Financial Services outlook for 2017

Change is coming

As the financial services industry looks ahead to 2017, what key trends will executives need to address in the coming year?

January 4, 2017

A blog post by Jim Eckenrode, Executive Director, Deloitte Services LP

Happy New Year! I’m pleased to share that our industry outlook publications on the coming year in financial services are available for your review here. We hope you take the time to read our take on what 2017 holds for banks, insurers, investment managers, and commercial real estate companies. And, since the quotable Irish playwright Oscar Wilde said, “There is only one thing worse than being talked about, and that is not being talked about,” we would like to think that you’ll also share them with your colleagues and discuss the implications for your own firms.

Without giving away too much of the headlines from these outlooks, the theme seems to be that change is afoot. Demographic trends are converging to influence the ways that financial institutions develop and distribute products and services. An increased level of uncertainty with regard to the direction of regulation in the new political landscape is causing many firms to debate whether to push forward on compliance initiatives in progress or to hit the pause button. And new technologies entered our consciousness in 2016 that offer the potential promise of greater efficiency.

What’s ahead in 2017?

Delving into these a bit deeper, we envision the following to be among the issues of importance to the industry in the coming year:

The influence of Millennials is affecting many sectors. Their use of established or emerging peer-to-peer financial services models, whether in marketplace lending, collaborative insurance platforms, or social investing, is worth noting. Commercial real estate owners, investors, and tenants alike are confronted by the younger cohort’s “live, work, and play” philosophy as they plan for a future that highlights mixed-use development and location choices. And finally, Millennials’ interest in socially responsible choices is influencing the direction of impact investing.

The direction that regulatory and compliance initiatives will take is uncertain at this time. We believe that sales practices, conduct risk, and overall fiduciary responsibility will continue to be a focus for financial institutions in 2017. Many initiatives related to increased transparency, management of capital and liquidity, and reduce risk (including cyber risk) are also expected to remain in some form over the next year. But in many other ways, the overall picture is less certain as the new political environment takes shape in the coming months. Nevertheless, firms should consider taking a “business as usual” approach to their risk management and compliance initiatives for the time being.

Change on the horizon

The economic environment may also see change as interest rates rise slowly, full employment emerges, and trade policy potentially shifts. These trends may impact bank net interest margins, insurance investment income, and profitability within specific business lines like transaction banking and homebuilding. While financial stocks have seen a run-up in prices in the aftermath of the election, this does not mean that cost containment is no longer a priority. Technologies like blockchain, robotic process automation, and advanced analytics are seeing increased interest from firms looking to streamline operations, reduce costs, and better target client needs in this environment. And the internet of things will offer other opportunities for cost management and new product development in insurance and commercial real estate.

There are many more trends and opportunities for financial services firms that we explore in our Outlook series of Closer Look reports, infographics, and other assorted materials. Please take the time to check them out and let us know if you’d like to engage further on these topics. And be on the lookout for our Outlooks Dbriefs series this month as well.

A time to embrace new opportunities?

I’ll leave you with this final thought from Wilde, who also said that “consistency is the last refuge of the unimaginative.” As we enter 2017, there seems to be emerging an undermining of some of the consistencies we have come to accept as part of the financial services industry. Some may see this as an exciting time for new opportunities, while others seek to avoid the coming changes. Does that mean that the former are imaginative, while the latter are not? That’s for you to decide.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The opinions expressed in QuickLook are those of the authors and do not necessarily reflect the views of Deloitte.

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