As traditional custody services become commoditized, much of the value addition comes from enhancing the financial relationship with your custodian bank to help build, manage and grow your wealth.
On the surface, custody appears to be a basic service. Most people associate it with asset administration and centralized reporting for a consolidated view of your portfolio. The valuation and safekeeping aspects of physical assets ranging from securities to documents, jewelry and works of art are also well recognized. But what may be less evident is the versatile role global custodians can play in opening up value-added services from your private bank.
In recent years, service enhancements by custodians have meant that a hitherto largely manual and basic service has been transformed into a digitized one. While some may be content with accessing basic reports at the end of their reporting periods via a simple portal, those with complex portfolios spanning multiple providers, regions and currencies may choose to have on-demand access to real-time information and tailored reporting capabilities.
Thanks to vastly improved digital portfolio analytics that give insights into your wealth, custodian banks can now collaborate with your private banking relationship team to enable additional services going beyond a custody-only engagement.
These services may include facilitating local or global market access – or both – depending on your operating needs. They can also include cost-effective liquidity via lending solutions and competitive deposit rates based on the assets held with us. This is true to an extent that would not be possible in the absence of a dedicated custody relationship with your bank.
We’ve described this shift as Custody 4.0; a service segment where we believe custodians have really come into their element. Furthermore, with this wealth of data on your assets at their disposal, custodians can also address many of your business needs.
For instance, against an assessment of assets held, financial assistance for you or your businesses may include risk, treasury and collateral tools to support additional middle and back-office functions (e.g., payments and resources management). As these functions also get more digitally advanced and less manual, speed and efficiencies improve in-step with a more digitally aligned business collateral management, i.e., the process of you and counterparty/custodian banks exchanging assets to reduce credit risk associated with any unsecured financial transactions between both parties.
The relatively recent deployment of new infrastructure capable of digitally reporting and assessing asset classes such as alternative investments (e.g., private equity, collectibles and real estate holdings), also supports these service enhancements, akin to the reporting of conventional assets under custody that is considered routine.
Having a custody and private banking relationship with same provider also has the potential for more cost-effective processing, among the other advantages that we have outlined here. For custodian banks with a global network like Citi Private Bank – your enhanced custody offering includes private banking access to many countries around the world, using existing branches and subsidiaries, or relationships with top tier third-party local banks in those countries.
Ultimately, we believe that custody with a private bank could be of further advantage should you choose to move beyond a mere custody-only arrangement. Of course, custodians will always continue performing their traditional duties of safeguarding and the administration of your assets. While that aspect of their service does not change, the extent of value-added banking services custodians can now facilitate depends on the level of engagement you choose to have with them.
Our dedicated private banking team provides comprehensive strategies for sophisticated wealth needs. Please contact us for more information.