Predictions for 2022

As we come to the end of 2021, I find myself thinking a lot about what 2022 will look like. It feels like this year in and of itself has been action packed, with a number of major macro shifts in the industry. I don’t think I’ve ever done a ‘year ahead predictions’ write up, but I felt like this year might be a good one to start. There is a lot happening in the markets: infrastructure, regulatory, technological, behavioural, and economic changes. I thought I would take some time to share what I think the biggest macro trends are heading into the new year, and how I think those trends will manifest in the industry with some more micro views. Without any further ado, here are some of my thoughts heading into the new year.

Macro shifts that I see either starting or continuing through 2022:

  • The hybrid is here to stay. We went from an industry pre-2020 that would never be remote, to an industry that was fully remote, and now we’re going to settle somewhere in-between. There seems to be a meaningful push on the sell side to return to office, but without a similar push on the corporate/buy side, I don’t think that really moves the needle long term. The reality will probably be somewhere in the middle, with organizations working in a hybrid or partially remote setup.

  • Technology is moving to the cloud. I don’t think I need to repeat too much here (I recently wrote about Wall Street’s “shift to the cloud”) but the technology arms race is accelerating with Microsoft, Google, and Amazon (AWS) all moving aggressively to secure major client alliances and industry partnerships. This will change how fast software can be released, improved, deployed, and the general availability of solutions to the industry.

  • European regulation is fizzling. MiFID II was supposed to change the industry forever with unbundling, but we’re already seeing major cracks form (such as an ever increasing number of exemptions). The EU will posture for market position and supremacy over the UK in European financial markets.

  • Internal systems are going through a major overhaul. It feels like a 5-7 year journey in the world of capital markets/investment banking CRM systems is over. Firms are evaluating all their client facing systems across portals, CRMs, recommendation engines, and business intelligence tools.

  • The “major resignation” will accelerate. We’re going to see a lot of career changes coming out of the pandemic. Not only traditional changes such as people moving funds, or sell side moving to buy side/PE, but people moving into crypto, leaving the industry, and joining industry focused tech companies.

  • Information levels reach a breaking point. With the shift to remote, we saw a massive increase in the amount of information being distributed electronically over text, email, and chat. With the explosion of information being pushed through electronic channels, something feels like it has to give in 2022 as the levels are currently unmanageable.

The next question is: so what? Given those macro trends, what are the micro impacts in the next 6-12 months? My views are obviously closely tied to where I sit in the industry: at the nexus of how information moves through the industry, how both producers and consumers interact with that information, and how firms leverage their client intelligence to drive the business.

Thematically, I think the focus of 2022 is going to be around building better systems and tools to help individuals and firms interact with the ‘information infrastructure’ of the industry. That could mean making information distribution more effective, capturing more client intelligence, managing information flows (inbound ), and managing your identity in that infrastructure.

Here are some of my views on how these macro trends manifest in 2022:

  • Identity management gets the spotlight. Hybrid work is going to drive more communication into electronic channels (mainly email, chat, and text) and more communication into asynchronous channels. Technological adoption is going to mean more of that information comes through “managed” channels too, which means there will be more ability to control the flow of information. Combine that with a massive resignation and people moving firms, there is going to be a huge focus on the portability and ease of transfer of individuals identity. When you change firms, how do you point all the information that was flowing to you through each electronic channel to your new address? Think mail forwarding in a digital age. The more information flowing through electronic channels, the more operationally valuable this becomes. The more operationally valuable it becomes, the more adoption it gets, the more information flows through those channels. It’s a feedback loop.

  • A new era of CRM systems begins. The challenge with a CRM has always been that everyone knows they need one, they just don’t like the one they currently have. The capital markets (on both the markets and banking side) is nuanced enough where the existing CRMs have worked, they just haven’t been magical. When you use a system that hits all the key pain points and just works, it feels magic – it’s a 10x improvement. The industry is still looking for that solution (it hasn’t found it yet), and I would expect many new CRM providers to either overhaul their offering or leave the industry, with a new wave of providers emerging to bring the next iteration to the industry.

  • Client intelligence becomes a major competitive focus. I’ve seen a massive uptick in interest across the entire industry around leveraging client intelligence to drive the business forward – not just from brokerages and investment banks, but from corporates and the buy side too. A couple of the macro trends are coming together here: everyone is hybrid, which means more electronic communication, and thus more data. The industry is adopting the cloud full stop, which means faster evolution and growth in the software available to capture that data. All internal systems are being revisited, which will create new areas of opportunity to try out new systems. There has always been an interest in leveraging client intelligence to drive the business, but I think 2022 is the year that it really becomes a major focus for the industry.

  • Information management becomes an industry focus. With everyone going remote, all communication has gone electronic (for the most part). With technology moving to the cloud, there are a lot of new opportunities to help individuals manage information they are receiving through those electronic channels. I expect to see a lot of solutions around managing what information you receive, what channel it comes through, and how you discover new information flowing through those channels that you currently aren’t receiving.

  • Scaling (especially client coverage) is the top focus. I’m hearing it across all the firms we work with – sell side, corporate, and buy side – how do we drive scale into the business? With the above trends, and the above predictions, the industry has never been in a better position to drive that scale through electronic communications, new systems, and better client intelligence. Hybrid work is also driving that focus on scale, with relationship managers able to take a much more global approach. I saw a lot of this in 2021 through operational means (cross asset coverage, global sales approach, single point of contact, etc.) and I believe we will see this accelerating through technological means in 2022.

  • MiFID II continues to be unbundled (pun intended). Parts of MiFID II will undoubtedly stay, but I would expect to see the unbundling requirements continue to be watered down (as we already saw this year with the various new research exemptions introduced). The regulatory push to unbundle the industry has certainly weakened over the last year, and I would expect to see that trend continue into 2022 as US regulation drives the agenda.

So there are my predictions for 2022 – starting with the macro trends that I think will drive the year, moving into some more micro views on how those trends will manifest themselves. With the (hopeful) end of the pandemic just around the corner, I think we’re gearing up for one of the most exciting years in a long time, one which will see the industry change in ways that we can only guess at now.

Do you think I missed anything? I’d love to hear your thoughts as we head into the end of the year.

Otherwise I wish everyone a great end to their year, a happy (and hopefully restful) holiday, and I look forward to getting back into it in January for an exciting year ahead! As always, we’re here to help, and look forward to catching up in 2022.

Street Contxt

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