SURREY, England — The deck chairs have shifted in the global custody business.
The names of the top 10 overall global custodians in the annual R&M Consultants client satisfaction survey, released March 7, remained the same as last year, although some of the rankings changed.
In addition, for the first time in four years, the average client satisfaction score in the annual survey — 5.56, on a scale of one to seven — failed to increase from the previous year, according to Richard Hogsflesh, managing director of Surrey-based R&M Consultants. In fact, the top score in the 2005 survey was down from the top score a year ago.
"What's been quite interesting is that despite the fact that everybody says the whole process of custody has become a lot more automated and therefore commoditized, what's highest on the list of clients' agendas — what they consider most important — is core custody and relationship management," he said.
"The survey (results) suggest clients still think the core service is not running as smoothly as it possibly could. The fact that overall scores remain flat does suggest that custodians have got their work cut out in terms of improving the quality of service."
RBC Global Services, Toronto, grabbed the top spot in this year's survey from Societe Generale Group, Paris, which slipped to second place. Mellon Group, Pittsburgh, climbed to third from number seven; UBS AG, Zurich, came in at four, up two spots; Pictet Group, Paris, fell to fifth from third; Brown Brothers Harriman, New York, slipped to sixth from fifth; and BNP Paribas Group, Paris, fell to seventh from fourth. The last three firms on the list — Northern Trust Co., Chicago; HSBC Holdings PLC, London; and Bank of New York, New York — finished eighth, ninth and 10th, respectively, the same as in 2004.
RBC took top honors with a score of 6.10, vs. Societe Generale's No. 1 score last year of 6.15. This year, Societe Generale's overall score dropped to 6.08.
"There are a number of custodians trying to develop extra features they believe to be important," Mr. Hogsflesh said. "They may well be, but clients are saying ‘That's great, but let's concentrate on the core services.'"
Separating out plan sponsor clients, satisfaction remained high this year. Their average satisfaction score was 5.71, and the top 10 custodians' scores in this area remained largely the same as last year.
RBC Global maintained its top ranking among plan sponsors, its satisfaction score climbing to 6.59 from 6.38. Pictet, Mellon, UBS, HSBC, BNP Paribas and Northern Trust followed, in the same order as last year. Credit Suisse Asset Management, New York, rose to eighth place from a tie for 10th in 2004. Citigroup Global Markets Inc., New York, and Bank of New York tied for ninth, with Citibank rising from 12 last year and Bank of New York holding steady. State Street slipped to 11th from eighth, and JP Morgan Investor Services, New York, came in 12th, slipping from a tie for 10th place last year.
Among this group, only BNP Paribas and State Street scored lower in 2005 than 2004. BNP Paribas' score slipped to 5.75 from 5.92, and State Street's fell to 5.35 from 5.52.
State Street's overall score also fell, to 5.07 from 5.37, ranking it at 14 — a move Mr. Hogsflesh said was surprising.
"I think in fairness to State Street, however, to an extent it's the fault of the survey because we didn't reach as wide an audience as we might have," he explained. "For example, we might have found more State Street clients in the Far East…"
In addition, he said there were indications in survey responses that State Street officials were working to improve customer relations.
"We have experienced a difficult year with State Street, following their acquisition of Deutsche, which resulted in a deterioration of service standards," according to one response. "However, senior management have been very instrumental in getting these issues resolved and have listened to staffing concerns and changed things accordingly. Hopefully, 2005 will be a time of consolidation and a return to improved service levels." In January 2003, State Street acquired the custody business of Frankfurt-based Deutsche Bank AG's Global Securities Services for $1.1 billion.
The most improved custodian was Northern Trust, which scored an overall 5.66 rating, up from 5.49 last year.
Mr. Hogsflesh said this result was also surprising.
"They managed — despite having taken on board a lot of (new) business — to pull themselves back to the service levels they were at a couple of years ago," he said. "They definitely slipped a bit in last year's survey, but they've obviously managed to identify and plug the gaps."
As for consistency of service, Brown Brothers was most consistent, with 74% of its clients who responded to the survey saying service levels were the same as last year.
In addition, Brown Brothers ranked first among overall clients with more than $10 billion in assets, retaining the top spot and increasing its score to 5.80 from 5.76.
The survey, which is in its 13th year, divides the world into four categories: North America, United Kingdom, continental Europe and the rest of the world. Mr. Hogsflesh said no custodian qualified as doing business in all four regions (based on the location of the survey respondent, not the location of the custodian).
Clients from the rest of the world, many in Asia, are most satisfied with their custodians, according to the survey, giving them an average score of 5.76. European clients scored their global custodians an average of 5.69; North American clients scored theirs 5.66; and U.K. clients, 5.38.
As in the past, most of the respondents — 40% — were from the United Kingdom. Thirty-two percent were from continental Europe, and 25% from North America.