Gartner Says Traditional Investment Services Firms Must Respond to New Web 2.0 Brokers’ Innovation

Analysts to Examine the State of the Financial Services Industry at Upcoming Gartner Financial Services Technology Summit 2007, August 27-29 in New York City

STAMFORD, Conn., August 1, 2007 � The new generation of Internet brokerages is creating a revolutionary approach to serving retail investors via the Web, and investment services firms must begin finding ways to adapt to this new marketplace, according to Gartner, Inc.

Rather than attempting to grow by competing with large firms for the mass market, these new Web-dominant brokerage firms target niche markets looking for specific functionality and services. These new-era brokers use the Web as a transformational � rather than a supplemental � channel and leverage Web 2.0 functionality, including new programming techniques, blogs and social communities. Traditional brokerages use the Internet simply as a different channel through which to provide the same content and services that they provide through branches, telephone and regular mail.

�Rather than build a business model on mass marketing and economies of scale, the new class of brokerages emphasize discrete sets of functionality,� said David Schehr, research director for Gartner. �They leverage �ambient findability� � the characteristic of the Web that shifts marketing from a push- to a pull-oriented effort � to be available to the specific set of potential customers who are looking for the mix of services they have to offer through Web search and community links. In this way, they can be successful without the massive scale that has characterized previous generations of brokerages.�

The second critical aspect of this new generation of brokerages is that they leverage the unique aspects of the Web to create a qualitatively different customer experience. This new and different type of relationship exists both between the customer and provider, and among the customers themselves.

�Rather than simply using the Web as a means of delivering the same content and formats through another channel, the focus is on using the technologies that are specific to the Web to deliver different types of content, such as RSS and highly interactive content,� Mr. Schehr said. �Further, many of the new-era brokers are adopting aspects of the collaborative Web, including blogs, community-based interaction, and ongoing efforts to develop mashups and other composite applications.�

While the focus has been on this new generation of brokerages, the evolution of Web 2.0 functionality and perspective is affecting other aspects of the investment services model.

Traditional financial advice media models have moved online, with mass-media sites that include Yahoo Finance, MarketWatch and The, as well as those from personal finance and business magazines. While some are adopting certain Web 2.0 aspects, such as RSS (Really Simple Syndication) news readers and columnist blogs, the dominant aspect is advice from experts to the less informed public. New sites are emerging that leverage the free community model of Web 2.0, focusing on the Web�s ability to link people in communities. Individually designed and populated blogs have also emerged for personal finance and investing.

�Generations X and Y were raised on the Internet and use it as a primary means of information gathering and communications,� said Mr. Schehr. �Investment services firms must begin to understand the role of the Web as more than just another channel for traditional forms of communication and interaction.�

Additional information is available in the Gartner report �Early Efforts at Web 2.0 Brokerage Will Challenge Existing Providers.� The report is available on the Gartner Web site at

Gartner analysts will provide more detailed analysis on the future of online brokerage firms and the overall financial services industry at the upcoming Gartner Financial Services Technology Summit 2007 taking place August 27-29 at the New York Marriott Marquis in New York City.

The Gartner Financial Services Technology Summit is a comprehensive and unbiased conference designed exclusively for financial services industry IT and business executives, and it will provide the latest information and analytical insights on the tools, technologies, best practices, and business processes that are transforming the way banking, insurance and investment services are delivered in today’s client-driven world. Additional information is available at

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