New exchange highlights need for custodial changes

The addition of a new exchange to the Australian market as well as a changing regulatory environment have highlighted the need for Australia’s custodial and investment administration sector to adapt to the changing environment, according to the Australian Custodial Services Association (ACSA).

“The custody community will be working closely with institutional clients to reshape business models and increase efficiencies in response to these shifting priorities,” said ACSA chair Paul Cutts.

Institutions are also facing other, sometimes competing factors, including growing attention on after tax returns, monitoring and management of risk and improved transparency, he said.

All of these factors test current operating models and the boundaries between internally managed and outsourced services. The association’s clients will need to adapt to external change, creating a need for new and extended services, Cutts said.

The changing information requirements of clients are an area where custodians can add value, such as an increasing demand for environmental and social governance information, he said.

The past year saw total assets in custody within the industry grow to $1.85 trillion at December 2010, up nearly 8.5 per cent from the end of 2009, according to ACSA statistics.

In the past year, ACSA consulted with the Board of Taxation on the implementation of a new tax system for managed investment trusts and highlighted the significant level of engagement expected within the custodial industry arising from an additional securities exchange later this year.