“Wait and See” Does Not Constitute A Strategy

“Wait and See” Does Not Constitute A Strategy

Our experience is that it is best to take action during disruptive periods – or better yet – at the first signs of trouble. The “wait and see” approach often leads to irrelevance and ultimately death.

Deutsche Bank plans to shed 18,000 jobs and exit the institutional trading business while simultaneously investing in technology. This is a case of too little too late. (companies mentioned: Deutsche Bank, FactSet, Goldman Sachs, JP Morgan, MarketAxess, SS&C Technologies, State Street Bank).

It’s best to take action once the writing is on the wall and there is ample time to course correct. Conversely, it pains me to watch scenarios unfold when it’s clearly “too little too late”. The latter is the result of corporate inertia which may take the form of pseudo strategies known as “wait and see” or “maintain the status quo”. For an example of the latter, look no further than today’s announcement that Deutsche Bank plans to exit the institutional trading business.

To those of us who were on the sellside during the early 2000’s, it was painfully clear that the institutional trading business’s best days were behind it, never to return. There were three realistic options at that time for all I-Banks:

  1. squeeze the institutional business and maintain the status quo elsewhere;
  2. eliminate the institutional business and run the I-Bank as an M&A shop;
  3. shrink the institutional business, continue to run the M&A advisory business and invest heavily in Technology.

My vote was option #3. Goldman Sachs seemed to have made option 3 work with its focus on its proprietary EMS – REDI (owned by Goldman from 2001-2013 before being spun out to a Financial Services consortium in 2013 and ultimately acquired by Thomson Reuters in 2016).

  • Few I-Banks followed Goldman’s example. GS continues to invest in technology with Symphony (competes with CEORater’s “Notes” offering) among other investments.
  • JP Morgan subsequently caught the technology bug some years later. It has since ramped-up its technology investment in recent years.
  • Depository institutions are not immune to the advances of Fintech companies and we have written about some of those examples in these pages.
  • Turn the clock to 2018 and State Street Bank (tkr: STT) acquired CRD for $2.6 Billion. Turn to 2019 and DB makes tonight’s announcement.

Rather than invest your dollars in these Fintech laggards, we suggest you look to invest in companies that blazed the Fintech trail years ago such as: FactSet (tkr: FDS), MarketAxess (tkr: MKTX) and our favorite, SS&C Technologies (tkr: SSNC).