The mergers are occurring across industries as well. Pressures to consolidate will intensify as the big get bigger. In eight years, financial services will be dominated by 5 to 10 global companies, each with a full array of services, predicts Steven M. Gluckstern of Capital Z Partners, a newly formed New York firm that will invest in financial companies. At the other extreme will be specialists that survive by doing one thing either very cheaply or exceptionally well. Predictably, the biggest winners from financial innovation will be companies, and families, that have complex finances.
Banks already show signs of losing interest in people who want just plain-vanilla checking accounts.
But as incomes and wealth rise, more people will find themselves thrust into the role of asset managers. That's where science comes in. Financial engineers view every investment opportunity as a bundle of separable risks and rewards. Their skill lies in teasing the bundles apart and parceling out components to the investors who will pay the most. A simple example is stripping apart the payment stream from a loan portfolio.