Not especially, according to an IBM report which surveyed more than 2,000 financial executives.

How good are banks on core technology skills? Not very, they admit.

Although 39 percent told IBM they think capitalizing on new technologies is very important, only 12 percent think their firms are effective at it. When it comes to forming successful strategic alliances, they found a 29 percent gap between importance and a firm’s professed ability. A full 80 percent said their firms were weak or only moderately proficient in key areas such as managing risk, understanding client needs, providing quality advice and eradicating inefficiencies.

Suzanne Duncan, Daniel. Latimore and Shanker Ramamurthy at the IBM Institute for Business Value surveyed more than 2,700 industry participants and conducted in-depth interviews with 185 executives and government officials in the course of researching their report:  “Toward Transparency and Sustainability — Build a New Financial Order.”

The financial services industry will have to make substantial changes to thrive in the future, according to IBM. It needs to begin working with regulators to build a system that is stable while still allowing for innovation. In addition, firms will have to specialize and deliver on their promises to clients.

A key area that requires improvement is managing and pricing risk, the report says.

“Most firms will also have to rebalance their portfolios to accommodate the increasingly sophisticated environment in which they are operating. In other words, they will have to continuously assess their risks and returns across each line of business and adjust their business mix accordingly. Moreover, they will have to place as much emphasis on balancing the risks as they do on balancing the returns, rather than concentrating primarily on returns, as the industry has historically done.”

The survey produces a disturbing image of an industry that is seriously out of touch with its clients. More than 60 percent of buy side executives said providers offer products that serve their own interests, rather than clients’. Nearly half of the sell-side respondents agreed.

“ So it is hardly surprising that many investors and intermediaries no longer trust the industry.”

For years financial firms have been pushing the one-stop shop despite consumers’ persistent lack of interest in the concept. Financial executives themselves will admit they don’t practice what they preach – they use different providers for insurance, investing and checking accounts. But they still believe in pushing it to customers who don’t want it. What customers do want is unbiased high quality advice and excellent service.

“In fact, 70 percent of executives proved completely disconnected from their clients.” In the future success will depend on understanding what clients want and delivering excellent service, not just selling the best products.

With IBM’s recent acquisitions of Algorithmics in risk management and i2, an analytics firm in the UK — the company is clearly putting its money on the transformation directions outlined in the report. The authors stress the need to identify and serve specific customer segments rather than flogging products.