RBC Investor & Treasury Services has unveiled a revamped ‘strategic intent’ which upgrades Australia to one of its three core markets, outside of Canada, to become a leader in its field. Backed by a massive new technology roll-out, RBC has gone to a new level in asset servicing.
In Australia last week, coinciding with the annual SIBOS banking and custody conference, attended by about 6,000 industry folk from around the world in Sydney, Harry Samuel, the RBC division’s London-based chief executive and chairman of the RBC European executive committee, and Douglas Moore, the Hong Kong-based Head of Investor & Treasury Services, Asia Pacific, spoke to the new strategy with staff and clients. Australia was a key component in the developments.
The last time RBC published its strategic position was in 2013, after it had bought out its former partner in asset servicing, the Dexia group. At the time, Luxembourg and Ireland were selected as the fast-growing asset-servicing markets in which RBC wanted to have a leadership position. Now, the firm has included Australia on the list.
RBC’s history in Australia is worth noting. While it was a global custodian bank already, in 2001 it entered the Australian and New Zealand market through the purchase of what was then known as Perpetual Investor Services. Perpetual Trustees, the group company, had dabbled with becoming an asset servicing outsource provider as well but decided not to continue in that field. RBC acquired the business and has retained Perpetual Investments as a key client.
RBC distinguishes itself in the asset servicing market in Australia by providing services solely for fund managers – not super funds. It has been successful in this strategy, most recently winning the $20 billion book of business of Warakirri Asset Management (as previously reported).
Interestingly, despite all the talk about technology in the funds management industry, Harry Samuel says that his bank’s investment there has been a means to an end, “not the end in itself”. People, are still important.
But, it has to be said, RBC’s global technology platform, with which Australian clients have been integrated over the last couple of years, is also a differentiator in this market. The transition meant exiting the well-used Hi-Portfolio system and also the transfer of some accounting roles to offshore offices, such as Malaysia.
Samuel says that the changes improved the profitability of RBC’s Australian business, run by David Travers, and set it up for a better growth trajectory because it allows it to offer clients better service.
“There is a growing number of asset managers across all asset classes in Australia,” he says. “With Hi-Port, which has been a great system, Australia was the only country where we used it. A lot of Australian asset managers, including Perpetual, are looking offshore for growth. So, we, and they, need to connect to a global platform.”
Samuel says that Australian asset managers are “very progressive”. They have largely outsourced both their back and middle offices to improve their efficiency. “So, we wanted to be able to provide them with an industrial-strength middle office solution, which we think we’ve done.”
RBC speaks about “smart data” rather than “big data”, as the way of the future. Samuel says that if you think about the post-trade cycle, the demand for data will drive pricing and, therefore, consumption. He uses the analogy of mobile phone charges whereby the data provided by custodians could be charged by the megabites the clients use in future.
David Travers says that when you look at technological developments, such as the use of robotics, artificial intelligence and the introduction of blockchain (distributed ledger technology), fees are dropping so companies like RBC need to do more with its provision of analyses and data. “It’s about how you visualise it, so the clients can better manage it.,” he says.
In 2008, when the GFC hit hard, a lot of fund managers put their investment in technology on hold, Travers believes. Even some very large managers probably haven’t kept up with the required spend.
Elsewhere in Asia, which is a booming, difficult, currently unprofitable but ultimately enormous potential market for asset servicing firms, Doug Moore says the issue is seeing what’s accessible. “There is no doubt we are witnessing history there,” he says, have spent 31 years working in Hong Kong… We have 55 people in asset servicing there and about 300 across the RBC business… We think we have a comparable advantage because we understand pension funds’ strategies, we have dealt with tough regulatory environments, such as Australia, Canada and Europe, and we can help our clients in their offshore expansions. Even the Asian companies are now starting to go global too,” he says.