Partner ● Brown Brothers Harriman
Taylor Bodman is the Brown Brothers Harriman (BBH) partner who bridges the gap between the sub-custodians in New York and the global custodians in Boston. He joined the firm in New York, fresh out of Princeton with a degree in European and musical history, more eager to become a banker than his background suggests. “If you can even imagine doing something else, then you have no business being in music,” he says now. “I could imagine earning a living, for example.”
But a career in banking at Brown Brothers turned out to be rather different from what he had expected. It was 1983, and the first personal computers arrived in the office at the same time as he did. It happened that Bodman knew more about computers than any of his colleagues, because his engineer father had shown him how to piece them together in his garage at home. “They thought I was a systems ringer, but the truth is that my inclinations were a great match for Brown Brothers at the right time,” he says. “I knew I needed some way to differentiate myself from my fabulously talented colleagues, and personal computers provided it.” As the only person in the office who had even heard of COBOL, Bodman found himself-in his first year at the bank-trying to interpret the needs of the users in the front office to the technical staff in the back office. By 1987 he was in the ideal position to start a whole new department. Although it was called International Treasury, and it did indeed manage the global liquidity of the bank, it was an operations department in all but name. “At that time Treasury was to a large extent an operational job, because we had to work hard to get our hands on the information at all,” explains Bodman. “Knowing how to swap out of one currency into another was not the hard part. The hard part was answering the question, ‘How much money do we actually have?'”
Once he had built systems capable of answering that question in US dollars, Bodman found the growth of the global custody business at BBH set him a new challenge: what to do with the foreign currency deposits of institutional clients. At that point, his own department morphed into a central, multi-currency treasury services department, which he ran for two years. “That was what put me on the radar screen of the investor services business,” says Bodman. “The thinking was that the cash should not be idle. Nothing new in that, of course, but it was actually quite a high bar to get over in many markets.”
The difficulty of getting local banks to pay interest on local deposits drew him into closer relationships with correspondent and sub-custodian banks, not only to persuade them to pay interest on balances they held, but in an effort to make more accurate predictions of cash balances on the basis of settlement success and failure rates. The willingness to pay became an important factor, not only in the appointment of sub-custodian banks to the BBH network, but in driving the dual custodian philosophy of the firm. “It catalyzed improvements in the terms and conditions we could obtain from local providers,” says Bodman. But the most important long-term consequence of the International Treasury department experience was to persuade the partners of BBH that technology was not the barrier to remaining competitive in the business that the conventional wisdom then held.
“In order for us to compete, my job was not to make BBH cheaper or bigger, in the scale business it was assumed we were in,” explains Bodman. “If I could keep us more or less at the same level operationally, there was a strong sense that we could differentiate ourselves in terms of client service and relationship management.” In the late 1980s, clients were still communicating with their custodians primarily by fax. Bodman recalls hosting numerous calls from firms selling optical scanning technologies designed to put paper faxes on to computer screens, but he never bought one. He knew, because he ran the money transfer business at BBH as well, that standardized electronic messages which did not require re-keying by human hand were a superior solution.
“I knew scanning could not be the answer in the long term,” says Bodman. “I knew we had to help our clients build messages electronically at source.” Yet the obvious messaging protocol-SWIFT-was not merely close-to-un- known in the United States, it was not much used by fund managers anywhere. BBH, however, was bold enough to use its pricing schedule to incentivize buy-side clients to adopt electronic messaging. To this day, BBH remains the pre-eminent advocate of the use of SWIFT messages not only in the United States but throughout its sub-custody network.
Significantly, and echoing the sentiments voiced by fellow Legend Stokley Towles, Bodman sees this emphasis on the automation of settlement messaging as just another example of how BBH was determined to ignore the traditional division between the front office and the back. “We were always asking ourselves, ‘How do we give the client more visibility and control of the process?'” he says. “The analogy was this: You could either hire a personal navigator to sit in the passenger seat of your car, or you could buy a GPS. We were the GPS. We aimed to make the life of the client easier, while leaving them in full control of the operations. That vision, of not removing operational responsibility from the clients but of making it easier for them to fulfill, has proved very successful for us.”
It reached its apogee with the launch of Infomediary four years ago, which not only aimed to offer clients low cost access to services such as SWIFT, but was based on the revolutionary logic that, since BBH could never be the sole provider to its clients, it should facilitate their use of third party providers. “We said to clients, ‘We will intermediate this for you. We will actually give you the system that gets you on to SWIFT, and allows you to use other service providers, but in a way that minimizes your administrative and operational requirements, and maximizes your ability to see what is going on.”’
Of course, the logic of Infomediary is more obvious in retrospect than it was at the time, and Infomediary was not so much the strategy BBH chose as the one that emerged from internal dialogue. One of the benefits of a partnership is the sense of ownership and security it affords to senior people, allowing the leaders of the firm to debate challenges and opportunities meaningfully, rather than politically. “It was the Dot Com boom, so we had one of these destroy-your-business.com off-sites, and asked ourselves what could wipe us out, or what could change global custody as we knew it,” recalls Bodman. “We did gain the insight that control of the assets in custody was waning in favor of control of the information. We thought there was potentially a role for an intermediary to give an investor a single view of where everything was, by facilitating the aggregation of information from many players through better connectivity. We reckoned that you did not need to be a bank to do that but, if somebody did it, the bank could be the loser. So we thought we would do it ourselves.”
Bodman became what he calls “the founding CEO” of Infomediary and saw it from its birth in the grandiosity of the Dot Com boom, through the deflation of the TMT bubble, to fruition in 2005 ahead of a number of competing propositions. He had not only to integrate the skills of multiple people within BBH, and capture their knowledge technologically, but insulate the project team from the internal pressure to cut its budgets in the downturn-and then sell the concept to a naturally skeptical buy-side audience. Somehow, BBH persuaded Wellington and GMO to agree to be development partners. “After two and a half years we knew it was going to work,” says Bodman. “We had critical mass. We had reached the tipping point. Pick your cliché.”
With Infomediary launched successfully, and reclaimed from its project status for the use of the investor services group as a whole, Bodman at last became properly a part of the custody business of BBH. It is sobering to recall that in 1993 he became the first figure at any level in the then 168 year history of the firm to make the move from the Brown Brothers office in New York to the Boston office, and then only to enable Susan Livingston to take command of the fledgling operation in Luxembourg (see Livingston’s GC Legends profile here). That move shifted him from the domestic sub-custody perspective of New York to the global custody perspective of Boston, but also exposed him to the different cultural nuances of BBH in the two locations. “There is one Brown Brothers culture, but that is like saying there is a single weather pattern in the North East Temperate Zone,” explains Bodman. “There are still micro-climates.
Boston definitely had a micro-climate. There are overarching general principles that are shared between Boston and New York, but on a day-to-day basis you could experience important climatic differences.” Chief among them was the different demographics of the Boston office (which employed a relatively younger and operationally-focused staff) and its New York counterpart (which is composed of a more mature and professionally diverse employee base). Boston also emphasized client service, while New York obsessed on risk management. Bodman saw his role as bridging the differences between the two cultural climates, partly by reminding each side of the strengths of the other, but mainly by persuading both that the firm would never succeed in either the global or the sub-custody business unless it operated off a single technological platform.
“It was clear that there was no future for me unless the place came together,” says Bodman. “And I obviously played a role in creating a shared vision around why we had to come together.” But he also plays tribute to the open-mindedness of fellow Legend and current managing partner Digger Donahue (see Donahue’s GC Legends profile here) for his own natural inclination to bring people together.
As a result of their joint efforts, the differences between Brown Brothers in Boston and Brown Brothers in New York are now “less pronounced,” says Bodman. He says it is no longer unusual for a partner to divide his or her time among those two and other cities, as he does. Perhaps it was that innate as well as necessary sensitivity to the human side of business success that makes it less surprising that a partner long immersed in technological matters should be asked in 2007 to take charge of human resources. “It was a partial surprise, because it was so completely different from what I had been doing before,” laughs Bodman. “But not a complete surprise because I had often said it could be done better. That is often how these things happen at Brown Brothers-‘Thank you for volunteering.'”
It is hard to think of a tougher time to have taken on the job, with revenue tight, staff feeling anxious, and the disagreeable tasks of curbing the payroll and reallocating people from low-yield to high yield occupations ever present. Yet hard times have also imparted to HR a strategic importance that makes the job much more interesting than it is in normal times, when the priorities are to keep employees happy and the firm out of trouble. “I sense that I can make a really big difference to the firm by attracting, retaining and rewarding the right talent during this time,” says Bodman. Within six months of starting in the new role, he was asked to resume his old job on an even grander scale-taking total supervisory command of operations and systems at the firm. He ascended simultaneously to the management committee of the firm. “There are now full partners running systems and operations on a day-to-day basis, so it is not quite the same job as before,” says Bodman. “If Brown Brothers was a normal public company, I might be called the chief administrative officer.”
But then Brown Brothers is most definitely not a normal public company. If it were, a musically inclined history graduate from Princeton would never have been put in charge of shaping its IT strategy. –Dominic Hobson