The giant bank believes it can meld technology and sales forces to lure to dug-in breakaways

June 2, 2010 — 5:31 AM UTC by Brooke Southall

1 Comment

With the hiring of a former Schwab executive, Bank of New York Mellon Corp. is moving more aggressively onto the custody scene with hopes of plucking the accounts of some of the largest, most sophisticated breakaways and RIAs.

The giant bank hired Peter Berg in April as sales director of BNY Mellon Wealth Management’s national custody division that had $73 billion of assets as of the end of 2009 from about 200 RIAs.

The division has long served BNY clients such as mutual fund companies that needed custody of their private client groups.

Now, it plans to expand its marketing efforts to capture the business of advisors with AUM of $500 or more and family offices serving ultra high net worth clients. To some extent, BNY’s national custody will be in competition with Pershing Advisor Solutions, also owned by BNY Mellon.

Berg and Mark Tibergien, CEO of Pershing Advisor Solutions, allow that they’re in the early stages of working out the details of their relationship.

In synch with Pershing

They’re resolved to make it work. “I had a nice conversation with Mark Tibergien,” Berg says. “We’re in synch with Pershing.”

Despite these efforts, Tibergien allows that BNY and Pershing will occasionally compete head to head for clients.

“I don’t consider it a negative as much as I’d like to get all the assets,”’ he says. “If, as a company, we take assets from Schwab, Fidelity and TD, I’m ecstatic.”

Until now, BNY’s national custody division has been a stealth RIA custodian, growing over the course of about two decades from referrals from BNY which has custody of $22 trillion as a global custodian. Though Berg declined to name customers, he said that many mutual fund companies like Eaton Vance, T. Rowe Price and Dodge & Cox have large private client groups. Those kinds of companies, he said, have brought assets over the years to National Custody.

“What’s been missing is a business development effort of any significance,” Berg says. “It’s been coming from existing accounts.”

Possible re-branding?

There is currently discussion at BNY about whether to re-brand national custody to suit its more extroverted marketing plans.

The shift in strategy signifies BNY’s decision to aggressively pursue RIAs by means of a second custody arm.

Though neither of the heads of the custody units named a specific trigger for the strategic move, Tibergien offered one thought: “I’m sure they’re observing the success we’ve had in the marketplace,” he says.

Tibergien adds: “I think it signifies that BNY combined with Pershing is very serious about the retail RIA market. The other three [big] custodians are going through change. Advisors are saying that they want a truly different custodian they can work with. It’s pushing business in our direction. [BNY’s market entry] is a response to the demand in the business: Let’s continue to invest.”

Pershing expects to land 100 new advisory firms in 2010, up from 70 new RIA practices in 2009, he adds. Pershing has about $74 billion of assets in custody. See: Mark Tibergien is making Pershing an industrial strength custodian with an RIA service touch

Research analysts at consulting firms declined to comment for the record about BNY’s entry into RIA custody but they question whether Pershing and BNY can find harmony in competing for RIA assets.

High asset minimum

BNY National Custody’s value proposition rests on what it can do for big advisors and family offices. BNY National Custody has about 50 dedicated employees including several service people who came over to BNY from Investor Bank & Trust Company’s RIA custody unit after State Street acquired that company and cut its New York service office.

National custody hasn’t established a set minimum of assets, but it’s typical cut-off point of $500 million means it will go head-to-head with State Street, which also has a minimum that falls into this range. RBC has established its minimum at $100 million. See: Royal Bank of Canada is hustling to become an RIA custody force

Pershing has a minimum of $100 million – with some exceptions for fast growers. Tibergien says that his company also competes for much larger RIAs. Its average RIA client has $150 million of AUM and the average end client of those RIAs has $1.4 million of assets.

“Size or net worth of the client is irrelevant” when determining whether a client is better suited to Pershing or BNY Mellon, he says.

Bank platform

The big difference is that BNY National Custody is on a bank platform, which some RIAs prefer, Tibergien adds.

There are a number of ways that a bank platform works better for big RIAs, Berg says. Examples he gave included:

  • global custody of assets [foreign currencies]
  • trust accounting to separate principal and income
  • the ability to make regular cash transfers without the same burden of paperwork found on brokerage platforms
  • and better access to fixed income products.

“We’re agnostic to executing brokers” when it comes to fixed income, he says. BNY can also provide access to jumbo mortgage loans.

These capabilities are expected to give BNY an edge when it comes to recruiting top-flight breakaway brokers, Berg says.

Sophisticated brokers’ lament

“One of the reasons it’s been difficult for these sophisticated brokers to leave is because they’re not able to serve large family accounts, and it’s been frustrating that they haven’t been able to get a comprehensive hold of that.”

Over time, the differences between Pershing and BNY’s national custody may blur.

A committee has been formed to better combine their technology, service and sales. BNY customers may get access to Pershing’s vaunted NetX360 technology platform.

“We’re in the investigative stage, not the decision stage,” Tibergien says.

30 referrals in 2010

Pershing customers may see some of BNY’s WorkBench capabilities. BNY is already leveraging Pershing’s 18 sales people and the two firms have made 30 referrals back and forth since the beginning of 2010.

Berg gave one example of a new RIA with $400 million of assets under management who put $300 million with Pershing and $100 million with BNY’s national custody. Some assets came from a bank and needed to be transferred to one.

“You can see why it makes sense for us to get more proactive” in marketing to RIAs, Berg says.

When BNY’s marketing brings it into conflict with Pershing’s efforts, there is a way to manage it, Tibergien says.

“If we trip over each other, we deal [with it] as adults.”


Mentioned in this article:

State Street Wealth Manager Services
Asset Custodian
Top Executive: Marty Sullivan

Pershing Advisor Solutions
Asset Custodian
Top Executive: Mark Tibergien



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