Custody banks finding opportunities in wealth management arena

Custody banks will increasingly start to operate in the wealth management space, as well as providing services to their traditional audience of institutional asset managers, says Michael Le Garignon, head of sales, business development and relationship management for UK clients at Société Générale Securities Services.

Having conducted a detailed study of opportunities in the wealth world, while working in a previous role at JP Morgan, Mr Le Garignon has built on some of these ideas since his recruitment by the French bank in 2012, exploiting a shift in the asset management industry away from mutual funds to outcome-oriented return portfolios.

This trend has been further fuelled by skilled managers leaving big groups and setting up boutique houses, offering services to wealthy families with different risk and investment profiles, he says.

The SocGen push is based on a belief these smaller houses, with a lack of resources in IT and compliance, are much keener to outsource client reporting, custody, clearing and settlement to third party providers. The boutiques’ heavier use of ETFs in portfolios also makes the support services more straightforward to provide.

“Bigger banks have an IT department, who want control of suppliers and vendors,” meaning they are much more complex clients to work with, he says.

Recent wealth management clients acquired by Mr Le Garignon include SCM Private, the high-profile husband-and-wife team set up by Gina Miller – a campaigner for retail investors’ rights – and her husband Alan, a former leading equity hedge fund manager at Gartmore, New Star and Jupiter.

South African wealth manager PSG Wealth has also recently started using SocGen’s wealth management system and Mr Le Garignon is in serious negotiations with another eight potential clients.

“If we pitch our services correctly, it is a very healthy business to be in,” he says, citing regulation as one of the biggest drivers for the anticipated wave of new business. “Mifid and RDR have impacted the wealth management space and will continue to change the landscape,” he says.

“Robo-advisers need to establish under RDR and Mifid that their system is robust. We will see an increase in their business, but we will never see a demise of pure wealth managers.”

SocGen also works closely with technology provider JHC. “We can wrap the full execution, clearing and settlement service around the tech piece,” he says, before offering a critique of those tech players who fear custodians encroaching into their traditionally exclusive space.

“A lot of tech companies just plug into an external custodian, which they say is providing custody. We undertake full, regular reviews of our sub-custody network. Are tech providers conducting such a review? What is the recourse of a customer to the tech firm if they lose assets?”  

SocGen’s cutthroat rival BNP Paribas has not yet developed a solution for wealth managers, although bosses realise they must work increasingly with distributors of fund management products, not just the manufacturers.

BNP Paribas Securities Services holds increasing numbers of “investor days,” where wealth managers are brought together with fund groups to discuss potential business opportunities.

“We are working more with distributors,” said the bank’s securities services boss Patrick Colle in a recent interview with PWM. “We are involved in helping clients to simplify the process of helping the distributor.”