London - 12 December 2006

New TowerGroup Survey Explores Use of Instant Messaging Across Securities Industry and Best Practices for Enterprise Use

A new survey conducted by TowerGroup confirms that instant messaging becoming increasingly within securities firms. A majority of securities employees surveyed converse by IM, have used the tool for at least two years, and feel it helps them to improve their productivity. Yet the survey also found that risk management remains the top barrier to institutional adoption of IM in many firms – and that the days are probably numbered for unsanctioned consumer IM applications on securities industry desktops.

The web-based survey was fielded by TowerGroup in October 2006, with responses from employees within investment managers, custodian banks, retail and institutional broker/dealers, and hedge funds. These firms range in size from large (i.e., over $100 billion USD in assets under management for investment managers) to small (less than $10 billion USD in assets under management).

“Within the securities industry, TowerGroup found that IM is primarily used to communicate within an institution on business-related topics – with the majority of messages sent and received between internal users,” said Peter Delano, senior analyst in the TowerGroup Investment Management practice who headed the study and analysis. “An analysis of responses by type of firm shows that institutional broker-dealers and hedge funds are most likely to use IM. Functionally, trading and trade-related operations are using IM more than their colleagues in other areas within a given firm.”

Highlights from the survey findings include:

Survey respondents in trading and trade-related processing exchange the highest number of instant messages and, compared to the overall sample, are more likely to converse with external recipients via IM. The average IM user in the securities environment sends and receives a small number of messages on a given day. 75% of survey respondents send 25 or fewer messages per day, while 78% of respondents report receiving 25 or fewer instant messages.

While 58% of respondents ranked improved internal productivity and employee satisfaction as IM’s top benefits, they were mixed when ranking the overall importance of IM to their firm’s success. 27% said IM is ‘extremely important’ to the firm – while a nearly equal amount (24%) ranked IM as ‘not very important.’

Instant messaging has room for expansion within the securities industry. While 60% of survey respondents use IM software, 16% only began instant messaging within the previous 12 months – representing a segment of relatively inexperienced users. Another 18% of non-users expect their firms to deploy some form of IM in the next 12 months.

Despite the security and compliance risks associated with instant messaging, 28% of survey respondents still use less secure consumer IM applications.

TowerGroup expects compliance / security concerns to drive consumer IM applications off the desktops of employees associated with trading and trade processing within three years. Consumer applications are likely to be banned from the desktops at all asset management firms within five years.

“Though consumer IM applications are unsustainable in the securities environment, TowerGroup views IM as a necessary tool for business communication and believes that asset management firms should treat it as such,” said Delano. “Firms will increasingly deploy IM platforms designed for business users in general and securities firms in particular. Firms will have to deploy best practices like platform standardization, message surveillance and storage, ongoing user administration, and defensive software against malicious attacks to manage IM risk. But one thing is certain – the asset management industry will not and should not go back to using the telephone and e-mail as the only methods of electronic communication.”

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