[ O P I N I O N
parallel processor may not be sufficient
for a data universe covering both front
and back office with their different regu-
latory reporting requirements and penalty
regimes.
And finally, we need to revisit the client
service and support model. We have the
choice of multiteam specialists to serve
the client or a lead relationship manager
with access to specialist support. In time,
and with training, more lead relation-
ship managers will be capable of wider
coverage and there will be a lesser need
for the specialist support. But investment
is going to be needed to train client facing
vestment process and deliver real value.
This in turn creates opportunities for us
to broaden and deepen our client rela-
tionships across products and services.”
Rumours from the industry suggest
that CRD had more than one suitor
at the time before its acquisition, and
perhaps the decision by State Street was
taken pre-emptively in order to beat its
rivals to the punch.
But has it been a success? So far, only
Lazard Asset Management has publicly
said it intends to adopt State Street’s
front-to-back solution. State Street said
another un-specified firm intends to go
live with the solution, and there are also
another five or six that are working their
way through negotiations.
Meanwhile, BNY Mellon has acceler-
ated forward with its partnership model,
and since its first deal with BlackRock in
April last year, the global custodian now
has alliances with a variety of vendors
to deliver unique technological and
data-driven services.
According to Hani Kablawi, CEO of
global asset servicing and chairman of
BNY Mellon EMEA, the core of its open
architecture is giving its clients the
freedom to choose whatever front-office
system is best-suited for their invest-
ment operations and trading strategies.
“We want to be the enabler for that
operating model. Through an open
architecture, we can, and should, be able
and willing to link up with any OMS in
the front-end, or be one of a number of
custodians for a client,” said Kablawi.
Last year Charlie Scharf, BNY Mellon’s
former CEO, said on the bank’s earnings
staff to grow their knowledge base and be
able to provide a more holistic view of the
client’s product range. And, as front-of-
fice products evolve at a faster rate than
new back-office solutions, leading edge
clients are going to demand ever greater
coverage of markets and products, from
knowledgeable counterparts. And one
should not forget that traditionally im-
mediacy is on a different scale when one
talks front-office versus back-office.
The new idea of back-to-front is excit-
ing. It will also be a costly investment
for those who want to get it right for it
reaches into the core of the business with
call that under the open architecture
ethos it would rule out any acquisition of
a trading software platform. “The strat-
egy has always been to provide clients
with choice, and not dictate a single set
of solutions for clients. With respect to
OMS, we would not have considered an
acquisition because it did not align with
our strategy of open architecture.”
However, while BNY Mellon owns the
mountain of custody and fund services
data that it passes through BlackRock,
Bloomberg and SimCorp, it does not
charge any extra for those mutual clients
to access it. The partnerships may not
bring in any direct revenues like State
Street Alpha would, but Kablawi said
they will be an indirect contributor to
the asset servicing business.
“To the extent that we are providing
investment data management or analyt-
ics solutions, clients will pay and have
been paying for those services, and it is
something we are continuing to build on
and mature. If we are providing produc-
tion data, near real-time, and allowing
the client to consume it when and
where they want, that makes our client
relationships stronger, and that’s just
as important as finding new
revenue streams,” he said.
But State Street is hop-
ing to build on its front-
to-back solution and move
even closer to the invest-
ment execution process with
a planned launch of an outsourced
trading service, and thus creating
a new revenue stream. This would
target small- and medium-sized asset
|
F R O N T-T O - B A C K ]
new technology, new operating proce-
dures, new compliance challenges and a
major need for up-skilling of staff. The
value added, if the market gets the detail
right, will be remarkable and will further
accelerate the decline of the legacy tradi-
tionalists against the “new world” survi-
vors. But, with fees tumbling still and the
monetisation of data proving difficult to
achieve at anywhere near the scale initial-
ly forecast, the question will arise around
whether the new paradigm is profitable
enough to merit the major investment
needed. Survival, as always, at times of
material change, will be challenging.
managers that can no longer uphold the
costs of running their own trading desks.
Both organisations have a long-term
view for their front-to-back strategies,
with data being at the heart of this
newly-created competitive market. What
is clear is that revenues from custody
and fund administration may continue
to wane in the face of asset management
cost pressure. But both BNY Mellon and
State Street are becoming extremely
creative over how to tap new reve-
nue streams and adapt the asset
servicing model.
Spring 2020
globalcustodian.com
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