Asset Servicing
| Date: | January 2007 |
| Author: | James Hockley |
Custodian banks make much of their value-added product range. They recognise that it is not enough to have a solid core service but that they must also offer an ever-expanding range of value-added services.
As the investor services industry matures, the time has come to seek new phraseology and recognise that the core requirements of each investment manager (and all other types of investor services client) will differ and be dependant on their own unique business model. To the investment manager client, the value add will come from a number of different perspectives - does their provider provide a good, accurate and timely service, that supports their evolving product range and their distribution strategy?
In this report, we explore how the investor services model is developing and how the key provider organisations are developing their business models to align better with the changing investment landscape.
We review custodian banks' service and product propositions and ask:
- What are the core services that form a base competency?
- Which value added services are increasingly becoming mainstream - are these services investment managers want?
- What is the next wave of services that need to be developed?
- And how will managers and custodians work together better to identify, develop and deliver services that are in the interest of both parties.
Learning from current and past experience, we look forward at the likely impact of changes within the investment industry on custodial and administration services and on the relationship between the investment managers and their custodial bank providers.
We identify those obstacles that will need to be overcome if the development of the investment industry is to be successfully completed.
Table of contents
| Management Summary | 1 | |||
| 1.0 | Introduction | 3 | ||
| 1.1 | Background | 4 | ||
| 1.2 | Research process | 5 | ||
| 1.3 | Terminology | 6 | ||
| 1.4 | Who are the key providers? | 8 | ||
| 1.5 | The global custody world in 1996 | 12 | ||
| 2.0 | Landscape | 15 | ||
| 2.1 | Key initiatives within investment management | 16 | ||
| 2.2 | Key initiatives within service providers | 17 | ||
| 2.3 | Types of provider and their corporate focus | 22 | ||
| 2.4 | Use of multiple providers | 25 | ||
| 3.0 | Products and Services | 27 | ||
| 3.1 | Service tiers | 28 | ||
| 3.2 | Service take-up and expectations | 31 | ||
| 3.3 | What type of businesses are they? | 33 | ||
| 4.0 | Service Quality | 35 | ||
| 4.1 | Service quality assessment | 36 | ||
| 4.2 | Industry surveys | 38 | ||
| 4.3 | Service benchmarking | 41 | ||
| 5.0 | Financials | 43 | ||
| 5.1 | Revenues and costs | 44 | ||
| 5.2 | Fee transparency | 48 | ||
| 5.3 | How do investor servicing organisations make money? | 49 | ||
| 5.4 | Investment managers and fees | 51 | ||
| 5.5 | Likely fee trends | 52 | ||
| 6.0 | Innovation | 53 | ||
| 6.1 | Investment industry changes | 54 | ||
| 6.2 | Managers’ stated needs | 56 | ||
| 6.3 | Providers’ stated aims | 59 | ||
| 6.4 | Product innovations | 60 | ||
| 6.5 | Data innovations | 64 | ||
| 6.6 | Providers’ business innovations | 66 | ||
| 7.0 | Forward Thinking | 69 | ||
| 7.1 | Forward Thinking | 70 | ||
| 7.2 | Investment managers’ sourcing strategy | 71 | ||
| 7.3 | Evolution of the manager custodian relationship | 73 | ||
| 7.4 | Relationship management – a growing challenge? | 74 | ||
| 7.5 | Common themes | 78 | ||
| 7.6 | Relationship pointers | 80 | ||
| 8.0 | Conclusions | 81 | ||
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