a set of prioritized initiatives today and move towards the initiatives of tomorrow.