Assurances by custodians that client service is high on their list of priorities are two a penny, but translating that commitment into client satisfaction is a far trickier proposition. Which is why the annual R&M Consultants global custody survey – now in its twelfth year – is such a breath of fresh air for those of us charged with assimilating the daily propaganda blizzard of mandate wins, rising assets under custody and the latest whizz-bang technological or product innovation. R&M is where the rubber hits the road, and in the final reckoning a brace of egos and reputations are usually left bleeding on the hard shoulder.
Not that this sorry fate is likely to befall RBC Global Services, the London-based custody arm of the Royal Bank of Canada, anytime soon judging by its sterling showing in the latest rankings*. “Everything a global custodian should be,” hymned one respondent. Although only closely pipped to the post in the overall rankings by Société Générale, RBC was nonetheless voted top provider by respondents in both North America and the UK; came second in the direct client investment managers category; and was also the second most improved custodian year on year after BNP Paribas.
One of the biggest positives for managing director Rob Wright and his team was RBC’s showing in the pension funds, foundations and charities sector – unplaced last year, it has come from nowhere to clinch top spot. RBC did slip marginally down the rankings in the European respondents and third-party investment manager categories, where it was ranked second and fourth respectively, down from first and third place in 2003. That said, in both instances its 2004 scores were up on the preceding year.
“This is an extremely pleasing result for us, and one which reflects our ability to deliver a superior client experience as well as supporting operations and technology, two areas where we have made great strides in enhancing efficiency,” says Tim Wood, RBC’s director of client services. “The pension funds and foundations segment was one which we specifically targeted over 2003, and our showing truly reflects the broader client base that we are now building.”
Client service remains the primary differentiator for RBC Global Services, Wood adds. “It is important to remember that what was special two or three years ago is now standard practice – the bar has been raised and we have had to anticipate and plan around that,” he says. “Custodians are expected to deliver more for less, no shock there admittedly, and so the challenge is to retain a profitable piece of business while delivering high levels of client service.” A solutions-based approach is key to the bank’s success in this area. “By creating a range of reusable solutions we are not having to reinvent the wheel every time we are approached by a new client,” he says. “It means we are able to offer a customised product, both in terms of products and day-to-day servicing, without that having a huge impact on our cost base.”
Certainly, RBC Global Services has succeeded over the past five years or so in making a positive out of what many of its competitors would like to characterise as a negative, namely its relatively small size compared to the US behemoths with their multiple trillions of custodied assets (although with assets under custody of E970bn the bank is by no stretch of the imagination a minnow).
Yet, while it has always acknowledged the fact that economies of scale are vital for any custodian if they are to support their clients’ cross-border activities, it has long argued that the accumulation of assets – without questioning where those assets are coming from and how profitable they are – is simply not enough
As Jose Placido, a former head of the London operation who now oversees the entire RBC Institutional & Investor Services business from Toronto, has noted, the focus on client satisfaction – coupled with the emergence in recent years of new and cheaper technologies – has ensured that RBC and other fellow ‘specialist’ custodians now give little away to the competition.
For some time now the bank has been pursuing what it terms an ‘integrated global’ or ‘super-specialist’ approach: “joining the dots both geographically and through a seamless service offering,” as Placido puts it. This contrasts with the usual strategy of extending a ‘sliver’ into foreign markets whilst remaining very reliant on their home market to drive the business – the path, in fact, that RBC itself initially followed. In this respect the acquisition in 2001 of Perpetual Fund Services (PFS), the custody, investment administration and unit registry business of Perpetual Trustees Australia, was an important milestone, consolidating the bank’s global credentials.
RBC Global Services has also sought to extract maximum leverage from its parent’s status as the largest bank in Canada. “Clients not only benefit from the ‘trickle down’ effect vis-à-vis offerings in areas such as performance measurement and stock lending,” says Wood, “but also act as a gateway through which they can also access a far broader and deeper product set – such as transition management and other RBC platforms such as capital markets, insurance, investment management and banking – than if we were a pure monoline custody player.”
*RBC Global Services R&M statistics – total value of responses: £54bn – 86% investment managers – 14% pension funds and others – number of qualified responses 44