Webinar: Trust Banks – Asset Servicing: The Cyclical vs. The Secular
Hosted by Jefferies Bank Research Analyst Ken Usdin, this webinar features James Hockley, managing consultant in our asset management and wealth management teams, discussing the trust banks and dynamics in outsourcing, custo and fund administration.
Key topics included the competitive landscape, investments and fintech, products and pricing.
You can access the replay at 855-859-2056 – or at 404-537-3406 for international callers – using ID# 2379893 until 7th June 2018.
- The competitive landscape remains fierce. Service providers across the spectrum continue to re-assess the importance of asset servicing to their broader businesses, with many increasing investments of late. The universal banks are focused on their ability to leverage their markets/execution platforms and their global footprints. Smaller and more regional providers continue to focus on specialized offerings/expertise and local relationships. Large clients also continue to generally consolidate the number of service providers, which should benefit those with true scale, including the trust banks, but also leaves some room for top niche offerings. The ever-increasing complexity of managing financial assets and regulation/reporting is driving increasing demand in this regard for specialized products. Provider consolidation should continue over time, but likely on a smaller scale relative to history or hopes, as most are focused inwardly on investments.
- Investing to drive efficiencies and to improve client experience. While most asset servicing platforms are built on older technology, there is significant opportunity to improve upon the legacy infrastructure. Data retrieval and distribution from various feeds and systems is an ongoing challenge. The push toward digitization should provide not only cost efficiencies, but also improved product creation/delivery and end-user experience. Investments in robotics are also driving more automation and self-service possibilities. While blockchain and distributed ledger technologies are only utilized in a small way today, they are becoming embraced as part of the longer-term evolution of the securities execution/servicing lifecycle. It could, however, take the better part of a decade (or even longer) for both full embodiment and for potential disintermediation to arise.
- Middle office outsourcing remains a key focus; decent pipelines. While back-office offerings remain a core competency for service providers, the middle-office has become a stronger focus. The global trend toward outsourcing the middle office remains strong, with prospects of reducing both costs and minimizing distractions to the core business of managing assets. Europe has traditionally led this part of the market, with North American opportunities more present of late. The regulatory burden also continues to intensify, leading more clients to consider outsourcing to satisfy increasingly demanding reporting requirements.
- Clients always focus on pricing; pieces are becoming more scrutinized. Appropriate value attribution for services/products provided is an increasing focus on both sides of the table. The post-crisis period led to increasing discussion and awareness around ancillary revenues in areas such as FX trading and securities lending. As interest rates rise, the value garnered from net interest income generated from client deposits will also be more closely watched (i.e. higher deposit betas over time, which is to be expected). For larger deals, the sales cycle remains quite long, as does the implementation period. This puts the burden on providers to show well at each big pitch given that only a few big ones are likely to hit each year.
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