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State Street
T
he 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 man-
agement 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 manage-
ment 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
Small
that “officers supporting the business are somewhat new
and 0 Medium
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 pro-
cedures. “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 re lationship,”
which means that State Street “knows [their] business and pro-
cesses and is able to Small
leverage Medium
a centralised
Large client service team
Equity
0 service
20% sites”. The
80%
100%
across multiple jurisdictional
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 20% of the services
they receive today.
80%
PROFILE OF RESPONDENTS
Large
20%
Equity
80%
20%
Small
Medium
Large
80%
Medium
Weighted average scores
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
2017 2016 Relationship management and client service 0.10 4.54 4.44 5.10 Value delivered 1.29 5.26 3.97 5.27 Fund accounting -0.63 4.86 5.49 5.60 Transfer agency -0.13 5.55 5.68 5.10 Distribution support n/a n/a n/a 5.89 Equity
Fixed income
Distribution
support
Reporting 0.17 4.87 4.70 4.60 Compliance 0.10 5.35 5.25 4.93 Operations and custody -0.15 5.08 5.23 Total 0.05 5.02 4.97
Summer 2018
Other
Medium 70%
Large
100%
90%
70%
Equity
Fixed income
Other
Weighted average scores versus the global averages
2018
Global Custodian
90%
By investment
Large
+/- 2017-2018
78
Fixed income
100%
By size
2018 2017 2016
Relationship management and 70%
client service -23.8% -29.3% -18.7%
Value delivered -10.5% -34.4% -12.2%
Fund accounting -19.5% -14.5% -11.5%
-12.6% -13.1% -20.6%
n/a n/a -8.1%
Reporting -18.8% -24.4% -25.6%
Compliance -15.2% -20.0% -21.6%
5.61 Operations and custody -12.5% -15.2% -9.2%
5.26 Total -17.2% -21.1% -16.1%
90%
Transfer agency
Other
Fixed income
90%