Evolving market conditions are a challenge to financial intermediaries (FIMs) and custodian banks. The growing cost of regulatory compliance; negative interest rates and a strong Swiss franc; end-clients’ focus on investment performance; more assets under management needed to cover rising fixed costs; and emerging client generations who expect more innovation and access than ever before.
Business-as-usual is not an option
Despite growing operating costs and lower margins, continuous investment is needed to keep pace with competitors and market developments. In truth, however, many organizations lack the resources to transform and suit the new reality. Some find themselves at risk amid accelerating consolidation and deteriorating returns. Investment and closer collaboration with peers and partners is required to produce fresh and creative change.
Custodians: Invest in IT and people
Custodian banks that deliver the greatest value for FIMs will be those that continually assess their offerings and infrastructures. Investing in IT capabilities can enhance the effectiveness and efficiency of bank-FIM interactions in areas such as digital account opening or full digital ordering. With bank colleagues needing a deep knowledge of the FIM market in order to give high quality support, proactive investing in learning and development and in attracting and retaining talent is also a necessity. These in turn help FIMs to attract new mandates and generate asset growth, which is key if banks are to grow share of wallet in a market where half of FIMs book assets with four or more custodian banks.
FIMs: Others are key to your sustainable business
Opportunities to collaborate more closely with peers or outsourcing providers should be seized. Potentially cutting fixed costs through sharing office space or delegating compliance tasks to tie up fewer in-house resources, collaboration can be an effective path to splitting up the value chain. Against rising costs and complexity, such delegation permits FIMs to simplify their value chains and create leaner processes while focusing on what they do best – such as relationship management and portfolio supervision. Leveraging the expertise of third parties has obvious benefits for FIMs’ end-clients too. But perhaps less obvious is that building relationships with fellow FIMs can formulate a clear succession plan, which owners sometimes wait too long before exploring.
FIMs and custodian banks have a great opportunity to improve how they work among themselves and others, and thereby how they serve their clients. In short, they can and should partner to secure sustainable growth.
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If you would like to know more about the topic or how we can support you, don't hesitate to contact Stephan Matti, Head FIM Switzerland by clicking on the link below.