Johan Lindberg (RBC Investor & Treasury Services): Helping Family Offices become custodian agnostic
“RBC can help Family Offices to manage multiple custodian relationships through one single access with our Middle Office”, says Johan Lindberg, managing director for client coverage at RBC Investor & Treasury Services in Luxembourg. Interview.
What are the evolutions regarding middle office outsourcing?
First of all, I would like to connect today’s interview with our last conversation where we discussed how Family Offices were becoming more institutional in their behavior. We estimate that Middle Office outsourcing will double over the next five years. The reason for that and the link to the institutionalization of Family Offices are decoupling from the “one provider” approach. Family Offices want to be self-sufficient, control their destiny and focus on their core competencies of investment and stock picking. We developed our Middle Office offering so that they can do exactly that.
“We estimate that middle office outsourcing will double within the next five years and we have seen this acceleration on the back of the pandemic as clients focus more on their operating models to be more resilient and support growth”
How do you help Family Offices become custodian agnostic?
In essence, Family Offices and Asset Managers can become custodian agnostic in a few steps. They deal with many accounts with several custodians, so they need to have one model for transactions, one for corporate actions and one for reporting. Imagine that you have two mandates with a custodian, another one with another custodian and therefore you have to instruct them 1:1 for each of the three models through different methods with different deadlines. With the outsourced Middle Office, you have a link between the front office and your entire range of custodians with a single point of entry for all these relationships. Technology plays a big role in this centralized approach as we help Wealth Managers to connect through APIs while providing scale through cloud-based technology. In theory, you could do this on your own, but it is expensive, difficult and you are left with with associated risks. By choosing an outsourced Middle Office model, you will instead offset those risks, secure regulatory compliance, access new technology and improve efficiency.
How is RBC Investor & Treasury Services adapting to this context?
We have been investing in a new platform for several years. We now see our clients move towards intraday updates. As a minimum, Portfolio Managers need an end of day view of all transactions and corporate events across multiple market counterparties. The outsourced Middle Office service includes an IBOR (Investment Book of Records) that consists of all this – end of day as well as intraday! Our offering allows our clients to focus on their core business while enjoying a state-of-the-art client experience. The end game is to empower Multi Family Offices with relevant reporting for their underlying clients. A digital experience through an online portal for corporate action notification and election (centralized for all client custodians), and oversight dashboards offers clients near real-time oversight and exception monitoring. This allows Family Offices to be more efficient and focus on other valuable parts of the business instead of identifying errors. The new technology ultimately reduces capital costs and risk for our clients in order to enable growth.