The halcyon days of broker-dealers splashing out on technology are set to come to a shuddering halt, and headcount may be trimmed as a result.

A report by consultancy Celent reckons that IT spend within brokerage firms will shrink from the 8.5% annual growth enjoyed from 2004 until last year to a mere 1.3% increase going forward until 2011.

David Easthope, senior analyst at Celent, says: “In line with moderate expectations for growth and decreased appetite for grandiose IT projects, operational efficiency and cost-reducing initiatives will be the centrepiece of many brokerage firm’s IT plans.”

And these cost-cutting exercises are bad news for staff. Consultancy Oliver Wyman says that headcounts are usually cut in lean times such as this.

More specifically, recent attention has been focused on brokerages bolstering their front-office capabilities, but this is now going to shift to back and middle-office operational efficiency projects rather than expansion plans.

The new darling of financial IT, risk management, is predictably top of brokerages’ technology priorities. However, compliance and portfolio management continue to be the beneficiaries of IT spend.

Just how long this belt-tightening continues will depend on the individual firm, says Chermaine Lee, analyst with Celent and co-author of the report.

“The closer the firms are to the subprime flame, the bigger and possibly longer the IT spending priority adjustments,” he says.