Outsourcing maestrom axed
The sudden removal of veteran executive Ramy Bourgi and head of securities Neil Henderson from their posts at JPMorgan Worldwide Securities Services (WSS) was perhaps inevitable following the long telegraphed collapse of the custodian’s flagship outsourcing arrangement with Schroders Investment Management.
That said, given the retirement of Tom Swayne, head of JPMorgan Investor Services at the beginning of this year, and the departure of other long-serving personnel over the past 18 months, Bourgi’s exit marks something of an end of an era.
Co-head of the WSS business for Europe, Middle-east and Africa, Bourgi had been a member of JPMorgan’s senior management team since 1992 – no mean feat given the sea change the industry has undergone in the past decade.
Given that the Schroders deal was one of the high-profile ‘lift out’ arrangements that kick-started the whole outsourcing ‘boom’ five years ago, its disintegration has undoubtedly dealt a blow to JPMorgan’s
pretensions in the outsourcing arena. However, Bourgi’s response said a lot about the man.
He stepped up to the plate to admit that mistakes had been made, not least trying to create a separate outsourcing platform from scratch, rather than building off a client’s existing systems – as, indeed, was ultimately done using Morley Fund Management’s infrastructure. The initial decision to segregate - rather then integrate - the firm’s outsourcing activities from other business lines, by setting up its Asset Managers Solutions Group as a stand-alone entity, had been another misjudgement. This refusal to hide behind the usual corporate blather was refreshing, and widely admired outside the bank.
Bourgi’s departure sees his co-head Liz Nolan, who also runs the clearance division, assuming full regional responsible for WSS EMEA. This ‘job share’ between Bourgi and Nolan - instigated earlier this year when the Investor Services and Institutional Trust Services businesses were combined to form WSS, which in turn joined Treasury services as a subset of JPMorgan Treasury & Securities Services (TSS) - was in any case perhaps not the ideal way to run the show. Such arrangements do not have a particularly good track record and can infer a lack of clarity and consensus at the highest level.
Where Bourgi will no doubt be missed is on the client relationship side of the business, a key priority for the bank – at the time of the reorganisation in April, TSS chief executive Heidi Miller stressed that its commitment to growing the securities services business “through a relentless focus on clients”. A relationship and sales man to the core, Bourgi was held in high esteem by many major clients in the EMEA region, particularly those in the Middle-East. Responsibility for client management in the region now passes to senior vice-president Richard Warne, who will report directly to Tom Christofferson, WSS global head of client management.
In addition, Neil Henderson’s replacement as head of the securities division - senior vice-president Conrad Kozak - has also had management experience on the client service side during a 27-year stint with the bank. Having also held positions in sales, operations, planning, finance and product management over that period, Kozak should offer a safe pair of hands on the tiller while the securities business looks to bounce back post-Schroders.
Depending how you look at it, JPMorgan’s efforts to get back in the saddle will be either helped or hindered by the news that F&C Asset Management has decided not to extend its existing relationship with Mellon by outsourcing the assets acquired via its merger last year with Isis Asset Management. (Ironically enough, Isis had been due to outsource to JPMorgan back in 2003, only for that deal to be nixed by the F&C merger.) Meanwhile, Merrill Lynch Investment Managers mandate held by The Bank of New York - which has made major investments in its spanking new SmartSource outsourcing platform - is to be bid for again, and may well be taken back in-house.
Such tribulations will either relieve some of the pressure on JPMorgan – or, in light of Schroders, they signal the appearance of the first serious, and potentially terminal, cracks in the larger outsourcing edifice. And such a scenario - given that custodians see outsourcing as the means by which they will claw back those revenues lost due to the commoditisation of much of their traditional offering - would not be good news at all.