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 Digital Economy The Internet has been the vehicle to deliver more information and to deliver that information faster right to each consumer’s desktop. As a result, consumers are taking control of their personal finances. Taking control of personal finances is a good thing – but “be careful what you ask for"! To understand the impact of taking control of your personal finances it might help to understand how the Internet has changed, how technology has impacted company operations and what we can expect in 2002. Financial services firms have consisted of banks, insurance companies, brokerage firms and financial planning companies. Companies sell products and services to consumers based upon relationships that have been formed with the consumers. Insurance agents, retail bankers, loan officers, stockbrokers and financial planners strive to meet new consumers in order to sell their products. Until the Internet it was very difficult to compare the features of stock brokerage accounts, insurance policies or banking services. Often time’s purchasing a financial instrument had very little if anything to do with price. It had to do with trust and past performance of the person being dealt with. The early adopters of the Internet were information providers. No one expected the phenomenal growth that occurred with the Internet. But many more new companies rather than the Fortune 500 spawned the growth. Companies such as Ameritrade, Datek, ETRADE, EBAY, PAYPAL and the list go on sprang up over night! The old brick and mortar companies treated these new start-ups as a fad. They probably would be gone as fast as they were created! These new brokerage firms placed tremendous pressure on commissions being charged by the brick and mortar companies. Why would someone pay a broker a $180 for a market order when the same market order trade could be made on line for $8.00 or less using the Internet? Companies rushed to embrace technology like never before. New companies, new services and the old brick and mortar companies all bought switches, routers, servers and bandwidth under the camouflage of meeting the competition. During this period, phrases such as the new economy or the digital ecomony were coined. Truth be known its capitalism at its best. Companies were building a better mousetrap and simply reducing prices to attach customers. The speed of this growth came tumbling down and the markets corrected. Unfortunately, many people lost 50% or more of their portfolios. And those that stayed with their old brokers forged by relationships missed out on most of the tech growth. No one was saved from the impact of this correction. Even mutual funds the once safe place to park money were hit hard. The result, the new companies are now trying to keep the customers they wooed away from the brick and mortar companies. This is interesting because to add more services requires these companies to increase their rates. Or, as we are now seeing unbundling services then using subscription models on smaller transactions. Be careful! You must now add the cost of the trading software, real time quotes, money management tools and the like to the $8.00 market orders. Last year the Graham-Leach-Bliley Act eliminated government restrictions in the financial services industry by allowing mergers and transactions between banks, insurance, brokerage and financial planning companies. While this may be a revolutionary idea, it has long been the standard operating procedure in European countries. Typically banks own the insurance companies and offer their customers a full suite of services. The challenges within insurance, banking, financial planning and brokerage firms are remarkably similar. How are they going to automate relationship selling, lower commissions and deliver one stop shopping of financial services to their customers? While legislation like Graham-Leach-Bliley Act eliminates the government regulations that prohibited mergers and acquisitions within financial services industry, it will take some time before strategies are developed and implemented by the financial services industry. In the meantime, European financial institutions are looking at the US market. European financial institutions have the systems in place and are not faced with the cultural problems of combining insurance agents with bankers, financial planners and brokers. The Internet is not going away! The old brick and mortar companies must implement strategies that combine the best attributes of brick and mortar with click and mortar companies. The financial services industry is a hold out from the use of Internet technology. For them 2002 is a year of transition. One possible scenario to watch is the brick and mortar companies acquiring successful click and mortar companies and then expanding the use of technology to other services. While the hype of such mergers and acquisitions would be met with great excitement the returns from such transactions will be years in the making. Assets can be bought relatively quickly, however, successfully combining company cultures does not happen so quickly. Still, opportunities such as this present a chance to get in early ride the increases in stock prices caused by great expectations and then get out! In other industries the use of the Internet has been more widely accepted. The automotive industry is a great example of how brick and mortar can be combined with click and mortar. The majority of the automakers have implemented Internet based logistic systems, which allow them to conduct business with their suppliers electronically. Reduction in parts inventory equals reduced costs for the automaker and more importantly the ability to increase or decrease production of certain automobile models without long lead times. The computer industry is another example of how to successfully combine brick and mortar with click and mortar operations. Companies such as Dell, Compaq, Cisco etc. all have implemented similar logistic systems used by the automotive industry. The concept is to do business with vendors and suppliers electronically. This allows shorter lead times to get products to market and to react timely to consumers demand. The Internet is about speed and the Internet is about change. Read any periodical or watch programs such as Bloomberg, MSNBC or CNN and you will find discussions about the recovery of our economy. Have we really hit bottom and when in 2002 can we expect everything to get back to normal? The Internet is about change. Companies have only just begun to discover ways to use the Internet within their own operations. Everyone was surprised when companies saw their sales reduced by as much as 40%, 50% or 60% in such short periods of time. Attention is now given to company projections for growth during 2002. How quickly can companies return to comparable sales levels and when can we expect the stock prices to climb from their depressed prices? We have repeated several times that the Internet is about change. Yet, there are those that continue to use the old buy and hold strategy and the same old way of evaluating investment opportunities. What if the Internet use of automated systems such as logistical software allows a company to support abrupt start and stops of their sales cycles? What if the use of partnerships and outsourcing used by technology companies find their way into other industries? What if new companies are formed because they create a better way to deliver products and services? Finally, what if new companies are created to take advantage of opportunities created by the elimination of government regulations over certain industries? There are many new and exciting opportunities in the new digital economy. Taking control of your personal finance means creating your own strategies and conducting the research to support the implementation of those strategies. The most important element of success in the implementation of any investment strategy is research. Whether you believe in technical analysis or believe in the analysis of company’s fundamentals conduct your own research, and then verify your research and just before you exercise your investment strategy check you research one final time. Market conditions combined with customer demand for more technology to empower themselves to take charge of their finances makes this time perfect for our research and information service. We do not earn commissions or fees from any banks, brokerage firms, insurance companies or financial planning companies. Our research enables you to earn consistent returns week after week. Join now!  Back | Order Now | Return Home | Home Business | Digital Economy | Sign In | Disclaimer | Training Center | FAQ | What's New | Contact Us | |
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