2005 UK Trustee / Depositary Survey Results

The third R & M Survey on fiduciary services in the UK reveals a number of significant changes between the 6 major providers to Unit Trust and OEIC managers and unit holders. The service providers are evenly divided into two camps. Those whose scores have gone up big time and those who have gone down big time. The overall average has changed little, but each provider has changed significantly. It would seem that this once rather esoteric, little considered but essential function has moved into the limelight as service providers strive to improve their product. As fund managers move into new markets and products they increasingly rely on these relationships for support and guidance through the tricky waters of regulation and reporting. They also expect to be able to access more information online and to see their bank investing in the future.

 Trustee / Depositary (2004 position)200320042005Change
1 Citigroup (3) 4.98 5.73 6.04 0.31
2 HSBC (2) 5.78 5.78 6.02 0.24
3 J P Morgan (4) 5.35 5.67 5.84 0.17
4 Bank of New York (1) 5.68 5.88 5.64 -0.24
5 RBS (5) 5.47 5.66 5.41 -0.25
6 State Street (6) 5.19 5.14 4.98 -0.16

The top position this year is taken by Citigroup – showing a dramatic improvement to their services from the inaugural survey in 2003 when they came in last place with a score of 4.98. This position and similar score has now been taken by State Street. Citigroup however have gone from bottom to top in two years. “Excellent service and support, consistently exceeds expectations in a wide number of areas,” was the comment from one satisfied client.

In second place for the second year running is HSBC, having achieved a big improvement in their score. In the first and second years of the survey they scored exactly the same – 5.78 – so the increase this year shows attention has been focused on their service offering. One client commented “Changes in Senior Management at HSBC have resulted in a higher quality of service, as further proposed changes are implemented we anticipate that the quality of service will continue to be improved.”

Third place goes to the only other bank to have improved its score year on year – J P Morgan. Not only have they moved from 4th to 3rd place but they have increased the gap between themselves and the other giant of the trustee world, RBS. Last year there was only 0.01 between them. This year the gap has widened to 0.43 putting JPM clearly ahead out of the two largest trustees / depositaries.

In fourth place, the first of the providers to register a decline in score, is last year’s winner Bank of New York. Some lower scores were noted in the area of compliance monitoring visits and in the follow up to day to day compliance monitoring of breaches.

In fifth place, unchanged from last year but with a lower score, is RBS. Client comments suggest that whilst there are a good many satisfied clients such as the following who said “There has been yet another improvement in service quality over the last year. They remain the Trustee of choice, and are significantly ahead of their main competitors,” there are a number of others who are more critical of the service. “The service has declined i.e. the compliance monitoring was poor and gives me no comfort of independent monitoring and the technical assistance or interpretation of regulations appears inflexible and unreliable.” Despite the decline in score RBS continue to successfully grow their business which prompts the question, why are they selected as depositary? Is it because of their service or is it because they are the only trustee / depositary that is truly independent since they do not undertake the related custody? And if it is because of their independence, does it mean that separating fiduciary responsibility from the custody element compromises service quality?

Finally, in last place for the third successive year, is State Street. This year the number of responses they received was down, from 16 to 8, and a few comments were received regarding high staff turnover and lack of online systems for trustee services. Their score now puts them on the same level that Citigroup were at two years ago. The question is, will State Street respond with the same vigour and turn their fortunes around? We shall find out in 2006.

The £1 billion Club

Results from clients with assets in excess of £1 bn.

1 Citi 6.12
2 HSBC 5.72
3 BoNY 5.65
4 JPM 5.60
5 RBS 5.50
6 State Street 5.18

Additionally respondents were asked to rank the different areas of the survey questionnaire in order of importance.

 Category of Service (2004)20042005Change
1 Regulatory / Technical Advice (1) 6.82 6.50 -0.32
2 Relationship Management (2) 5.77 5.78 0.01
3 Breadth of Services / Overall support (4) 4.81 5.17 0.36
4 Day to Day Compliance Monitoring (3) 4.82 5.07 0.25
5 Value for money (7) 3.42 4.79 1.37
6 Production / Review of Scheme documentation (6) 4.10 4.49 0.39
7 Compliance Monitoring Visits (5) 4.19 4.27 0.08
8 Scheme Audits (8) 3.26 4.05 0.79

There was little change in the ranking from last year, confirming that the regulatory / technical advice and relationship management are still the most important. Value for money did see a rise in its importance. This might suggest that pricing is becoming an issue.

Finally the methodology. The survey was conducted during October and November 2005.

Bank of New York 18 17 1
Citigroup 8 8 0
HSBC 17 15 2
J P Morgan 16 10 6
RBS 19 33 -14
State Street 8 16 -8

The number of replies was slightly down on last year but the value of assets covered represents in excess of £300bn or about 90% of the market by value. 83% of responses were received via the internet. The questionnaire examined 26 specific areas of service and the scoring was out of a maximum of 7.

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