The future looks a lot more centralized, based on SIA's recent conference.

    Technology spending in the securities business should continue to increase at a rate of about 4% a year over the rest of the decade, Marc Lackritz, president of the Securities Industry Association, told the SIA Technology Management Conference in New York June 21-23.
    The conference focused on the increasing role of technology in shaping the future of the securities industry. In his opening address, Lackritz gave an historical overview and a perspective on the industry and its acceptance of technological change, along with increased compliance, from the 1990s to the present and beyond.
    He pointed out that spending on technology waned in the early part of this decade, following a historic climb in the markets and associated technology spending, but has begun to rise again since 2003. Lackritz also noted that, along with an increase in daily trading volume on the New York Stock Exchange, an accompanying decline in equity trading personnel seems to suggest that more investors are turning to the Internet and other electronic means of trading in equities. This shift has forced the industry to reevaluate the role of technology in daily operations, from trading to compliance to risk management and more.
    Corey Booth, chief information officer for the Securities and Exchange Commission (SEC), offered a different perspective on the securities industry. From the SEC's viewpoint, increased technology creates the need for increase regulation, Booth said. Recent high-profile cases of fraud and/or conflicts of interest have raised some new challenges for the SEC, he added.
    Such things as investor interest in complex products, competing and consolidating exchanges, innovations in executive compensation, shifting profit pools, globalization of markets and technological advances in communications and analysis tools have prompted the SEC to shift its enforcement attention to some new areas, he said. Of these Sarbanes-Oxley (SOX) implementation is at the top of the list, Booth said, along with mutual fund, hedge fund, and market mechanics regulation. The SEC has pledged to perform more corporate reviews going forward, according to Booth. He also stressed the need to better leverage technology as a tool of information for the public as well as a tool of enforcement for the SEC.
    At a luncheon meeting, the keynote speaker was Jonathan Schwartz, president and chief operating officer for Sun Microsystems Inc. Schwartz began by suggesting that technology alone is not going to be enough to generate growth or savings in the securities industry. He suggested that along with technological change, the industry will have to effect a cultural change that embraces new technology and finds new ways to leverage them for efficiency and competitive advantage. He compared the technological revolution to the electrical industry by pointing out that, in the beginning, electricity was produced by small generators and placed in homes of the wealthy. Over time, the industry evolved to a more cost efficient model, with centralized power plants providing electricity to customers on a per-usage basis.
    Schwartz believes that this is the future of computing in the financial services industry, where centralized server farms will provide computing power to the industry based on usage charges. This trend, for instance, is reflected in many popular software products now being offered on an ASP platform (Web-based).
    There are signs that this trend of technology consolidation is already occurring. Raj Shah, chief marketing officer of ClearCube Technology (, echoed Schwartz's sentiments in an interview but suggested that a lower-cost alternative might be available through ClearCube by the use of PC Blades, a technology that removes the traditional PC from the desktop, shrinks it and centralizes it in a secure data center (or dedicated computer room), leaving only a monitor, keyboard, mouse and small user port at the desk. By centralizing hardware, in the typical financial advisor's office, compliance issues are easier to monitor as all storage is centralized along with the computers themselves.
    Shah also suggested that computer downtime could be minimized with the use of spare blades that could be mirrored (cloned software, operating system, etc.) and placed into the slot occupied by the failed computer in only a few seconds. Compared with the traditional steps in bringing in a tech person to work on a malfunctioning computer, and suffering the extended downtime, PC Blades offer a quicker solution with enhanced security and compliance benefits. Shah said that computer upgrades are a snap (literally) with interchangeable components on the PC Blades, making hardware upgrades quick, easy and cheap. To be cost effective, a firm that maintains 20 or more computers in their offices may wish to consider ClearCube's products.
    Schwartz also discussed technology and security. He suggested that the problems of hackers, e-mail spam, viruses, phishing and other security issues will not be solved by software solutions alone. Ultimately, the industry will have to embrace hardware solutions that protect information. As an example, he pointed to cell phones and ATM machines as examples of secure technologies that rely on hardware, not software to protect user information. 
    In a press briefing following his speech, Schwartz expanded on his comments concerning security, saying that he envisions a retail computing grid, comprised of four individual grids-a usage grid, a storage grid, a research grid and a display grid (in effect an outsourced workstation). These grids would be secure and could be tapped into by business, industry and universities to substantially increase computing power and storage size, while reducing infrastructure costs and heat dissipation issues associated with housing massive computer servers onsite. He also defended Sun's decision to open-source their operating system, Solaris 10 ( by comparing it to Verizon giving away cell phone handsets. The money is not in the software (in Sun's case), but in the usage charges. Schwartz mentioned that by taking this approach, Sun Microsystems is positioning itself in the securities industry as a technology consolidator for the industry.
    Most sessions at the conference supported the notion that technology is only going to play a greater role in the financial services industry going forward. Participants pointed out that the largest firms in the country are already embarking on technology innovations to streamline processes and make their respective operations more efficient and, therefore more competitive. Financial advisors should take to heart the lessons learned at this conference by recognizing that, in order to stay competitive, they will have to adopt similar (albeit scaled down) technological efficiencies in their practices. 

David Lawrence is a freelance writer and monthly columnist for Financial Advisor magazine. He is also a practice efficiency consultant and is president of David Lawrence and Associates, a practice consulting firm based in Lutz, Fla. (