Pershing LLC has increased its assets under custody by more than 50% since its 2003 acquisition by Bank of New York Co. Inc., to nearly $1 trillion, but it still has plenty of room to grow, according to its top executives.
The Jersey City custody and clearing firm, now a unit of Bank of New York Mellon Corp., is taking steps in particular to expand its business serving registered investment advisers, Richard Brueckner, the unit's chairman and CEO, and Brian Shea, its president and COO, said in an interview this week.
Fee-based advice is too lucrative a business to be ignored, either by Pershing or by brokers who are moving to it, Mr. Brueckner said.
According to Mr. Shea, many advisers are getting dual registration, so they are eligible to take commissions or fees. "Since there is a growing trend toward dual registered advisers, we want to provide solutions to serve both."
Pershing is allowing dual-registered advisers to provide more products like managed accounts through either fee-based or commission formats, he said.
The unit's effort to broaden its customer base was evident early last month when it hired Mark Tibergien, a well-known expert in the RIA field, as the CEO of its Pershing Advisor Solutions LLC, a major provider of clearing services to independent broker-dealers, who are licensed by the NASD. The subsidiary wants to build up its smaller business supporting RIAs, who are governed by the Securities and Exchange Commission and work off a fee-based model.
In the RIA business, Pershing will compete more with heavy hitters such as Fidelity Investments, Charles Schwab & Co., and TD Ameritrade, said Alois Pirker, a senior analyst with Boston research firm Aite Group.
Mr. Pirker agreed that Pershing's flexibility could position it well to serve those advisers. "The middle ground really hasn't been covered that much," he said.
Meanwhile, Pershing also is looking to increase its foreign business. A quarter of its customer base is currently outside the United States, Mr. Breuckner said.
"We expect to see that percentage grow as the demand for diversifying portfolios across currencies grows," he said, and he expects Pershing's foreign-based business to grow faster than its domestic operations.
For example, early last month its London unit, Pershing Ltd., launched Nexus Funds, a no-transaction-fee mutual fund platform that provides a single access point to global funds. And the company is working to expand the number of offshore mutual funds available on its platform for U.S. distributors, Mr. Brueckner said.
Meanwhile, the merger of Mellon Financial Corp. with Bank of New York presents many opportunities for Pershing.
"Each bank has a large custody business, and custody is one of the big feeders for Pershing in terms of broker-dealer and RIA clients," Mr. Pirker said.
And Mr. Brueckner said that Bank of New York Mellon's size ? it has $20 trillion of assets under custody ? provides further options for Pershing. For example, it is developing a program to lend stock to investment managers that offer hedge-like 130-30 funds. "There would be a seamless opportunity between Pershing and the bank custody area to service investment managers that offer those products," he said. There is also the opportunity to make Bank of New York Mellon's asset management products available to the broker-dealers and advisers in Pershing's network, Mr. Brueckner said.
Meanwhile, iNautix USA, which Pershing formed last fall, has staffed up with 200 technology professionals. The unit's offerings include document management and imaging, data warehousing, and net commission and payout system services.
The idea is for Pershing to provide a one-stop shop for such services while using its scale to compete on price against small rivals, Mr. Brueckner said.
