The US-headquartered firm recently spoke to this publication about its business in the EMEA region and beyond, explaining why it is broadly optimistic about wealth management and how it sees opportunities arising from structural change.
The managers of the wealth management platform at Pershing enjoy one of the best seats in the house when it comes to seeing the flows of money and industry trends affecting today’s industry. This business, part of BNY Mellon, has certainly been close to the action, whether it be around the impact of UK regulations to financial advisors, outsourcing of back-office functions and developments in technology.
Geoff Towers, the CEO of Pershing in the UK (he previously had stints in senior roles at Friends Life and Legal & General, among others), likes to stress that for all the supposed angst about volatile markets, Brexit or Trump, the global wealth management sector enjoys the benefits of “enormous tailwinds” from an ageing Baby Boomer population set to transfer assets to the next generation.
Greater freedoms in the UK over how people can invest pension fund assets, coupled with inheritance tax rule changes affecting pensions, have also put billions of more pounds into play and boosted the pool of wealth, creating new opportunities for managers, he told this publication in a recent interview at his firm’s Canary Wharf offices. And as a signifier of Pershing’s own growth that reflects such buoyancy, he said the firm now has more than £50 billion under administration on its wealth management platform, having risen by about £10 billion ($12.43 billion) in the space of just 12 months.
Pershing is one of those businesses which despite its considerable size and economies of scale, tends to operate in the background and away from the gaze of end-clients. In providing much of the “work behind the scene” of the financial system – handling custody of assets, reporting and transfers – it rarely is the kind of firm one sees on the front pages. If it does, then that might mean that an adviser or a wealth manager has collapsed into administration; in which case their assets will still be safe if held with Pershing . Pershing employs about 400 people in the EMEA region and a further 200 in India. (Entities doing something similar to Pershing might include SEI, Multrees, State Street and Northern Trust.)
The company is currently planning to introduce a new front-end offering for firms that don’t want to create their own,” he said. This, in a way, is an example of how businesses such as Pershing do much of the tech “heavy lifting” for financial advisors and similar players, creating platforms they can customise and removing some of the costs of having to create such platforms in-house.
Pershing serves a wide range of clients, from IFAs to wealth managers such as Tilney Bestinvest, 7IM, OCM Wealth Management, Raymond James and broker-dealers such as Stifel and Shore Capital.
“We target a level of profitability but are flexible how we charge for our services. For some customers this translates into a fully unbundled fee schedule, while for others we charge an all-in bps on assets under custody/administration. We offer our clients a large degree of the flexibility to decide on the fee structure, for them and for their customers. As a business-to-business provider, we typically charge the wealth managers and advisors but also have the flexibility to charge the investor directly if our wealth management, or advisor client so desires,” Towers continued.
What sort of trends are in play? Towers said he sees many examples of independent financial advisor aggregators snapping up IFA firms to build scale, a process encouraged in part by regulatory developments such as the Retail Distribution Review. Similarly, he sees demand for services in helping firms, where they have grown through mergers or other corporate linkups, in trying to make disparate technology platforms work together.
Towers says the pace of business growth has been solid.
“Our assets under administration have grown by 32 per cent in the last two years to reach £50 billion. We don’t have set targets for growth of AuA as this is influenced by the financial markets and our clients’ growth. We do have targets to add more clients, both large and smaller companies, and specifically companies that share our attitude to growth and quality,” he said.
When asked about the impact of Brexit, Towers said some of Pershing’s clients have asked whether they need to create a European Union vehicle for a business so as to retain market access; Pershing has an advantage, he said, in that it already has a legal entity in Ireland (an EU nation).
Towers also said that on the controversial US FATCA Act, which is blamed in some quarters for hitting access to financial services for US expats, there appears in his view to be a clearer idea of how this regulatory regime is working and what the costs are.
Talk of such cross-border issues also brings up the issue of international footprint and Pershing’s business growth ambitions. “We already have three offices in the UK, London, Liverpool and Manchester, and one in the Channel Islands and Dublin which makes us well placed to look after clients either side of the eurozone. Through our parent company we also have several offices in the USA well as Australia, Hong Kong and Singapore. We also have IT development teams in to Chennai in India which adds resilience. Looking forward we are exploring other opportunities in the EU countries but it’s still very early days,” he said.