Venturing together

Tom MacMillian

Tom MacMillian led one of the most successful joint ventures in global custody at a time when technology and scale began to influence competition

In a world where joint ventures can be difficult to successfully pull off, Tom MacMillan’s successful stewardship of CIBC Mellon could be a model for the future.

In 1996, CIBC (Canadian Imperial Bank of Commerce) and Mellon created a 50-50 jointly owned company, CIBC Mellon, and in 1998, MacMillan stepped in as president and CEO, a role he held until 2009. During his tenure, MacMillan focused on improving client service, starting with instituting a strong workplace environment, growing the headcount from around 200 to 1,400 during those 11 years.

“It’s like running any company,” he says. “We came up with core values, we came up with good HR practices, we created a company that people like to work in. It’s not one thing; it’s a myriad of things that all come together, and then you know it’s working when you feel the boat underneath you moving pretty well.”

And in order to ensure the boat did move well, MacMillan acknowledges that throughout the management structure, people worked together to steer the ship.

“Companies are real live things,” he says. “We had huge support from the parents. Most joint ventures don’t work, but this one has really worked, and a lot of credit goes to the parents. They had good governance, they respected each other, they invested and worked through problems. And so it wouldn’t have happened without good management and certainly wouldn’t have happened without good, strong support from the parents.”

During his time at CIBC Mellon, MacMillan saw the relevance of the custody industry rise.

“The sense that I get of what has changed is the importance of the industry to the marketplace,” he says. As the world has changed, a whole myriad of things have changed in custody. Now there’s more of a timeliness to it, more complexity in dealing with global markets and more instruments, and there’s the requirement for adding value in terms of risk measurement. All of those things have driven the industry forward in a way that I think professionally must be very satisfying to those who’ve been in it for a long time.”

Whereas 25 years ago clients didn’t really value custodians as highly and just thought they would communicate with them once a month or so, now the interactions between custodians and clients are far more connected, he says. “Back then, there was a lot of manual reporting, there were certificates, etc., so that change is huge. If you’re someone onerously producing statements with bare technology, you feel different with your clients; it’s not all that professional.”

As technology improved, though, custodians have been able to deepen their offerings to clients.

“Custodians saw that they needed to invest in technology, and that forced, at least in Canada, a major consolidation because people saw that and some didn’t have the stomach to invest and/or the capabilities or didn’t have the market share to justify the investment. So there was a huge consolidation, and that I think was a direct response to that change into the much more robust offering, and that’s what clients were demanding.”

“There was quite a rich opportunity to upsell and cross-sell, because if you developed a good, strong relationship, we were well positioned to have clients outsource to us things like performance measurement, reporting for board presentations, foreign exchange, securities lending, etc. It’s a nice business in that sense. If you do a good job for them at the basics of settlement and reporting, you build a relationship that makes you a trusted supplier, and there are other opportunities to provide services. You had to develop those services, but you also had to get yourself established as a very important supplier, and then I think people would listen to you.”

Today, MacMillan serves as the chair of Blair Franklin Asset Management and on the board of Gluskin Sheff, which recently acquired Blair Franklin. But he both looks back fondly of his custody days and sees potential for the business going forward by focusing on many of the same things that made CIBC Mellon successful.

“I think there’s lots of opportunities to continue to add services. There are lots of pressures in the business on pricing, etc., as there should be because it’s competitive, but I think it’s a nice banking business where you’re not just doing one thing.

“Things will get faster, more complicated, more global. The demands of clients for good service will always be there. That’s why I like the custodial business because it’s servicing that can be done on a scale basis, because clients don’t want to do it themselves, and legally a lot of them aren’t allowed to do it themselves, and so to me, that bodes well for the future. But we have to be up to the task, which means you have to spend on systems, and you’ve got to spend on people and creating a company that takes client service seriously.”