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Wealth, the Web, and Bear Market Fever.

During the biggest bull market in history, tales about e-brokerages threatening to put traditional investment houses out of business have abounded. Widely disseminated and easily accessible financial information seemed to turn every man, woman, and child into potential market wizards, and, although far less expensive than hiring traditional asset managers, do-it-yourself wheeling and dealing has attained its own level of chic among the nouveau riche.

True, markets are faltering and day-traders have retreated to the hills, but technology still has a firm place in investment banking and asset management, particularly in back-end operations. This month, we talked to Anne Tatlock, CEO of New York-based Fiduciary Trust Co., a global money-management firm with $46 billion in assets, about the Internet, the markets, and why risk-taking is a good thing.

C.J. Prince

What's your take on the do-it-yourself brokerage craze?

We've had the biggest bull market in the history of the U.S. throughout the '90s. People feel successful. They feel capable of making decisions. And coupled with that is the fact that many of these people don't have any memory of very difficult markets or markets that went nowhere.

But that doesn't mean that all these people are great investors or can make better decisions than an investment manager could make for them. People who looked brilliant three weeks ago look pretty inadequate today. And it doesn't mean that they're really going to be able to handle their money effectively five years from now or even next year if markets become difficult because a lot of the decision making is very short-term oriented.

At the same time, you have another sphere of money that has been made and is looking to be managed in a very opportunistic way and a way that will benefit from technology. These people are still using investment managers and there's a lot of new wealth being created which is going toward investment managers as opposed to being managed by these people on their own on the Internet.

How germane is the Net to your strategy, as far as serving clients?

We have done client surveys and, interestingly, only about one-third of our revenue-driving clients really feel the Internet is important to them. It's different depending on who you are. For an institutional investor, the Internet allows you to really gain daily access to information and to rearrange it and sort it according to the analysis that you're using internally. So it really enhances the ability of a company's pension fund department to basically operate more efficiently.

For the individual investor, it's about information access. They don't want as much paper. They'd rather receive all their appraisals online. They would like to have more dual contact with the firm, which we're doing through the Internet. Here again though, security of the client data has to be a top priority and all of that is built into both of the efforts that we're undertaking. So we're really supplementing and enhancing the existing relationships with our clients. They're not looking to do anything differently than they had in the past. They don't want to give up the direct contact, but they want to have choices.

The brokerage firms have to be much more aggressive though, because what the client wants from them is more one dimensional. They really want to cut out the middleman. It's cheaper, more efficient. So in order to stay even, the brokerage firms have to have this fuller, faster, the trading capability.

What happens when members of the Web generation reach their 40s and 50s--will they still have assets managed traditionally?

They'll still want the same services. They won't go back to any pre-computer era where the only way to communicate with an investment management firm is via a letter or a fax or written mail. It has to be electronic. On the other hand, when people have a degree of wealth, they say it would be wise to step back and maybe retain control over some of it but have it managed professionally and objectively by a group of people for whom this is their job. And I'll hold them responsible for it, the same way that managers have always been held responsible. Because there's still the feeling that a lot of what's happening in terms of self-management is very reactionary.

That said, technology is very, very important. We will be doing much more with respect to analytics, with respect to risk management, with respect to the whole taxation area, the trust and estate area, the complexity of large pools of wealth and how you come to terms with asset allocation.

What else are you doing internally with technology?

We're using it aggressively. Technology enhances the degree of analysis and the degree of insight that you can bring to the combination of securities that you put in a portfolio with respect to risk, volatility, tracking error, trading, all sorts of things. We have much better control over understanding the dynamics of what we're doing in a portfolio today than we did three years ago or five years ago or 10 years ago.

As the CEO of a traditional, non-dot-com firm, what do you think of companies trying to reinvent themselves as dot-com models?

I think that it's a mistake to try to "reinvent" yourself because then you're a new company. You're a startup. You're abandoning the principles that made you a success.

If you're a fairly solid company you have things going for you, presumably. You have financial stability, which a lot of the fastest growing startups don't have, because the access to capital isn't in place. You have depth of management, proven products. To turn 180 degrees, you're probably going to go out of business.

You need to move strategically and aggressively. You can't study it too much, but do a plan and be ready to begin to implement it and, at the same time, be open to shifting and abandoning something that you've invested money in. You may find 18 months out, only a third of what you've just spent money on is of value. So don't complete the spending. It's like doing all this work on a company, thinking that stock is a good investment, and going into it; it goes up a little and then, for whatever reason, it goes down, but you've done that work and invested that money so you stay with a losing situation.

It's hard for people who have run good companies that are not in technology to have the same degree of confidence behind their IT decisions as they have behind their other decisions. I understand this because I've not been in a position where I've had to make technology decisions, and this is a big area, an important area but you're doing the company and yourself a huge disfavor if you study things too much. Because if you're not a risk taker, you're not going to be around to even be allowed to take risks.
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Publication:Chief Executive (U.S.)
Article Type:Interview
Date:Jun 1, 2000
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