The debut of riskview.com, a joint venture of Infinity Financial Technology, Dow Jones and IBM, marks the first time that investors will be able to access underlying stock data-free of charge-to evaluate the risks and returns in their global equity portfolios over the Internet.
Infinity Financial Technology vice chairman Till Guldimann attributes the market need for such a Web site to three megatrends that are reshaping the financial services industry: powerful information technology, institutional investors, and the Internet.
These megatrends, Guldimann contends, will be the drivers of a new market for risk management software and information.
MS: What is the significance of riskview.com to the financial services marketplace?
GULDIMANN: Two things happened (to give rise to riskview.com). One, we see a big shift of power from the brokerage and intermediary financial industry into the asset management industry. As more reserves are being put into financial assets and as more financial assets are being professionally managed, there is a need to look not only at returns, but also at risks. So there is a big opportunity to transfer technology developed for the trading markets, the intermediaries-brokers, traders and market makers-to this new market.
If you look at players in the industry, I would distinguish between commercial banks, which take deposits and make loans; traders and brokers, which hold assets temporarily and turn them over; and asset managers, which hold assets and invest them on behalf of third parties.
If you're an asset manager, the only way you can make more money is to get more assets under management because fees are fairly standard. The only way to get more assets under management is to convince the market that you can manage assets better. What nobody's focusing on is the risks engaged in for the generation of these returns.
In the trading industry, there is a standard evolving, which is value at risk (VAR). I see that same technology coming over into the asset management industry, where standards will evolve so that, in the future, you will have mutual funds, for example, publish not only their total returns, but also their risks engaged in to achieve these total returns. The (Web site) riskview.com is a first effort to propose such a standard for global equity investors.
MS: Who are the financial professionals that are currently testing riskview.com?
GULDIMANN: It's basically investment and portfolio managers who have asked us to participate in the beta test of riskview.com.
The whole thing is being rolled out in three phases. In the first phase, you can go to riskview.com and see a six page quick tour. At the end of that quick tour is a button that says "Start," which gets you into a screen and then you need a user ID. Beta clients have received such a user ID so they can test it out and give us feedback. That will allow us to test our software on greater demands before (general release). The problem with Internet releases is that you have no clue (about) the volume that's going to hit you. We didn't want to (immediately release) the product out on the Internet, which can get 50,000 hits the first day. So one of the reasons for this staggered rollout is to make sure it works for five concurrent users, then 100, and then 5,000. Later this month, we'll take the password (restrictions) away and it will be available free.
MS: What's in this for Dow Jones, Infinity and IBM if the service is free to users?
GULDIMANN: Dow Jones is a provider of a global equity index. It's important in the index business that people are actually using it. There are two established indices which are more broadly used; Dow Jones will provide more underlying data to the market over the Internet than the other (providers), and, therefore, make its index family more attractive. This is an effort by Dow Jones to respond to market demand for more information on the index and the underlying stocks. This is the first time that anyone has access to underlying stock data (building) indices.
Infinity does it for free because we want to highlight our technical abilities and our understanding of risk. We want to be one of the first companies to be contacted when people need more sophisticated software for risk management. We believe there is a big market coming.
MS: To what do you attribute this emerging big market?
GULDIMANN: More and more assets are being managed, and somebody has to make decisions about who is going manage them. In that decision process, you need the risk component.
MS: And how does IBM benefit from this joint venture?
GULDIMANN: IBM's role is twofold. First: Be the Web host, able to service this sophisticated, large Java application worldwide. They probably have the largest information network in the world, and they are best equipped to handle such a service. In addition, IBM is showing, in this application, one of its new technologies called Personal Assistant, which links related information dynamically into riskview.com. So if you are an investor who has put an Australian stock in (your portfolio), for example, when you come back to the Web site the following day, all of the sudden you see news on Australia.
MS: The movement to offer products and services free of charge on the Internet is good for individuals, but it's dramatically changing how the financial services industry operates. How is this good for players over the long term?
GULDIMANN: The whole industry is changing. The world doesn't stand still; the rules of the game are continuously changing. The rules of the index game in the past have been be the first, establish yourself as the benchmark and then the milk the market by selling data. Just providing more information to your clients, which was a very good strategy in the past to attract trading volume, is no longer good enough. Now, you have to provide more sophisticated services. You have to provide risk management information to your clients.
-sraeel tfn.com
