The execution to custody value chain and the players involved have remained relatively stable since the consolidation of custodial providers in the 1990s. The financial crisis and new capital and regulatory rules have forced asset managers to reduce fees and have increased the challenges for sell-side firms participating in the cash equities and fixed income execution to custody value chain.
To adjust to the new market realities, firms are aggressively pushing to change their business models in a number of ways. Firms are changing their business models by:
Eliminating product/service and geographic silos by collapsing functions and costs across multiple products/services and territories.
Outsourcing to or combining capabilities, processes, and functions with others who possess best-in-class capabilities, scale, and/or cost structures.
Better leveraging existing infrastructures to gain greater scale and cost efficiency from a cost-per-transaction perspective.
Redoubling their efforts to create new capital efficient revenue growth opportunities.
Focusing on increasing the share of wallet from existing clients. Leading firms are taking drastic action and revamping their product offerings, business models, and client relationship strategies to gain “trusted advisor” status with their target clients.