One of the biggest changes to hit financial services industry in the coming years will be the demise of the middleman, according to a new report from IBM.

Traders, analysts, fund managers and others who stand between investors and their money will come under pressure to deliver or depart by 2015, the report suggests.

In a global survey, IBM, in cooperation with the Economist Intelligence Unit, spoke to more than 400 executives who run 296 of the world’s largest exchanges, broker/dealers, asset managers, custodians, hedge funds and regulatory bodies.

These executives overwhelmingly believe that more profit will flow to investors in an increasingly transparent marketplace.

The report says three forces are expected to rearrange the structure of global capital markets by 2015. Complete marketplace transparency, instantaneous and uniform global networks and a growing need to commit to a permanent state of risk are the underlying forces bubbling up to shape the new single market for the world’s capital.

“Power will shift from the traders who have benefited from merely facilitating transactions to the buyers and sellers who take positions on either end of the trade,” said Sarah Diamond, head of IBM’s financial markets consulting practice, in a release. “Ultimately, firms will need to reexamine their relationships with risk to uncover new ways to grow in the next decade’s renaissance.”

Pushed by marketplace transparency and the velocity of the computer technology driving modern trading engines, the roles of many major industry players will morph, merge or die out in the coming years.

Among the reports key predictions:

  • Excessive agency profits will evaporate as automation replaces traders.
  • Actively managed funds – currently 70% of worldwide assets under management – will see a huge outflow of capital as investors look to passive, indexed funds for same-size returns.
  • Many regional broker/dealers will be acquired by universal banks in a push to achieve greater scale.
  • Asset managers and broker/dealers will exit the business of processing trades, opting to partner with global custodians or form new shared-services utilities instead.


  • The full research results and whitepaper are available at: http://www.ibm.com/services/fm201