State Street

The Boston-based global custodian is different from almost every other provider in this survey. It is being assessed not by relatively small or alternative asset managers, but the collective verdict that these scores represented is delivered by some of the biggest names in asset management in the United States. While the results represent a recovery – in most, if not all, service areas – from the nadir of 2017, they still leave State Street underperforming the survey average. The needs of larger clients are more complex, and their expectations are higher, as the detail of the comments reveals. One client wants“ improvement around timely invoicing and set-up of new accounts / user IDs on the My State Street portal.” But even after making allowances for demanding clients, it is striking that only the score for transfer agency even gets close to rankings that are routine for other administrators in this survey – and even that is based on a limited rate of response in that area. The lowest score of all is incurred in precisely the field where forgiveness for operational shortcomings is most easily earned: relationship management and client service.“ Relationship management is pretty weak,” is the verdict of one respondent. Not everyone agrees the relationship managers are a problem – the“ engagement and attentiveness of [ the ] relationship management team” is singled out as a strength by one client – but the average score tells its own story. The detailed scores also suggest that client service officers are experiencing churn, with a consequent loss of knowledge, experience and the ability to get things done. One client says that“ officers supporting the business are somewhat new and require more senior level oversight. A lack of depth of personnel servicing our account has been more evident over the past year.” A second cites“ staff turnover” as problematic. Likewise, fund accounting – a core business at State Street, and a source of robust scoring in 2016 and 2017 – is admired only for its timeliness, not for its accuracy, and certainly not for the reconciliation process that lies behind it. The ability of State Street to value alternative investments and instruments( such as swaps) is also called into question. In operations and custody, where the bank should expect to shine, there are instead brickbats for inadequate settlement procedures.“ Settlement services, especially non-US settlements” – an unkind verdict for a global custodian – are the weakness identified by one client. Another client also cites“ settlement response” as problematic, while a third has noticed“ errors processing trades that require manual touch-points” and“ issues with data file quality.” At bottom, State Street aims to deliver to major buy-side clients a scalable, real-time accounting system, which can be combined seamlessly with global custody and cash management on technology and data platforms that minimise operational and regulatory risk. This is not easy to deliver when every client is large enough to demand to be serviced in a unique way(“ ability to customise” is exactly what one respondent likes most), but it does insulate State Street from rapid client turnover. What one respondent values is a“ long-term relationship,” which means that State Street“ knows [ their ] business and processes and is able to leverage a centralised client service team across multiple jurisdictional service sites”. The obverse of this is that clients are unlikely( even unable) to exercise their right of exit. The only way they can get better and more-innovative services is by complaining about the poor quality of the services they receive today.