GC Friday Interview: Markus Ruetimann, Group COO, Schroders

As traditional sources of revenue continue to deplete, it is now becoming more important than ever for custodians to revamp business models and adapt to the emerging digital age in the securities services industry. At the same time, new rules since the financial crisis are requiring asset managers and fund managers to revamp their technological infrastructure. Buy-side firms are now increasingly demanding that custodians help them with their technology to allow them to comply with the rules. Markus Ruetimann, group COO of Schroders, speaks to Global Custodian about what he wants from global custodians in terms of new products and services to help the asset manager meet its regulatory requirements.
By Joe Parsons(2147488729)
As traditional sources of revenue continue to deplete, it is now becoming more important than ever for custodians to revamp business models and adapt to the emerging digital age in the securities services industry. As the European Market Infrastructure Regulation (EMIR) begins to take hold, in combination with the incoming Basel III rules, it is becoming more expensive for global custodians to carry out traditional services. At the same time, new rules since the financial crisis are requiring asset managers and fund managers to revamp their technological infrastructure. Buy-side firms are now increasingly demanding that custodians help them with their technology to allow them to comply with the rules. Markus Ruetimann, group COO of Schroders, speaks to Global Custodian about what he wants from global custodians in terms of new products and services to help the asset manager meet its regulatory requirements.

GC: How important is it for custodians to invest in technology in this current regulatory environment?

MR: It is absolutely crucial for three reasons: one, custodians have to help us, asset managers and other institutional investors, to meet regulatory reporting requirements. Secondly, a lot of the data which we need to fulfill our regulatory requirements are actually hosted by the global custodians because not all data is replicated or administrated in our own IT architecture. And thirdly, investment is required not just in technology but also in their talent pools, so it is important the global custodians have sufficient internal expertise to assist us in ensuring operational compliance with emerging regulations.

GC: What are you looking for, in terms of new products from the custodians, to meet the current technology demands?

MR: The concept is really “digital”. I would like the custodians to come up with a dashboard which basically gives us access to the data we need, rather than them sending it to us. I’d like the custodians to help us with data mining, and then how to visualize it and share it; we call this data curation in terms of the whole cycle. Finally, I need to have access to an expert who understands data flows end-to-end. Not everything is done through screens and we need dialogue to help us get ready for evolving regulation, changes in investment products, global business process convergence, or when we introduce a new investment strategy.

GC: Where do you see the value in data visualization?

MR: The value is to assist us in making decisions; there is no value in just mining the data, storing it and creating yet another information management report. The value is by saying ‘this is the data you should mine, visualize and share to help us make business and/or investment decisions. For instance, many fund managers are now incorporating the sentiment of social media and information you get from the internet into their investment workflows. Custodians can help us with mining information which helps us to assess operational risk, market risk, counterparty risk, etc. For them, it is an opportunity to monetize the data which they have available because data leads to information, information leads to knowledge, and knowledge leads to decisions.

GC: Where will you see collaboration in this space?

MR: I think it will be at the CSD (central security depository) level. When you look at Europe, and with T2S coming on board, it’s those CSDs that will most likely link up with each other and have a host of data because the global custodians will be supplying it to them. So in many ways where consolidation and data curation will happen more naturally will be there.

In addition to that, we have market utilities that are currently being created for certain data, such as AML, Securities Master and KYC, that is being shared. I think it is that combination of competition between new utilities which are owned by market participants and a conglomerate of CSDs that are most likely to compete in the same space. Competition is healthy.

GC: How much will global custodians have to meet cyber-security needs?

MR: We have regular discussions with our global custodians over both internal and external threats, being that cyber-attacks, malicious attempts to steal or corrupt data. This is incredibly important because of the reputational effect it has, as we have seen with some of the American global custodians that have been attacked. You can’t prevent every cyber-attack, but the key is how you react so when it does happen, you respond very quickly and make sure the client’s assets and data are safe.

GC: Do you see technology as the key to rebuilding trust in the industry?

MR: Absolutely. I look at the three T’s: first of all it is the talent, we need to rethink what talent our industry actually needs in a more digitalized world; secondly technology is key in a digital disruptive operating environment, it is one of the key differentiators. And when you have talent and technology, you have trust because the first two components lead to the third.

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