25 years, 25 CEOs: José Placido, CEO, RBC Dexia Investor Services

25 years, 25 CEOs: José Placido, CEO, RBC Dexia Investor Services

Turmoil in global financial markets has deeply affected both the reputation and the profitability of the investment management industry. The effect of the financial crisis continues to influence how asset managers and their service providers operate and function on a day-to-day basis.

The slew of regulation affecting the sector, from UCITS IV and AIFMD through to FATCA is largely driven by the ongoing demand for transparency and structure brought on by the economic turmoil. The opportunity that presents itself for asset servicers - particulary ones who have aggressively developed products and services around these new rules – is the ability to help asset managers successfully wade through these murky regulatory waters.

The struggle for asset managers dealing with the introduction of new regulations – or the updating of older ones – will challenge service providers who did not have the foresight to mitigate these risks and help asset managers manage these changes. The flight to quality of asset managers seeking providers with experience dealing with this overload of new legislation risks will benefit some providers and sting others.

Two years is beginning to look like a very long time in the regulatory arena, given that the dust has not even started to settle on UCITS IV and yet the fifth iteration of directive is already in the works. While the implementation of FATCA has now been delayed until 2013, the potential cost to foreign financial institutions could be significant.

Under the current broad definition of foreign financial institutions (FFIs), many funds industry participants will need to make substantial changes to processes, technology and internal governance, in order to manage the increase in due diligence and compliance procedures. We are currently polling the marketplace on FATCA to gauge the readiness of our global clients and will offer guidance and expertise as the deadline for compliance approaches.

We have a series of regulatory initiatives examining the impact all these new regulatory requirements might have on our clients as well as all of our custody, shareholder services, fund accounting, securities lending and investment counsellor businesses. I would say the biggest impacts will be that we are providing more regulatory guidance for our clients as a matter of course, acting more as consultants in this respect, and that the cost of implementation for all of these regulations will affect both asset servicers and their clients equally.

The march of service providers up the asset manager value chain will continue. Already the relationship has changed from providing a service to consulting on many aspects of the fund management business and this will only be accelerated by the rising tide of regulation.

The ability to adapt to an evolving industry will also separate the niche providers from the providers who take a holistic approach to asset servicing. That being said, consolidation between the niche service providers seems inevitable as the competition for business intensifies.

The key themes that asset servicers will need to focus in the next two years and beyond are accessibility, accuracy, information and responsiveness. There is increasing focus on pension assets as various jurisdictions moved to a more self-managed structure.

Retail clients will be looking for information, choice, accessibility and efficiency from the managers whose funds they invest into, so securities services providers will also need to meet this need.

In most circumstances the client will only see the brand of the fund that they invest into, rather than those of the service providers that support it, so it is essential that we assist our fund management clients to maintain the highest brand image possible. We can achieve this through providing excellent service in a timely and cost efficient manner, delivering accuracy and responsiveness back to their end clients.

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