Financial Services without Borders
Summary
The reference has not verified this book in detail; the summary states only what the title, author and subject establish.
Ellis, who founded Greenwich Associates and wrote Winning the Loser's Game, produced this in 2001 as an assessment of how the financial services industry would develop as national boundaries mattered less. The reference has not verified the book's detailed contents.
The context was the period's expectation that financial services would consolidate globally: national restrictions were falling, the euro had been introduced, electronic trading was replacing physical exchanges, the Glass-Steagall separation had just been repealed in the United States, and large institutions were combining banking, asset management, insurance and securities across borders.
Ellis's recurring positions across his career include the observation that active investment management as a whole cannot outperform the market it constitutes, that costs determine relative outcomes, that institutional investors' decisions are driven by client relationships and career considerations, and that the asset management industry's economics differ fundamentally from the interests of its clients.
The predictions of the period were substantially wrong in specific ways. The financial supermarket model that the repeal of Glass-Steagall enabled produced few of the promised cross-selling gains and considerable risk. Global consolidation reversed after 2008, with large institutions retreating to home markets under regulatory pressure and capital requirements. What did happen, the growth of index management and the resulting fee compression, was not the direction most observers of 2001 expected.
Readers should treat this as a period document and verify its specific arguments against its contents.
Key takeaways 6
- The 2001 expectation was that financial services would consolidate globally as national restrictions fell.
- The financial supermarket model enabled by the repeal of Glass-Steagall produced few of the promised cross-selling gains.
- Global consolidation reversed after 2008 as regulation and capital requirements pushed institutions back toward home markets.
- Active management as a whole cannot outperform the market it constitutes, which is arithmetic rather than a finding.
- Costs determine relative outcomes among managers more reliably than any other observable characteristic.
- The growth of index management and the resulting fee compression was not the direction most observers of 2001 anticipated.
Who should read it
Readers interested in what the financial services industry expected of itself in 2001, verified against the book's actual arguments.
About Charles D. Ellis
Founder of Greenwich Associates; chair of the Yale endowment investment committee; author of 'The Loser's Game'
His 1975 essay 'The Loser's Game' is the primary source that reframed active management as a negative-sum contest, and the argument is still cited verbatim.
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