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The outsider CEOs
Never before have we seen three new CEOs step up to the helm of the biggest global custodians at the same time , and never have there been three new CEOs all considered as ‘ outsiders ’ or ‘ wildcards ’.
Welcome to the helm of the world ’ s top global custodians : Charles Scharf of BNY Mellon , Michael O ’ Grady of Northern Trust , and from 2019 , Ron O ’ Hanley of State Street . A recent Wells Fargo research report by Mike Mayo , a well-known Wall Street analyst , describes the investment spending by the new CEOs as a “ wildcard ” for the three banks . “ The three new CEOs , all relative outsiders , have an unstated mandate to better monetise their platforms . The greatest long-term upside potential is if one of these firms could lead the industry enough to obtain a FinTech type premium ,” the report said . All three have come from either outside of the custody or the banking business as opposed to their predecessors . O ’ Grady previously oversaw Northern Trust ’ s wealth and asset management businesses , O ’ Hanley currently serves as head of State Street ’ s global asset management arm , and while Scharf previously served time at JP Morgan , he is best known for his time as CEO of Visa . The fact that these three new CEOs come from backgrounds outside of custody means they will most likely bring a different view to how to monetise the business and generate new revenue flows . At Northern Trust , O ’ Grady takes over a steady and stable business which in the past has not been caught up in the scandals that BNY Mellon and State Street - see below - have had to face . It is easy to see that the wealth management business could become an even more central part of the bank ’ s global business . Over the past decade , the wealth management business has grown just as fast as the S & P 500 , making it one of Northern Trust ’ s top asset gatherers . Northern Trust is perhaps in stark contrast to BNY Mellon , which over the past year has given its asset servicing business a complete makeover . With no Brian Shea , the long-time CEO of BNY Mellon ’ s Pershing and its investment services unit , steering the business , it is likely Scharf will bring a new focus to technology and payments . At his first investor services day this month , Scharf highlighted that his bank will increase its tech budget by $ 300 million to $ 2.7 billion for the year and aims to provide the “ best operating platform in the business .” Arguably the biggest question mark surrounds State Street ’ s O ’ Hanley . He originates from global consultancy firm McKinsey , where he founded the investment management practice worldwide . He had since held leadership roles at the asset management business of BNY Mellon , Fidelity , and now State Street Global Advisors . O ’ Hanley has the mammoth task of rebuilding State Street ’ s culture . While it has taken tremendous steps in promoting ESG investing and diversity within the business and wider capital markets , it has in the past been embroiled in a number of scandals . However , the good news is that State Street is one of the best performing banks out of the three global custodians , having seen its assets under custody increase 15 % over the year to $ 33.1 trillion . Furthermore , State Street ’ s “ Project Beacon ” looks to more fully evolve the bank to become a digital enterprise that better anticipates and reacts to real-time client needs . The advantage for both State Street and Northern Trust with both of their CEOs coming from the buy-side is that they will bring with them their own experience and perspective on what a custodian bank needs to offer to its clients . “ Customers will value this knowledge
Joe Parsons , Deputy Editor , Global Custodian
of their business – a trait that is always rated highly in custodian evaluations . The CEOs from the buy-side will have a sense of what is essential to retain and attract business . It will be interesting to see how well they can switch to a service provider mentality , as they discover what is actually achievable ,” said Dayle Scher , senior analyst for global research firm TABB Group . “ They will need to combine their tech savvy with their empathy for their clients when considering new product lines that add value and revenues , again without sacrificing the quality of the services that are table stakes .” These CEOs need to embrace technology and automation along with a greater focus on big data , digital transformation and cyber security this year as a way to meet client demands . For these three outsiders bringing a fresh new perspective to an otherwise tired business could be the key in propelling the industry forward .
82 Global Custodian Summer 2018