A room with a view

Marsh Carter’s vantage point throughout his career in financial services has yielded some valuable lessons for the financial services industry as a whole
By Editorial
Marshall Carter

Marsh Carter’s vantage point throughout his career in financial services has yielded some valuable lessons for the financial services industry as a whole

Starting out with a degree in civil engineering from the U.S. Military Academy at West Point and an M.S. in operations research and systems analysis from the U.S. Naval Postgraduate School in Monterey, California, Marsh Carter’s career has taken some unusual turns, but in each phase, he has left his mark.

From 2003 to 2013 he was a board member and chairman of the New York Stock Exchange (NYSE) and deputy chairman of the subsequent parent company NYSE Euronext. Carter was one of seven executives asked to postpone retirement in 2003 to form a new board of directors at the NYSE, and, in 2005, he was elected chairman.

Prior to NYSE, Carter served as chairman and chief executive officer at State Street. He joined State Street in July 1991 as president and chief operating officer, becoming CEO in 1992 and chairman in 1993.

During his nine years as CEO, the company grew more than six-fold. Before that he was with Chase Manhattan Bank for 15 years in executive positions related to finance, product development, operations, regional banking and global businesses.

Less known is his role—possibly not cleared in advance with his superiors at the time—in backing the launch of a nascent publishing venture called Global Custodian with some crucial early advertising.

A former Marine Corps infantry officer who was awarded the Navy Cross and Purple Heart during two years’ service in Vietnam, Carter served from 1975-76 as a White House Fellow at the State Department and Agency for International Development, studying at night on the GI Bill for an M.A. in science, technology and public policy at George Washington University.

During his time in the financial services industry, Carter was active in industry affairs, co-chairing the U.S. Working Group of the G30. Carter subsequently chaired the Massachusetts Governor’s Special Advisory Task Force investigating Massport and Boston’s Logan Airport following the events of September 11, 2001. All of that adds up to a varied and storied career, from which he is now happily retired. “I think 55 years in the workforce is sufficient,” he quips.

Looking back at his time in the custody business, Carter realized early on that the business model would need to change for global custody to have a future. “When I was assigned to the global custody group at Chase Manhattan Bank in 1988, Chase, like all the money center banks, had viewed custody as a transaction processing business,” says Carter. “However, in the period from 1988-1991, the price we could charge for global custody fell from 12-16 bps for global and 7-11 bps for domestic custody to 8-10 bps for global and 1-5 bps for domestic.”

This price erosion, caused in part, in Carter’s view, by everyone buying market share, caused a serious reappraisal of the business. “In the late 1980s, there were 26 U.S. banks doing custody,” he says. At that time, custody consisted essentially of four core functions: settle the trade, safekeep the security, service the asset, and provide information on the portfolio. “Some research we conducted at State Street showed that most institutional investors allocated 14% of their expenditure on custody, 26% on pre-trade information and data services and 60% on trades and related functions,” says Carter. “Clearly if a global custodian wanted to grow they had to migrate into the trade and pre-trade businesses.”

In the early 1990s, says Carter, “State Street launched its strategy to migrate up the food chain to focus on servicing and providing information on the portfolio. Within a few years, most banks recognized the change and adapted or got out of the business, which is why we are today left with less than six major custodians.”

Since his retirement, Carter has largely devoted himself to education. He teaches leadership and management at the Sloan School of Management at MIT, as well as at Babson College outside of Boston and the Naval War College in Newport, Rhode Island. He was also a senior fellow at the Kennedy School, Harvard University from 2001-2004. And while retired from the industry, he still has his concerns.

“What concerns me today is the falling away of ethics and risk management,” says Carter. “After Glass-Steagall was repealed in the United States, the companies that used to be the bridge to the market started pushing their own products,” he says. “We’re now seeing financial institutions settling with regulators for north of $100 million dollars. A renewed focus on ethics would bring the business back on the rails.”

–Richard Schwartz