Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
Forest for the Trees

Wednesday, January 01, 2003  

I was perusing InformationWeek and came across a very brief introduction to an event sponsored by Centerbeam, an IT outsourcing company. Putting aside outsourcing, the blurb lists some initiatives and asks whether they are the trees (tactical) that are in the way of seeing the forest (strategy). It puts me in the mood to think about 2003 a little harder in respect to the company for which I work.

Company Overview:
Very small division of larger parent corporation. Last year reached $22 million in revenue broken down primarily between two business lines, wealth management and commercial banking. Number of employees: 100. Locations: headquarters in Santa Ana, CA with two full-time branches in Newport Beach and San Diego, a new office in Los Angeles and a virtual office in Phoenix, Arizona (slated for expansion into Scottsdale). Revenues are split approximately 40% commercial banking, 60% wealth management. Net income is split the opposite. Let's examine this company with your standard, run-of-the-mill business school SWOT analysis.

1. Well-established company in wealth management business for almost 40 years. Part of core business, not a dilettante in the industry.
2. Good community and professional (read: CPA and attorney) contacts in Orange County and San Diego.
3. Employs several subject matter experts in personal trust, well-respected in their field.
4. Strong real-estate support.
5. Commercial banking business is growing rapidly, serving primarily the parent company's wire and demand deposit account needs.
6. A strong housing and refinance market has spurred banking growth for us, trebling top-line results over the last three years.
7. Commercial bank product is very scalable, i.e., we can handle significantly more business with existing personnel & infrastructure.

1. Fully staffed, the new offices in Los Angeles and Arizona are expected to run at a loss for the next three to five years.
2. Wealth management offerings are not as complete as competition's, e.g., we do not offer private banking or multiple money managers.
3. Operating margin for wealth management line of business is very low.
4. Stock market losses have cut fee income from wealth management over last two years, forcing layoffs and reorganizations.
5. Commercial banking primarily relies on one major client.
6. Commercial banking brand is closely tied with the parent company, making third-party sales difficult.
7. Our parent company has forbid us to get into lending for fear of jeopardizing existing banking relationships.

1. Positive story of the fiduciary nature of wealth management and our company's long history and solid reputation in that field gives competitive credibility.
2. Solid wealth-management contacts in established areas (OC, SD) that are practically crying out for stronger reciprocal relations.
3. Large pockets of wealth tied up in real estate in California that our company can handle whereas others won't touch it.

1. Consolidation in wealth management market will bring larger players to our markets soon with better product mixes.
2. Continual decline in stock market will force shrinking fee revenue.
3. A decline in refinances will negatively impact the commercial banking business without further client base diversification.

With this analysis, where is IT? What initiatives does the information services department need to implement to help the company build on strengths and opportunities and minimize weaknesses and threats? Next post!

posted by Henry Jenkins | 1/01/2003 07:06:00 PM

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