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Financial Services Leadership Group US-China Leadership Development
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Home Initiatives
Global Massachusetts 2015
"Securing Massachusetts' Leadership Position in Financial Services"
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the full report Massachusetts' financial services economy is at a critical inflection point. Local, regional, and global forces threaten to relegate Massachusetts to second-tier status in financial services, even in the sub-sectors where the state has traditionally excelled: asset management, asset servicing, and insurance. Though the sector is growing rapidly worldwide, Massachusetts's position as a global leader in it is far from certain. The industry - long a pillar of the state economy, employing 180,000 people and generating $38.5 billion in gross State Product - faces the challenge of reinventing itself at a time when pressure from national and global competitors is more intense than ever before. In many ways, the challenges in the financial services sector reflect those confronting the Massachusetts economy as a whole. Consolidation has eroded the state's position as a corporate headquarters for leading companies - only nine Fortune 500 companies are based in Massachusetts today, compared to 17 a decade ago. Many of the largest remaining companies are adding middle-income jobs in other states, such as New Hampshire, Rhode Island, and North Carolina, where the costs of living and doing business are considerably lower and executives find it easier to get things done. And while economic growth in financial services has been robust over the last several years, nearly all of those gains have come from advances in productivity rather than employment. Productivity growth is critical to maintaining a nimble, innovative financial services sector, but without enhancement of the job base across the economic spectrum, growth becomes increasingly dependent on a few, highly mobile individuals. Recent actions by public and private sector leaders herald some changes in the way companies can do business in the Commonwealth. Successes by the Office of economic Development and the newly formed Business resource Team in creating a more attractive business environment - through improved business outreach and expedited permitting, among other efforts - have started to yield results. New state leadership has taken important steps to forge relationships with top executives of the Commonwealth's leading employers. And the John LaWare Leadership Forum is helping to drive increased collaboration within and among the public, private, and nonprofit sectors. While more work is required to make Massachusetts as business-friendly as competing states, the trajectory is positive. Yet the financial services sector faces a variety of powerful market and competitive forces that are creating major changes in industry structure and redefining the demands of leadership. An aging population needs a new set of products that can help them sustain longer lives than were contemplated by public or private retirement schemes. A virtual revolution in technology and communications has turned companies like Fidelity and State Street into information companies first and foremost; in many ways, these institutions have more in common today with IBM than with the asset managers or asset servicers of a few decades ago. Globalization of markets is gaining momentum, as the world's financial stock and its population of skilled workers grow much more rapidly in Asia than in the U.S. In this challenging context, focused, concerted action by leading financial services companies, the public sector, and academia will be necessary to secure a permanent role for Massachusetts as a globally recognized, top-tier financial services hub. As a first step, Massachusetts's top financial institutions should take the lead in uniting the private and public sectors around a clear, common vision for financial services in Massachusetts in 2015. Looking ahead, the financial services industry in Massachusetts can be a destination of choice for top talent, a welcoming and supportive home for the most innovative firms of all sizes, and an attractive place to do business for the Commonwealth's largest employers. Pursuing and achieving this vision will have tangible benefits for financial services businesses operating in Massachusetts. Incumbent leaders will be able to grow faster and strengthen their competitive positioning by leveraging new sources of innovation, more high-quality talent, and heightened productivity. Financial services companies headquartered in other states and countries (and even many companies that don't yet exist) will look to Massachusetts as a "must have" location for accessing skilled talent and developing distinctive capabilities. Strengthening the financial services sector is also good for the broader Massachusetts economy. By taking action now, as this report suggests, the sector has the potential to grow at the same rate as in other leading states. If it does so, it could add nearly 15,000 jobs by 2010 (relative to current projections of only 3,000 new jobs) and $12 billion in incremental economic output. These twin accomplishments would stand in stark contrast to recent trends of anemic or even declining employment and output, and would make a meaningful contribution to the Commonwealth's overall growth. Massachusetts has all the ingredients for success: legendary educational institutions, an unparalleled talent base, a tradition of innovation, and a concentration of leading financial services companies. The Commonwealth has also shown an ability to reinvent itself in the face of fundamental changes to the underlying economy, most recently in the transition from a manufacturing base to an information economy. Our research - including more than 30 interviews with CEOs, politicians, and academic leaders, surveys of 70 other industry decision-makers, and a broad range of proprietary analyses - reveals that the key to success is coordinated, focused leadership. This report offers an assessment of the challenges and opportunities facing the financial services sector, as well as a roadmap for moving forward.  Back To Top
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