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Financial Planning > Behavioral Finance

Financial professionals: Innovation is critical to industry

By Warren S. Hersch

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Nearly eight in 10 financial services professionals believe that innovation will be critically important to the industry over the next three to five years, according to a new report.

Celent discloses this finding in “Innovation in Financial Services Firms: The Leadership Gap.” Based on a survey of 110 financial services professionals, the report examines financial services firms’ efforts at innovation, including changes to products, services or business models that “break existing trade-offs and result in value to the customer.”

Noting that customer expectations are “changing rapidly” and that the industry is “under pressure to keep up,” 79 percent of the survey respondents flag industry innovation as “critically important” over the next three to five years. This compares to 20 percent who say innovation will be “somewhat important” and one percent who believe innovation to be “relatively unimportant.”

Turning to current investments, nearly one in three (30 percent) of the professionals polled say they have been advancing an “innovation agenda” at their firms for five or more years. An additional 40 percent have been “building capabilities and skills” for two to three years. Just 9 percent are not pursuing an innovation agenda.

“Based on this data and on informal discussions with numerous financial services companies, Celent expects a continued focus on building innovation skills and practices in the next several planning periods,” the report states. “The question that must be explored is how to make these efforts as effective as possible.”

When asked to compare the financial services firms’ track record on innovation relative to that of other sectors, most respondents give the industry a less than favorable rating. Among the responses:

  • Financial services firms innovate worse (51 percent);
  • Financial services firms innovate about the same (22 percent);
  • Financial services firms innovate better (17 percent);
  • Financial services firms innovate much worse (7 percent);
  • Financial services firms innovate much better (3 percent).

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