INEUM Kurt Salmon                           QUADRICHROMIE                                               INE_06_0409_Logo_C...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                     INEUM Kurt Salmon                 ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                     INEUM Kurt Salmon                 ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                   INEUM Kurt Salmon                   ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                     INEUM Kurt Salmon                 ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                    INEUM Kurt Salmon                  ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                                                       ...
KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY                      INEUM Kurt Salmon                ...
ContributorsWe would like to thank the financial institutions whocontributed to our research and their participation in th...
Our officesGERMANY - DÜSSELDORF              USA - SAN BRUNO                     JAPAN - TOKYOKönigsallee 11              ...
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  1. 1. INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Kurt Salmon Investment Servicing Business Confidence Index - Survey Building and maintaining sustainable business in the asset servicing and management industryJuly 2011
  2. 2. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 About Us Kurt Salmon is a global management consultancy of more than 1,600 consultants in 15 countries across five continents. Our clients are industry leaders who benefit from our deep industry and functional expertise. As trusted advisor, Kurt Salmon partners with clients to design, and then drive strategies and solutions that make lasting and meaningful impact. We are committed to deliver measurable results for our clients through executional excellence. Kurt Salmon is part of Management Consulting Group Plc, listed on the London Stock Exchange.2
  3. 3. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100ContentsResearch Background 4Executive Summary 5A snapshot of industry attitudes and key concerns 7 Optimism to creep through from a current low 7 Market is split as asset servicers identify opportunities 8 National optimism differs whilst caution remains a general trend 9 Key concerns are consistent throughout the industry 10Navigating in turbulent times - actions taken by the industry 12 Earnings growth will be limited with some players expecting more 12 Transfer concerns into harmonized strategies – the industry approach 13 Enhancing the existing value proposition as an effective approach to sustainable growth 14 Regulatory changes pose a challenge and opportunity 15 Operational efficiency is a key to cost reduction 16 Take care of the customers 17An industry approach to building and maintaining sustainable business 19 Case study - Brown Brothers Harriman: partner in the pursuit of business sustainability 19 Kurt Salmon, the business sustainability process 22 3
  4. 4. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Research Background The investment servicing industry has been under considerable pressure in recent times. During May and June of 2011, Kurt Salmon conducted a survey in an effort to gauge current sentiment and expectations over the coming 6 months. Senior Executives representing both Asset Managers, Asset Management Companies and the providers of Asset Servicing were questioned on topics such as business environment and earning expectations, areas of concern and the strategies that have been put in place. The report provides a barometer of views on the current situation and plans for the near future with an aim to identify key strategies that will endure beyond the coming six to nine months. Figure 1 Number of financial institutions polled 28 participants Senior Executives were • CEO polled • COO Asset Manager • Country Head 36% • Head of strategy and products 64% Asset Servicing • Head of regulatory affairs • Head of sales and distribution Assets size Asset under Management (USD • 1.6 Trillion) Asset under Custody • 107.3 Administration (USD Trillion) 9 countries Countries coverage Countries coverage Australia, Belgium, France, Ireland, 4% UK/Ireland 4% Japan, Luxembourg, Portugal, Luxembourg 11% 21% Switzerland, UK 3% France 7% Belgium Portugal 14% 36% Switzerland Japan Australia4
  5. 5. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Executive SummaryAsset Mangers and Asset Servicers alike, find the current business climate difficult with neither expecting asignificant improvement for the second half of 2011. On the other hand, the level of skepticism differs with AssetService providers registering as marginally cautions rather than full out pessimistic. Asset Managers are clearlyexpecting the doldrums to persist well into 2012.For a good part, low interest rates, general market instability (in particular the European financial situation) andregulatory burden are responsible for poor expectations across Europe, Australia and Japan. A closer look revealsa somewhat polarized landscape - clearly some countries are dealing with particular issues; Japan and Portugal forexample, whilst other regions and in particular Benelux expect a better than average improvement.In addition to agreeing on industry concerns that appear less than positive the market also appears to be in agreementregarding earnings growth expectations which remain mostly cautions. With fewer external opportunities theasset management industry will turn to its core services and infrastructure with an aim to maximize the potentialof existing products through enhanced distribution - BRIC and CIVETS markets are key - and focused pricing. Inparallel to the expected revenue increase, cost reduction, which means streamlining operations, will result in a netgain.One sign of an industry trying to draw competitive advantage from wherever it might arrive appears in the form ofFATCA, AiFMD and UCITS IV/V. More industry participants will find ways to have regulatory reform work for themthan not.At the end of the day the customer matters. Every player in the investment servicing business will make sure thatthe customer experience is close and quantifiable. Michel Kabanga KAYEMBE Investment Funds Advisory Services, Practice Leader 5
  6. 6. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K1006
  7. 7. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 A snapshot of industry attitudes and key concernsOptimism to creep through from a current lowTough market conditions have almost become the norm with ongoing economic crises raging through Europe.The investment servicing industry as a whole is contending with one regulatory reform after another which addschange on top of an already unstable base. Emerging markets continue to grow but not without a few falteringsteps, adding to an air of nervousness, further compounded by unprecedented natural disasters, such as Japan.In the face of adverse conditions industry confidence is not surprisingly low and should remain that way thoughthere does seem to be a glimmer of hope from some industry contenders over the next six to nine months.Figure 2 Perceptions about the current business conditions Over the next 6 months 33.0 52.7Key findings from our research• arket pressure and few opportunities are putting a squeeze on the investment servicing industry as reflected M by a negative perception of the current business conditions.• ver the next 6 months conditions are expected to improve with an increase of 19.6 points. O• arket pressure pushes industry players to pursue their effort in containing cost while looking for new sources of M revenue with a focus on the value proposition in light of limited opportunities. 7
  8. 8. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Market is split as asset servicers identify opportunities Asset Servicers have converted changes, whether directly positive or negative, into opportunities whilst Asset Managers have not. As a result Asset Servicers expect some improvement in business conditions, a factor that creates a clear distinction within the investment servicing industry. Figure 3 Over the next 6 months – Asset Managers Over the next 6 months – Asset Servicers 38.4 14.3 Key findings from our research • Asset servicing providers and asset managers are separated by a difference of 24.1 points. • sset managers are considerably more pessimistic as they don’t see any future structural changes over the next A 6 months. The asset management industry will have to demonstrate its capability to cope with the uncertainty through new sources of revenue with a clear approach for survival. Their confidence is to improve with an increase of over 4.5 points. • sset servicers expect an increase of middle office outsourcing and plan to extend their global service offerings A capabilities despite great regulatory burden. Their confidence is to improve with an increase of over 15.2 points.8
  9. 9. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100National optimism differs whilst caution remains a general trendA common trend of low interest rates, general market instability and regulatory burden ties regions – cautionprevails. However, different regions are facing different challenges a fact reflected by varying levels of optimism. Figure 4 Confidence Level Frontier 25% 33% 42% Benelux 17% 50% 33% UK / Ireland 25% 50% 25% France 0% 50% 50% * Australia / Japan 33% 33% 33% Switzerland * 100% Portugal * Limited sample set of 1 or 2 participant(s) Pessimist Cautious OptimisticKey findings from our research• ocal market conditions are considered favorable by 42% of organizations surveyed - Luxembourg, as the largest L fund administration platform in Europe remains optimistic.• In Luxembourg, Asset servicers are expecting: • Asset funds to return to pre-crisis levels and to win new mandates (small, medium and large size). • Demand for Specialised Investment Funds (SiF), private equity structures to increase. • Modest increases in interest rates are expected to have a positive impact on net interest income revenue.• All other regions remain cautious. 9
  10. 10. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Key concerns are consistent throughout the industry Regardless of the industry sector or region the core concerns are evident. Asset managers and service providers are harmonious about the root cause of negative sentiment in the prevailing business environment. Figure 5 Industry main concerns Asset mgt Asset servicing Regulatory burden cost related 50 50 N=2 Client nervousness 67 33 N=3 General market uncertainty 43 57 N=7 Stock market downturn 100 0 N=3 EU financial crisis 62 38 N=13 Japan tsunami, nuclear crisis 75 25 N=4 Middle east political instability 50 50 N=4 Low interest rate 36 64 N=11 Key findings from our research • 6% of the participants are concerned about the EU financial crisis, the low level of interest rates and general 6 market uncertainty. • he industry is clearly sensitive to the market conditions. This means it is imperative that asset managers and T asset servicers be able to assess the sensitivity of earnings whatever the business conditions in which they operate. • egulatory burden and related cost have been accepted as embedded to the financial sector. R10
  11. 11. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 11
  12. 12. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Navigating in turbulent times - actions taken by the industry Earnings growth will be limited with some players expecting more Most participants expect little change in the top line however some have clearly identified viable areas for growth. With tough external factors the asset industry will have to turn inwards and innovate with what it already has. Figure 6 Earning growth expected over Asset servicing Asset mgt the next 12 months 14.0 Extremely optimistic 20 13.2 Optimistic 11.5 8.5 A cautious outlook prevails Cautious 4.1 2.5 Pessimistic 2.5 0.0 Extremely pessimistic 0.0 Key findings from our research • onsidering that a cautious outlook prevails, the average earnings expected range from 4.1% to 8.5%. C • onfidence in structural changes remains low however, the industry expects an optimistic 14% to 20% growth. C • ey Metrics effecting the positive upswing include: K • ncrease in revenue per AuM I • ncrease in average revenue per client I • Increase in net sales per product (fund)12
  13. 13. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100Transfer concerns into harmonized strategies – the industry approachThe asset industry will continue to operate in a restrictive environment one which is driving managers and serviceproviders alike to focus on factors within their control. Strategies to reduce cost (synergy, outsourcing andimproved efficiency) and increase revenue with customers, more evolution rather than revolution, is the recipe forcontinued and sustainable growth, growth against which the industry has marked double figures. Figure 7 Key source of earnings Asset mgt Asset servicing Internal factors Internal factor - value proposition 57 43 N=23 adjustement Revenue Internal factor - pricing discipline 17 83 N=6 Cost Internal factor - cost containment 13 88 N=8 based approach External factor - normalization / of net 0 100 N=6 interest income External factorsKey findings from our research• trategy will focus on the value proposition as attested by 53% of the participants who are already working on S adjustments to secure their source of earnings over the coming months coupled with a pricing discipline in an effort to increase their margin.• ighter filter on deal acceptance with an aim to reject the unprofitable. Whatever the size of the deal, asset T servicing providers who want to stay in the industry have recognized the importance of identifying non profitable clients.• iFMD and UCITS V bring with them the necessity to align risk against reward with the liability of a depositary A or custodian bank. 13
  14. 14. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Enhancing the existing value proposition as an effective approach to sustainable growth Most organizations will follow a common trend and capitalize on existing products distributed through new and/or extended channels. In parallel, cost will be driven down with externalization of middle-office functions. In general confidence is high that these two measures will promote stable growth over and beyond the next six to nine months. Figure 8 Components of an adjusted value proposition Slice #1 Extending distribution capabilities, reporting services 7% Slice Slice #2 Middle-office outsourcing #5 capabilities (OTC, collat mgt) 29% 18% Slice #1 Slice #3 Expending business to new markets Slice #4 / extending geographical coverage (mainy Emerging Markets : BRICS, CIVETS) 21% Slice #3 Slice #4 Fund governance, directors ships, 25% oversight and risk management Slice #2 Slice #5 New asset class / investment solutions capital protection (e.g asset allocation) Key findings from our research • nvesting in distribution services, reporting and middle–office services are the priorities for the next 6 months and I should provide continued growth. • he enhancement of distribution capabilities will require organizations to establish and develop relationships T with 3rd party distributors in the perspective of an open architecture for example; reaching beyond an asset manager’s traditional network. • any organizations also expect to expand their business into the emerging markets, such as BRIC and CIVETS M regions (Brazil, Russia, India, China, Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa respectively).14
  15. 15. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100Regulatory changes pose a challenge and opportunityA number of regulatory changes are either on the horizon or already in motion and although not identified asa particular cause of concern their strategic relevance becomes interesting when turned into a competitiveadvantage. Over two thirds of interviewees are approaching regulation as such. Figure 9 Is regulation a constraint or does Main regulation being implemented over the next 6/9 it create some opportunities? months Asset mgt Asset servicing 15% Slice #1 33% Slice #2 Other / general regulation 40 60 N=5 T2S 100 N=1 52% Slice #3 Solvency 67 33 N=3 CAD 100 0 N=2 DODD - Franck 29 71 N=7 RDR 100 0 N=2 Slice #1 A pure constraint FATCA 44 56 N=16 Slice #2 Offersome opportunities AIFMD 29 71 N=14 UCITS V 38 63 N=18 Slice #3 Each constraint can create an opportunity UCITS IV 30 70 N=10Key findings from our research• nly 15% of those polled identify regulatory change as a pure constraint with an overwhelming 85% that identify O some kind of opportunity.• hanges in regulation are identified as an opportunity even though they are considered a constraint by some C 52% of those polled.• he top 3 regulatory changes in sight for the next 6 to 9 months: FATCA, AiFMD and UCITS IV. T 15
  16. 16. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Operational efficiency is a key to cost reduction Organizations will (if not already doing so) break down their different functions in order to harmonize processes, find synergies and indentify tasks that can be handled elsewhere. At the same time centers of excellence will further improve economies of scale and efficiency leading to lower costs. Figure 10 Operational efficiency constituents Enhance / Rationalize platforms Shared services refer to: HR, 18% compliance, legal or IT functions Shared services Offshoring / nearshoring 33% 11% 7% 31% Centre of Outsourcing Centre of excellence refers to a excellence functional expertise located whether in one country or in a specific region Key findings from our research • reater operations efficiency is a key to future growth with shared services (such as HR, compliance and G legal), centers of excellence (with functional expertise being located in one country or region) and platform rationalization as key proponents. • trong organization is required with well managed procedures to ensure that improvements are effectively S implemented throughout the operational model, resulting in a lower risk of failure.16
  17. 17. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100Take care of the customersAll in all, the industry understands that their clients expect a regular and informative relationship. The ability toestablish and maintain such a relationship will over time increase share of wallet and drive sustainable earnings. Figure 11 Asset manager – Asset servicing – the customer intimacy journey the customer intimacy journey 14% Communicating Communicating 22% directly with 43% directly with clients (Roadshow, clients (Roadshow, survey) survey) 67% 43% 42% 45% Improving client Improving client 37% 36% experience / experience / Ensuring reliability Ensuring reliability 21% 18% of the promised of the promised services services 10% 9% 14% Leveraging / 40% Leveraging / 45% expanding existing expanding existing 40% 23% services and services and expertise 10% expertise 9% Weekly / daily Monthly Quarterly Half a year YearlyKey findings from our research• Regular customer interaction will play a key role in an effort to expand growth.• 0% of asset managers and 45% of asset service providers polled mentioned that they only meet their clients in 4 a formal manner two or four times per year for a strategic review.• oughly 40% of relationship managers (asset managers and asset service providers equally) ensure satisfaction R of services on a weekly basis. 17
  18. 18. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K10018
  19. 19. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 An industry approach to building and maintaining sustainable businessCase study - Brown Brothers Harriman: partner in the pursuit of businesssustainability Geoffrey M. Cook, there is no real return on those investments - interest Partner, rates are needed to give long-term meaningful return. Brown Brothers Liquidity has, therefore, been temporarily restored but, Harriman in the low-interest-rate environment, this may not be sustainable. Geoffrey was made a Partner of the Firm in Until there is a greater agreement, on a multi-country January 2009, is res- basis, on public finance that is in balance with what ponsible for the Firm’s the public is willing to accept, there will continue to Luxembourg office, be uncertainty. We are in an unusual economic cycle, its Global Relationship the likes of which we have never really seen before. We Management and Bu- are all doing okay, people continue to invest in funds, siness Development BBH is doing very well, our own capital investments disciplines as well as are increasing, and however, we are not yet back in a its Fund Solutions and normal economic cycle. Distribution Support offering. Therefore, we would say that the outlook for the market seems to be stable for the immediate future. We expect Mr. Cook is a member it to only start to trend more positively when some ofof the Institute of Chartered Accountants of Scotland. these other structural factors become clearer.1. WHAT IS YOUR VIEW OF MARKET CONDITIONS IN 2. WHAT ARE THE PRIORITIES FOR BBH TO MAKETHE NEXT 6 MONTHS? YOU SUCCESSFUL?Despite the positive rebound in the economy towards The foundation for all our work at BBH is the relationshipthe end of 2010 following the 2008-2009 financial we have with our clients. Therefore, our priorities arecrisis, we at BBH are taking a fairly neutral view of the primarily dictated by those of our clients. This factorshort-term market conditions – in other words, it is has been core to our strategy for many years and willneither positive nor negative, rather, we feel that we are continue to remain so. This is also what we believein a ‘holding pattern’ at the moment. makes our business truly sustainable – our structure and our business model is uniquely client-centric. OursThere is a feeling of uncertainty in the marketplace is a privately held partnership, and our success is fullylargely due to the European government debt dependent on the success of our clients.problems. Uncertainty impacts currencies, the ability toinvest, market stability in both debt and equity markets. How do you align with clients and how often do youMarkets thrive on clarity and direction and, until there contact them?is a clearer path forward in terms of when and howEuropean debt restructuring is to take place, we will We work with our clients to create a framework thatcontinue to live in a slightly surreal world. is aligned around their strategic objectives. In order to attain this alignment, we need to know what our clientsHow do you view bank liquidity at the moment? want to achieve. We also advocate regular contact with clients on all levels. One of the benefits of a partnershipBanks have done a good job of restoring liquidity by structure is that clients can easily access the businessmoving assets out of other financial vehicles into bank owners, and the flat hierarchy promotes collaborationdeposits. However, in a low-interest-rate environment and flexibility. 19
  20. 20. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Our service delivery and strategic approach is local- the business. This approach produces ownership and to-local with a global overlay to ensure a consistent alignment – and ultimately promotes the sustainability approach. For example, one of our main areas of focus of our organisation’s business. in recent years has been on creating a global service model for many UCITS funds which are registered in To ensure consistency of approach globally and to one domicile (for example, in Dublin or Luxembourg) monitor our progress, we have set up, what we call, but sold and invested globally. Those clients need “Disciplines” – for both Relationship Management an operating model that will cover the entire globe – and Sales – in order to provide a framework for our starting in Japan through to the end of the U.S. day employees in the RM and Sales areas. We give them – the end points of delivery are local, in Hong Kong, a toolbox, consisting of a light geographical overlay Tokyo, Luxembourg, New York, and so on. The most of tools and best practices, which the Discipline noteworthy feature of this model is that it is commanded management monitors to make sure that we are and controlled globally to ensure smooth and consistent providing a consistent experience to our clients. The service delivery. Discipline reports back centrally and educate us as to how we are performing. It also delivers sales reporting, In a partnership, the partners are directly liable for which helps us understand where we need to adjust, the the firm’s obligations; therefore, risk management is a types of business we sell, the types of clients, etc. high priority for us. In short, for us, risk is personal. We focus on risk management at the local and global levels. What type of clients do you have and what type are Globally, our focus is at an enterprise risk level which you looking for? covers not only the firm itself, but also every element from credit to operational risk for our whole Investor We subscribe to the philosophy of maintaining a Services organization. Our product risk managers balanced portfolio of clients. We choose to serve a oversee the implications of executing certain functions smaller number of clients than our peers – more in the with certain products. We also have local, geographical hundreds, than the thousands – so that we can build risk functions. Finally, we instill personal responsibility better and longer lasting relationships with each of for risk management in all our employees at every level them. We service the large international blue chip asset across our firm. managers, as well as maturing middle-sized clients, and we also work with some start ups, taking some bets on How selective are you in terms of choosing your new companies that will grow to be successful. A great clients? example - we engaged with an asset manager in 2001 that had zero assets when we started to work with them. To run a sustainable organization we need to be very Today they manage over $40 billion, and we service the selective and focused in terms of our client base, majority of those assets. especially in the current environment. We have very rigorous upfront and ongoing selection criteria for How do you choose a good start up? clients to make sure they are aligned with the type of organization we are and would want to be. We need We look at a start-up’s plans, its products, its area to understand the owners of the organization, their of focus, and get answers to questions such as: Who business philosophy, resources, capitalisation, and are the people that are involved with it? How serious sometimes there are also country /political issues to are they? Do they have the right resources, sufficient take into account. capitalization and backing to get up and running? What are their distribution plans? This can give us a fairly We view top-line growth in two parts in order to be good idea straight away about how realistic and viable sustainable. The first is growth with existing clients, they are. It’s important to have a balanced portfolio to and the second is growth through new clients. We be sustainable – the bigger complex clients will push take a focused approach to both. We have made it our you into new areas, the others medium-sized ones mantra to have very limited stand-alone sales efforts. provide the volume, and the smaller start-ups are a way Whilst relationship management and sales are different of incubating ideas and an exciting source of potential disciplines, we encourage our relationship managers growth. They become collectively a group of clients that to own the whole process and be responsible for the works well together in terms of how we move forward client relationship, both before and after BBH wins as an organization.20
  21. 21. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K1003. WHAT DIFFERENTIATES YOU AND MAKES YOU The proof that our strategy works is really shownTHE SERVICE PROVIDER OF CHOICE? in how we are doing – our clients are expanding, our business is expanding – we service more than $3 trillion1. ur client -centric and consistent approach has O in assets globally, we are expanding geographically and probably been the most important reason why we in terms of products – for example, we are expanding have built a consistent and increasing group of clients our Transfer Agency business for cross-border fund on a global basis. managers – we have trebled our Transfer Agency book of business in the last 18 months and doubled staff in2. ur people – we don’t have an enormous balance O that area, which is key to building out of global funds sheet of assets, which makes our people even more and asset managers’ services. Our clients also continue valuable to us. They are our best assets. For us it is to rate us very highly in industry surveys as well as in our critical to get the people right, which is shown in all own internal client satisfaction surveys which of course, our client feedback, surveys report cards etc. to us, is the most critical measure of our success.3. ur partnership structure – we can consistently, year- O on-year, pursue our focused strategic direction. In 2009-2010 we did not lay off any staff by design in order to proactively maintaining our workforce for the time when we would come out of the crisis and be ready to supporting our clients when they needed us the most. We can adapt our response to market conditions in a measured thoughtful way which can smooth out economic peaks and troughs. We made some modest cost adjustments, but there was no front line impact. The partners accepted a lower return in 2009 and, in 2010, our performance rebounded. 21
  22. 22. KURT SALMON INVESTMENT SERVICING BUSINESS CONFIDENCE INDEX - SURVEY INEUM Kurt Salmon QUADRICHROMIE INE_06_0409_Logo_CMYK 14/12/2010 24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE M100 Y100 Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com M65 Y100 Ce fichier est un document d’exécution créé sur Illustrator version CS3. K100 Kurt Salmon, the business sustainability process From the analysis performed we can trace an almost sequential flow of questions to answers and issues to solutions. Participants representing key areas of the business have made clear their concerns and understanding of where the risks and challenges come from today and forward into the medium term. In doing so and as part of the exercise areas in which the industry is taking initiative to ensure a prosperous and sustainable future becomes apparent. 1 2 3 4 Immersion Set direction Prepare road map Take action What does “business To what extent How should we What feedback do sustainability” the business develop and clients and industry means for your sustainability adds communicate our influencers provide organization? unique value and vision to foster the on this concept? creates lasting broadest possible impact? alignment? Iterate In order to steer a clear path to sustained growth an organized and rigorous approach is necessary. Kurt Salmon has identified four key steps based around a set of Business Sustainability Criteria (the value of any individual criterion is important to the global process) with at the end of each step a value oriented deliverable. The organization in question is measured and referenced against the criteria alongside comparable rivals in order to identify key indicators. With recommendations in hand indicators are built into the organization’s business and importantly, communication mediums. As part of the process implementation value verses implementation cost are clearly evaluated. As is necessary in a constantly evolving and complex environment a periodic (at this time annual) calibration of the Business Sustainability Criteria is performed through an equivalent survey process.22
  23. 23. ContributorsWe would like to thank the financial institutions whocontributed to our research and their participation in thissurvey:• Aberdeen (UK)• Apex (Ireland)• Brown Brothers Harriman (UK, Luxembourg, US)• BNY Mellon (Belgium, Luxembourg)• BNP Paribas Securities Services (Luxembourg)• CACEIS (France)• CITI (Luxembourg)• Credit Suisse Fund Services (Luxembourg)• Dexia Asset Management (France)• Fidelity (UK)• HSBC (UK)• Invesco (Belgium)• JP Morgan WSS (Luxembourg)• KBL (Luxembourg)• Millenium (Portugal)• Natixis (Luxembourg)• Northern Trust (UK)• Pictet (Switzerland)• RBS (Luxembourg)• Schroders (Luxembourg)• Societe Generale Securities Services (France)• State Street Bank (France)• Swiss Global Asset Management (Luxembourg)• Tokio Marine Asset Management (Japan)
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