Custody leaders tell us what they think differentiates their firms from rivals, and talk about challenges facing them and their asset manager clients.
NO PRODUCT PUSHING
Marc Briol (CEO, Pictet Asset Services)
We are organised for and around our clients rather than simply pushing our products; we are thus carefully listening to their needs, blending our staff stability and experience with our flexible approach. We are selected for our niche and personalized added value service provision suited for sophisticated asset managers, banks and pensions.
The focus is being increasingly and rightly so put on operational integrity and controls framework. Our clients take a hard look behind the scenes to confirm the evidence through on-site visits.
We were increasingly asked about the overall industry pricing level of the industry by clients and prospects who are now understandably so increasingly worried about the unsustainability of the offerings of certain providers looking exclusively for assets accumulation.
Regulator pressure will continue and the debt crisis will certainly reinforce that trend.
The industry will also probably be challenged in terms of potential conflicts of interest since clients will look at more agile solutions and connectivity across the value chain rather than imposed solutions upon them.
Frank Froud (Head of EMEA Asset Servicing, BNY Mellon)
We are the only US bank to retain a AAA rating, underlining our financial stability and security.
Our clients’ challenges are bound up with our own. Our central challenge is to continue to satisfy their needs around risk mitigation, transparency, compliance and cost management. With 25 pieces of new legislation in scope in Europe right now, regulations are not only proliferating, they are becoming ever more complex and onerous. Meanwhile asset servicing providers are coming under increasing pressure to provide greater fiduciary oversight across the value chain while also continuing to ensure a business-as-usual approach to delivering high quality service and innovative new solutions.
Our industry is at a transformative moment, one that demands a reassessment and reinvention of how we do business, with whom and on what terms.
Most of all, the risk-reward profile of this business has shifted radically in the past decade, and we will need to price those risks in a more realistic fashion.
Penelope Biggs (executive vice president – regional head of institutional investor group, Northern Trust)
Our ability to deliver data solutions as part of our Institutional Governance Services suite is a differentiator, delivering independent data to a granular level, providing clients with the increased transparency and oversight they require.
Clients challenge us to provide greater transparency and granularity in a faster environment, in order to make more informed decisions.
Dealing with the growth and complexity of regulation will continue to be the biggest challenge in 2012. Not only do we need to understand how it’s impacting our business, but also the implications for our clients and their clients.
One of the most challenging aspects is the pace of the rule-making process in both the US and the EU. Rapid rule-making requirements allow little time for planning and implementation; in other situations, slow rule-making hinders progress.
Joanna Meager (global head, operations, RBC Dexia Investor Services)
Our ability to leverage our onshore and offshore capability, in geographies that are important to our clients, remains one of our most significant competitive advantages. Also, based on the long term relationships we have managed to sustain, we have witnessed a shift from being a more traditional service provider to a consultancy type role offering solutions to many different challenges in the asset management space.
Ongoing turmoil in the financial markets will place significant pressure on asset managers seeking performance. Helping our clients manage regulatory risk, whether Ucits IV, AIFM or eventually Fatca will play a significant role in 2012 and beyond.
Guido Buehler (head asset servicing, UBS)
The differentiator Today, custody clients ask for an integrated offering going beyond the classic global custody services. UBS Asset Servicing therefore combines a wide range of transaction banking and reporting services like custody and securities lending, risk reporting, fund services and cash management as well as direct access to execution platforms.
Safety, transparency and convenience. Regulatory changes will continue to be complex and to cause substantial efforts in the compliance organisation, the education and the bank infrastructure. But to champion this challenge also means to build the foundation of future cross-border business as clients want to be sure to be safeguarded against any violation of local regulations.
The other long term challenge will be the mastering of the pressure on margins for core custody and to remain innovative in the offering of value added services.
FUNDS OF HEDGE FUNDS
Bruno Prigent (deputy head of Societe Generale Securities Services)
The differentiator A proprietary network of sub-custodians covering 24 countries, part of a global coverage of more than 80 countries and representing the broadest geographical coverage of Europe. Dedicated multi-country IT platforms for supporting the provision of funds administration and transfer agent services. Expertise in trading on funds and hedge funds with direct market access and trailer fees management. A European tax hub to serve our fund administration’s customers.
Regulatory initiatives are mostly creating our challenges. Similar challenges faced in 2011 are likely to be continued in 2012. We mainly anticipate the impact of AIFMD and Ucits V on the depository organisation and level of risks as the two directives aim at reviewing the definition of its role and liabilities. The OTC derivatives and collateral activities will be deeply transformed due to the enforcement of EMIR and Dodd-Frank Act.
Henrik Staffas (vice president, head of fund services, Swedbank)
The main differentiator in comparison to competitors in Swedbank’s home markets is the strong and solid technical product alliance we have in cooperation with JP Morgan.
The challengeKeeping pace with the many regulatory changes ahead of the securities industry and preparing for the necessary internal developments. Also, to continue to monitor the developments and preparations for the regulatory changes and T2S.
EMERGING MARKET ACCESS
John Van Verre ( head of global custody, HSBC Securities Services)
HSBC’s ability to offer our customers - all over the world – an opportunity to tap into the faster growth emerging markets; our broad suite of global markets products, including prime services; the strong global footprint and the in-depth knowledge of local markets.
The ongoing changes in the regulatory environment. As many changes are being implemented within a relatively short period of time and the detailed requirements are not yet available for some of the new regulations, there is little time for making all the required operational and IT changes.
The changing regulatory environment will drive new business models, for example, clients looking more and more for end-to-end solutions and transparency. At the same time clients are very focused on cost control. The challenge will be to balance the clients' service requirements with the ongoing efforts to leverage Global Operating Models and the drive for efficiency.
RELY ON US
Kelly Mathieson (managing director, global custody & clearance business executive, JP Morgan)
The differentiator JP Morgan’s leading global custody service gives clients extensive options with a uniquely broad and deep range array of capital markets services including collateral management, securities lending, foreign exchange, and performance measurement. Clients rely on us for support that extends beyond trade settlement and custody to encompass the entire investment cycle.
Pricing pressures continue to impact custodians, particularly in light of the sustained investment necessary to support regulatory reform and develop new services to support our clients in evolving markets. Although the details underpinning much of the proposed regulation have yet to be defined, we must determine today what products and technology will be required tomorrow.
2011 also brought staggering market challenges...such as the Arab spring, catastrophic natural events such as the earthquake in Japan, and political and economic events playing out in Eurozone economies and the United States.
Geoff Cook (partner, Brown Brothers Harriman)
Our partnership structure drives our collaborative and flexible approach which allows us to align with our clients’ priorities. Our global service model offers clients a single point of access to BBH across the globe, providing full data transparency. Our clients benefit from our consultative approach to relationships, co-creating and implementing solutions to grow their businesses.
One of the main challenges for custodians over the past year has been helping clients to navigate the changing regulatory environment. Looking forward to the next year, we expect the major challenges to be negotiating the continuing regulatory change, and how to best align with our clients to support their global business growth in an environment of uncertainty.
©2011 funds europe