Alexander Hamilton would have been surprised when setting up his Bank of New York in 1784 to be told that 237 years later it would include a thriving subsidiary in old Jersey.
After helping to write the US constitution and establish the United States of America, Mr Hamilton still found time to grow his bank, which in 2007 merged with the Mellon family business to become one of the biggest financial institutions in the world.
Now its Jersey subsidiary, Pershing (Channel Islands) Ltd, is helping the group to grow even bigger and become ever more innovative, according to the local director and country officer, Mike Rothwell.
‘BNY Mellon isn’t a traditional bank anymore,’ Mr Rothwell said. ‘It transitioned into being more of a service provider to the global securities industry. That includes the Pershing business, which had been around since 1937 but was acquired by The Bank of New York in 2003.’
Now celebrating ten years in the Island, the small but hugely profitable local Pershing subsidiary concentrates on investment administration and custody, which continues to grow strongly, although now it is part of a diverse business-to-business operation, providing the infrastructure and facilities for other wealth managers to prosper and expand to meet increasing demands.
Pershing (Channel Islands) has therefore grown from nothing ten years ago to having £4.2 billion in assets under custody and administration, and 17 clients, including investment managers, trust companies and at least one Middle Eastern global bank as the core of its business.
Pershing helps them to concentrate on their clients’ needs, by doing nearly everything else for them, down to integrating digital platforms to help keep clients connected.
Mr Rothwell says that the group’s story of longevity without any significant losses in 237 years is comforting to their clients and has helped the group as a whole to become one of the largest custodians looking after a sizeable portion of the world’s investible assets.
BNY Mellon’s investment servicing operations covering administration and custody now amounts to more than $41 trillion, and Pershing alone looks after $2 trillion of assets, with seven to eight million investor records. Not all are high-net-worth investors, either, and there are many mass affluent investors reassured to know that Pershing is the custodian behind their wealth manager.
‘If you are a brand-new wealth management business with new teams and just starting out, you can partner with Pershing, who will effectively provide the entire infrastructure for your business, with all of the nuts and bolts, including all of the connectivity but also crucially custody of the assets,’ said Mr Rothwell.
‘That is a great help when you are new and credibility is important. People will trust the wealth manager with their savings because they know they are partnering with an organisation whose history goes back to 1784 and is solid and dependable.’
The fact that the Pershing operation includes three subsidiaries covering Europe, the Middle East and the Africa region, with offices in London, Ireland and Jersey, has also opened up new opportunities in the past five years because of Brexit.
Pershing has strong businesses in the UK and Ireland, while Pershing (Channel Islands) is available if neither of those options fits investor requirements.
‘Not everyone wants their assets booked in the UK, particularly as these days there is inevitably some divergence between the EU and the UK,’ said Mr Rothwell.
‘But the EU says if you are a wealth manager with an office in Spain, for example, then your custodian has to be in the EU. So, you often have to have more than one custodian, and EU clients use Pershing’s Dublin-based custody solution. Pershing (Channel Islands) is positioned to be the international solution for Pershing EMEA.’
There are other trends that Pershing intends to ride in a promising future for the Jersey operation. That includes an increase over the last 15 years of new wealth businesses based on the Island expanding globally. Many of them are good businesses starting from scratch or are revitalising existing wealth managers, and in some cases mopping up others as part of the consolidation taking place in the sector.
They can benefit from Pershing’s enormous custody operation, while being offered a less complicated and more appropriate regulatory environment in Jersey.
‘Regulators, including the Fed, the FCA and SEC watch us closely, which is to be expected as we are so intrinsic to global markets, but they are reassured by our resilience and stability, and that includes Jersey,’ said Mr Rothwell.
This will also help to cope with the increased political and geopolitical instability of recent years, where Pershing’s reputation can be of great assistance.
Governments are also urging their citizens to look after their own retirement needs more closely, and so there will be increasing demand for advisers and managers and the support that Pershing offers them. Even Pershing’s global banking client in the Middle East takes advantage of its custody solutions in multiple countries.
There are not many international challenges facing the custody business, as it is an accepted method for protecting assets, which is the backbone of Pershing’s activities. There will necessarily be changes in the markets, according to Mr Rothwell, but he believes that Jersey will retain the core of its business while adapting to the new circumstances and repositioning itself, as it has done historically.
‘We at Pershing think we are part of a good solution for the wealth industry, particularly some of the newer firms who don’t need to take on enormous numbers of staff or buy expensive systems. We’re doing that for them,’ said Mr Rothwell.
‘We’re already servicing multiple wealth managers across the UK, Ireland and the Channel Islands, as well as in the Middle East, and we are talking with businesses that are even further afield. Trust businesses also want to know how we can look after their assets, so there’s a huge diversity of business. However, at heart, most of these businesses come down to one thing – they want to focus on the end investor and doing what is right for them. That’s not our business; we want to help these wealth managers to grow and we can do that to scale, whether it’s £100m in assets or more. In Jersey we can focus on our wealth management clients, meeting local regulations and going out to win business internationally. I think we are doing a pretty good job of that, and we can concentrate on it and rely on the heavy-lifting and processing done by Pershing at probably a lower cost than other centres.’
With a staff of only four in Jersey doing a lot of business, Pershing is just the type of taxpayer the Island economy needs.
