eFinancialCareers

Big business in the back office.

Back in the day – let’s call it a pre-computer era some time between big collars, afros, shoulder pads and excess hairspray – the role of the global custodian was a tedious affair.

Traditionally, custodians had gigantic filing systems for storing certificates of stock and bond ownership for their clients. Today, certificates are stored electronically. At the same time, the range of products custodians deal with and the spectrum of services they deliver to their clients has snowballed.

Core functions now include fund administration and fund accounting (running the books of the funds), settlements (delivering securities to the buyer and the money to the seller), corporate actions (dividend and coupon payments), reconciliations (matching the actual securities to the client accounts), and cash services (dealing with problems arising from cross-border transactions).

Francis Jackson, head of business development, EMEA at JPMorgan Investor Services, says: “Investment managers are investing in equities, bonds, cash, derivatives, hedge funds, real estate or private equity. We’re here to support every asset allocation strategy, every instrument type and every trading strategy anywhere in the world.”

Key players

Big-name US banks dominate, with HSBC the UK’s sole representative. BNP Paribas Securities Services, Société Générale Securities Services and others make it into the bottom half of the top 10.

Roles and career paths

There are three key areas – client, delivery and technology.

Client – Here, you’ll get to schmooze with clients, ensuring they’re happy with existing services and – hopefully – developing further business opportunities with them. Firms rarely offer client-facing roles at graduate level. Three years’ experience cutting your teeth in the core functions of a global custodian is generally a prerequisite.

Delivery – These are roles you would normally associate with a global custodian – fund administration, fund accounting, settlements, corporate actions, reconciliations, dividends and cash management. As a graduate trainee, you’ll usually be given a grounding in all these key areas before settling into a specific function and working your way up the ranks.

Technology – Custodians spend big money on technology – J.P. Morgan Investor Services tells us it spends $600m a year. Unsurprisingly, they need to hire technology professionals to help them spend it. Much of the technology activity is driven by the need to remove some of the monotonous work, such as reconciliations or net asset value (NAV) calculations within fund administration. Firms are also spending on straight-through processing – where the whole transaction is conducted electronically without re-keying or manual intervention. Custodians hire system programmers, data architects, business analysts, systems integrators and business process re-engineering experts.

Top five global custodians – Assets under custody
Bank of New York Mellon: $23,100bn
JPMorgan Worldwide Securities Services: $15,900bn
State Street: $15,300bn
Citigroup Global Transaction Services: $13,100bn
HSBC Securities Services: $6,100bn
Source: FT Mandate Research

Pay

Custodians don’t make the big money of investment bankers. In the UK, entry-level salaries fall between £25k and £30k, which rises to £45k-£70k at a senior level, according to figures from recruiters Morgan McKinley.

The highest-paying roles are sales and business development, business analysis, relationship management and product development, which come in at £70k-£75k+ at the top level in the UK.

In Ireland, a major centre for global custody, a fund accountant can expect to earn €30k-€38k after one year, rising to €61k-€100k+ at the top end, according to recruiters Robert Walters. Corporate actions jobs bring in a mere €47k-€68k at the senior end.

In Luxembourg, a head of fund administration can expect €115k, while a business development manager can earn a maximum of €95k-€170k after 10 years.

Skills

The official line is that there are no favoured degrees for this sector, but certain roles will require you to come with a pre-existing skills base. Fund accountants, for instance, must obviously be equipped with an accountancy qualification, while the IT roles will need the relevant technical knowledge.

Meanwhile, within the core functions, engineering graduates tend to gravitate towards the sector due to the complex models employed by the custodians to calculate the many administrative needs of multiple portfolios of assets, reckons Jackson.

However, Daron Pearce, head of relationship management EMEA, Bank of New York Mellon, says degrees are used as a ‘hygiene factor’ and skills can be taught, hence the industry’s openness to arts and science graduates. “The key talent we look for is people with strong problem solving skills and a logical mind-frame, but particularly good people skills. Recruits with good social skills and the ability to keep their head in a crisis are very valuable,” adds Jackson.

While numerical skills are needed to get your head around accounting and valuation models, it’s what you do with that information and how you transmit it to the client that counts. “People who can listen effectively, synthesise information and then communicate it in a concise and understandable way to a diverse audience will find success,” says Pearce.

Click here to find out about global trends in global custody.