For the third time in the last few years a custodian bank in Australia has tried to change its technology platform with messy results. JP Morgan was the first to try to ditch its system and then back-tracked. The Australian CEO, Jane Perry, left that position shortly after. BNP Paribas was next and lost a big client, Suncorp. Now, it’s RBC.
RBC Investor & Treasury Services, the custody arm of the Canadian-based global bank, is relinquishing about 100 positions, mostly contractors, many of them this week. A spokesperson for the firm would not confirm the numbers last week but it is believed that about 40-50 of the accountants and IT people doing the work are in Australia and the rest are in Malaysia.
The work in question is a transition from Hi-Portfolio, the ubiquitous system for investment administration among fund managers and some custodians in Australia and the UK, to RBC’s international, and much simpler, system known as Multifonds. The problem is the Australian complicated tax system. And, this is not a new problem – it inevitably gets forced on the Australians in the chain from overseas head offices, with bad consequences. Here’s the track record.
Jane Perry was the chief executive of JP Morgan Investor Services for several years, prior to her departure in 2011. Much to the firm’s chagrin, she subsequently got the job as chief executive of one of its most important clients, Qantas Super. She let it be known that the custodian was going to migrate from Hi-Portfolio to an in-house bespoke system. Clients became nervous about the decision.
This year, BNP Paribas made a similar mistake, although the senior management has managed to retain their positions. BNP Paribas won the $25 billion custody contract for Suncorp, away from NAB Asset Servicing. BNP Paribas promised to deliver on a new global system, which is a common theme. It didn’t work as much as expected and Suncorp has gone back to NAB, which, not surprisingly, is Hi-Portfolio’s biggest client.
Now, RBC IT&S is in trouble because of an attempted technology transfer, which may prove more costly. RBC, which does not provide securities services to pension funds outside of Canada, told its clients that it was moving to Multifonds, its global system, and started up the project last year. Doesn’t anyone read the history?
RBC is now ditching Multifonds for Australia and New Zealand. The problem is it may cost several million dollars to upgrade the Hi-Portfolio system, to which it will revert. Hi-Port is not a cheap system.
RBC I&TS Australian management has also had its casualties in the past couple of months – including Australian boss David Travers and head of operations David Banks. It’s the human cost of mistakes – often decisions taken on the other side of the world.
Andy Allen, general manager of RBC I&TS, Australia, said in a prepared statement: “We have carefully considered the impact on our stakeholders and we’ve spoken to our clients. We are committed to doing everything we can to support the individuals impacted by this change, and we thank them for their commitment and dedication throughout their time with RBC.”
In a background note. RBC also said: “There is no change to our registry service offering (which had been rumoured). It was never within the program’s scope. This decision is part of a global review of cost saving opportunities. We’re in the process of redeploying almost all affected employees. The project was successful in migrating to a new custody platform. Some development (from the recent program work), which can be used globally, will continue to progress. We are committed to continuing to service our clients at the high level to which they are accustomed.”
As an aside, people think Australian and New Zealand funds management is a big industry. It is not. Interestingly, Hi-Portfolio is owned by the global systems company SS&C. SS&C in Australia is now run, since last year, by Steve Tremelling, who has employed David Goodacre as head of sales. They both worked at RBC in Sydney. What comes around goes around.
Greg Bright is publisher of Investor Strategy News (Australia)