“There is no efficiency without added value”
According to the Chief Executive Officer of Societe Generale Securities Services (SGSS) in Italy, with the return of volatility, interest rates and inflation, the role of the asset service provider as innovation enabler within the asset management industry takes on even greater importance. “Objectives and development lines do not change: the ability to evolve together with clients is fundamental”, he says.
There is no doubt that we are now facing multiple challenges that make adaptability fundamental, understood as the ability to remodel paths and processes without giving up one’s development objectives. The world is volatile, uncertain, complex and ambiguous, and to face it you need the ability to analyse and act.
The statement, made by the CEO of SGSS in Italy Roberto Pecora, can be applied to all the players of the asset management value chain but strongly concerns asset servicing providers, who are central, as they are innovation enablers within every segment of the industry. A centrality recognised and placed by SGSS at the centre of its 2021-2023 plan which has just entered its third and final year. A vision, expressed by Pecora, in which clients are travel companions with whom we travel the uncertain paths of the markets in the awareness that only joint forces and best ideas lead to better results.
The solidity of the industry
“2022”, says the CEO of SGSS in Italy, looking back over the year just ended as a starting point for an assessment of the bank's plans, “had already begun with an inflationary surge due to the strong acceleration in demand then greatly accentuated by the outbreak of the conflict in Ukraine and the consequent disruption of the supply chain of primary goods such as energy and raw materials”. “A change in the macroeconomic framework with immediate effects on central bank policies, interest rates and markets, generating a simultaneous repricing of shares and bonds that obviously led to tensions among investors and risk aversion”, adds Pecora.
For the asset servicer provider business, the consequences of what happened in 2022 are numerous. The first one is determined by the impact on assets stock linked to the generalised decline of the markets. “Asset servicing and fund distribution activities were affected by this, impacting the fee base,” explains Pecora. There were, however, some factors capable of counterbalancing these negative elements. Among these, Pecora recalls the recurring flows from institutional investors but above all the ability to generate new business. “Not to mention, moreover, that interest rates increase for a liquidity-generating business such as securities services has a high positive effect”, he specifies. “Considering all effects, the year just ended was resilient”, summarises Pecora, confirming consistency with the strategic objectives of SGSS in Italy and beyond.
Efficiency with high added value
It’s precisely the ability to evolve in synergy with clients that represents a fundamental quality to navigate in the new investment environment characterized by the increase of interest rates and inflation.“A great confirmation as regards the asset and securities services business certainly concerns private markets, a segment of great interest both globally and locally where in recent years we consolidated our positioning by reaching an important market share”, states the Head of SGSS in Italy before going into the detail of the way in which the bank establishes a relationship of close partnership with asset class key players. “In our country", he explains, "we launched several initiatives, including an exchange platform with real estate players, a sector in which we are strongly positioned, to discuss the challenges and opportunities brought about by the new macro framework and encourage the dialogue between management companies and investors." “In this sector”, he continues, “there are many areas in which development can be made both from the point of view of the distribution channel, with an interest in the retail segment, and in terms of new asset classes emergence such as social and student housing, interesting for institutional investors”.
This is an example of how client experience is strongly rooted at the heart of the strategic development of Societe Generale's asset and securities services division “which shall continue to evolve, thanks to the ever-increasing efficiency of the end-to-end model, by focusing on innovation, digital and data as fundamental elements to give added value to the relationship”.
“Reliability, safety and effectiveness in operations are the basis on which to build a client journey made up of sharing and awareness of the relationship purpose”. Therefore, it is not just a matter of buying a tool or a service but strategically thinking with a partner to discuss and develop.
This is where lies what Pecora defines as “the necessary balancing of the relationship”. “Costs are an issue, and everyone must be ready to openly and transparently discuss them because the reduction in profitability exists and concerns every player in the value chain”, he says. For this reason, it is becoming increasingly important for a large pan-European player such as SGSS to act as a one-stop-shop in which to find broad-spectrum but modular solutions for one's operational and business needs. The partnership with MFEXbyEuroclear, one of the leading fund distribution platforms in Europe, goes in this direction, giving the bank's clients access to a complete and integrated service including custody, settlement and fund distribution, both for retail and professional channels and institutional ones. Another example is the offer of solutions allowing clients to make the most of their assets held by us and for which we are seeing increasing interest. Specifically, securities lending which makes it possible to benefit from additional profitability from securities and liquidity solutions which the increase in interest rates make even more attractive”.
A multi-disciplinary approach
The clear concept of best execution permeates the transformation plan of SGSS both internally and externally. “We have also introduced in Italy - in France it already started in 2021 - the agile approach in project management”, says Pecora on this point. “Through a proprietary methodology, a series of characteristics of each project is evaluated, a ranking established and then a series of priorities for action. On this basis we work step by step in a flexible way with the ability to reconsider priorities as conditions change, constantly monitoring intermediate objectives allowing us to better control the trajectory of our action. All this, once again, with client experience as primary objective”.
An action based, therefore, on value where increased productivity and process efficiency are at the centre of what SGSS identifies as a key element for transformation.
HR, business, technology. Everything must be involved in this process in which investments in information technology, central for an asset and securities services player, play a main role.
“In the 2021-2023 plan, we have begun a process of transforming our IT which involves the renewal of Core applications which will allow us to improve the quality of our client service and our operational efficiency”. Without forgetting the integration of sustainability goals not only for the asset servicer provider division but for the bank in general.
“Our diversity & inclusion programme”, of which Pecora is a global sponsor, “works with a specific plan and objectives and a dedicated governance. Our efforts on the topics of gender diversity and inclusion have been recognised in 2022 by the Winning Women Institute which awarded SGSS in Italy with the Gender Equality Certification”: 53% of women in the workforce, ambitious targets with a minimum 30% of women in top positions, as well as a series of very important initiatives in terms of talent management. All this testifies our engagement for gender equality, but also for internationality, a very important factor for a pan-European player”, concludes Pecora.
Article published in Focus Risparmio in the January-February edition 2023 – in Italian.