There is no doubt that Covid-19 has turned 2020 into an annus horribilis for the global financial services industry, but the pandemic cannot be the scapegoat for corporate capital markets woes. Indeed, key challenges facing asset managers, wealth managers and investment banks – such as digital disruption, shifting revenues, rising and inflated cost levels and difficult customer service – predate Covid-19.

Covid-19 simply “capsulated in time” the same old issues. That’s why capital markets firms shouldn’t wait for the pandemic to recede to roll up their sleeves and start tackling these issues. We see ten trends emerging as investment banks, wealth and asset managers and stock exchanges head into the next year.

Trend 1 – Remember 2008 and avoid the bunker mentality

If companies continue to use the pandemic as an excuse for inaction, it’s a red herring. The global financial crisis of 2008 should also be a salutary story for companies. At the time, the vast majority of the financial markets industry was hanging on and hanging grimly, while some industry players continued to invest in technology during the recession, changed their position on costs , were dropping lines of business and building more asset structures. This allowed them to accelerate after the crisis was over, while the rest of the industry was caught off guard. The average business, which is not immune to stress in retail and commercial banking, cannot afford to make the same mistake again.

Trend 2 – Continue to bend the cost curve

In the meantime, companies should not expect shareholders, regulators and customers to relax their demands for higher value at lower cost. The capital markets industry incurs costs of approximately $700 billion each year. But a radical cost overhaul shouldn’t be a daunting prospect. A high percentage of the industry’s costs comes from its organizational complexity, which has accumulated over decades. There is now a lot of will within the industry to break free from these byzantine structures where lucrative inefficiency reigns supreme. And companies are only scratching the surface in terms of the cost-saving potential of technology, data, and analytics.

Trend 3– Be different and reassess the power of your digital brand

Companies must put digital at the heart of their strategy and ask themselves fundamental questions: who are you and what do you represent digitally? Why are you better than others at X or Y (or not) numerically? How easy, fast and efficient is it for your customers to interact with you anytime, anywhere, and in any way they choose? These digital strategies must be sophisticated and long-lasting. Not every company can be number one or two at everything they do, but smart companies can survive and thrive by acting decisively and strategically to differentiate their product, technology and cost mix.

Trend 4 – Expect Consolidation, Structural Changes and Business Rotations

Legions of midsize companies that aren’t leading in a particular area are a surefire recipe for industry-wide consolidation. In some regions, this is already the case. Take mid-size asset managers trying to expand or investment banks moving into wealth management, driven by the promise of more stable earnings. Regulators in Europe also seem to be increasingly open to cross-border transactions. Increasingly, businesses cannot be everything to every customer; it’s time to place your bets.

Trend 5 – Become sustainability guardians

Capital markets firms are stewards of capital, which today means they are stewards of sustainability, not just conduits of cash. This fundamental objective should be emphasized in 2021, especially since many of their customers are in a difficult economic situation. It’s not just about paying lip service to ESG. Companies have a duty to be guardians of sustainable, transparent and ethical capital.

Trend 6 – Show off your digital talent

Businesses need a robust strategy for digital assets that goes well beyond decentralized blockchain currencies such as Bitcoin and Ethereum. As the world moves towards a cashless society, central governments are looking to deploy their own digital currencies (CBDCs) that rely on distributed ledger technology. As the name suggests, these CBDCs will be digital forms of cash. They will be fiat money, a store of value and a state-issued medium of exchange. They will also be ubiquitous: ordinary people will use them for everyday transactions, while banks will use them for interbank settlements. The need for a company-wide strategy is essential.

Trend 7 – Think about bringing some people back to the office

It would be wrong not to recognize the industry’s success in shifting to remote working. But our conversations with merchants at big banks indicate that remote work is taking a toll. Concerns also remain about the ability to protect sensitive information in a remote world, the difficulty of maintaining customer relationships in the absence of face-to-face contact and, most importantly, the lack of camaraderie, culture shared and shared information favored by the trading room environment. . This is why capital markets needs a plan to get people back to the office, even with a very small office footprint, where it could make sense and be done safely.

Trend 8 – Rethinking talent acquisition

Remote work is here to stay even if companies bring some people back to the office. Falling geographic barriers will create an almost limitless pool of talent. This will trigger fierce competition for talent, and one thing is certain: companies that can enable flexible working both technologically and culturally will prevail. There is also a paradox at work in the industry. It is made up of people who deliberately complicate things when it needs people who deliberately simplify things. It requires talented people who engage with customers and are data savvy.

Trend 9 – Create a digital distribution advantage

Businesses need to ensure that they know their customers better than anyone, allowing them to engage authentically. The best way to do this is through enhanced digital distribution, which allows them to better tailor products to their customers’ needs. They will also need to learn millennial knowledge: our research shows that wealth managers expect to lose $1.5 trillion every year due to intergenerational wealth transfers. If wealth managers want to stem the leaks, they will need to provide millennials with holistic, on-demand digital advice and products that match their interests.

Trend 10 – Go beyond security and compliance

More companies will move to the cloud and rely on software from third-party supply chain partners, but they cannot sacrifice security in pursuit of improved customer engagement. They must deploy the best software and protocols in the world to strengthen the privacy of their customers’ data. They also cannot afford to neglect compliance as their staff continue to work remotely for the foreseeable future, increasing the risk of employee misconduct.

This is my take on the top financial market trends for 2021. I’d love to hear your perspective and encourage you to reach out to us on Twitter or LinkedIn.