Custodians are focusing on their client servicing levels to attract and keep clients, but are client...
Custodians are focusing on their client servicing levels to attract and keep clients, but are client expectations being raised too high? All custodians know that if they are unable to provide clients with consistent and knowledgeable support at all levels, the client will leave and find someone else who can.
But question any custodian about their client focus and more than likely they will provide near-identical replies along the lines of: "Our commitment to serving clients is something that really differentiates our organisation from the competition. More than any other custodian, this is an area of particular attention for us."
Client servicing is important and no one is going to say that they are poor at it. But whether a custodian is already being used or a client is conducting a review for the first time, there are certain key steps they can take to 'stress test' whether the affirmations of the custodian are true or based purely on rhetoric.
To begin with, they should try to get a feel for the importance of custody to the organisation as a whole. If custody is not a core business, then sufficient investment in the people and the technology used as part of the service is unlikely to be there. Ultimately, the organisation may look to withdraw from the custody market, causing inconvenience and the expense of moving assets. The annual report is often a good place to gauge commitment - how often does custody get a mention? This is usually a good indicator of how important custody is to the organisation.
The custodian may wheel in the big guns for prospective clients during the sales presentation. The client should try to ascertain if they will receive the same level of attention once the sale is over and ask how many client visits the senior members of the company make each year.
One of the most critical issues relates to the structure of the client servicing team. Will the client have both a strategic contact and someone to answer their day-to-day queries? The skills of these individuals will be different and the client should be comfortable that their team has people experienced enough to make presentations at board level, as well as able to resolve questions regarding failed trades or income payments.
If it is a multinational client, they may be serviced out of different locations, so can the custodian provide a global relationship manager to assume responsibility for the overall relationship?
A great way to find out just how important client service is to the custodian is to obtain examples of instances where they have gone that 'extra mile' for a client. What bespoke services do they offer? Examples include customised websites, automated investment manager reconciliations and compliance monitoring services.
Interaction with existing custody clients is also important. Ideally, this should happen on an ongoing basis, not just when references are taken up. Clients should ask whether the custodian provides any custody user groups where they can discuss mutual themes and issues. Such forums should also address the views of common groups, for example separate forums for pension funds, investment managers, local authorities and so on.
One of the most obvious ways to benchmark custodians and compare service delivery standards is via the round of annual industry surveys. These can be split into two camps, the most important of which are those that seek client opinion. Some surveys are particularly meaningful as the performance of the custodian is based on comments and opinions given by clients and fund managers, as opposed to an unconnected third party with no experience of how the custodian operates in practice.
Some custodians will also employ their own external consultants to conduct confidential client satisfaction surveys. These are generally detailed and give the custodian a chance to see which areas or products their clients are happy with and those which leave room for improvement. It is worth checking if this is something they do proactively at regular intervals.
When it comes to how the relationship works in practice, the custodian should be able to provide specific service level benchmarking reports. For example, data relating to the timeliness of settlements, income collections and tax receipts should be available to review on a monthly or quarterly basis. This can then be compared to an agreed service level description and monitored at regular meetings between the client and their relationship team.
It is important to assess a custodians ability to absorb new business. In conjunction with a diminishing number of global custody providers, there has been substantial increases in the amount of assets under custody of the major players. It does not take a lot to realise that the service may deteriorate if the relationship manager has 20 clients to keep happy when previously they had only 10.
But it should not be a question of simply adding a new relationship manager when everything is just about to fall apart. There should be a process in place that quantifies the requirements of each client well in advance of taking on any new relationship. After all, looking after 20 clients requiring only standard mainstream services can be easier than looking after two or three clients with more complex demands. Custodians serious about keeping the number of clients per relationship team to sustainable levels will take a more analytical approach. Researching and developing a greater understanding of clients allows custodians to plan staffing resource in advance, to the benefit of all parties.
What can often ultimately determine the level of service received is the quality of relationship manager. Why should a client suffer because they end up with a manager struggling to prioritise their work or delegate efficiently? Again, the custodian needs to have in place a documented process that ensures service deliv
Future World funds
Square Mile’s series of informal interviews
Achievements, charity work and other happy snippets
Latest news and analysis
When is a refund allowed?