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Perspectives on Make Your Bed – a securities services journey

From the desk of Roy Zimmerhansl

Practice Lead, Pierpoint Financial

You may have noticed that over the past couple of months, only my partner John has been writing the blogs. I wasn’t planning on writing one today either, but I was inspired by a weekend conversation that triggered this post. It’s a very long one, so sit comfortably and have a drink handy, but I am hoping that you will find something meaningful somewhere in it.

I recently met a new friend who will hopefully become a close friend over time. As part of our conversation, I was reminded of the “Make Your Bed” commencement speech given by Admiral William H. McRaven at the University of Texas at Austin 2014. I was going to send the YouTube video to my friend this morning when I realised (while on the treadmill at 6:15 am) that it would be good to listen again before sending it. It’s a remarkable story and has charged me up for the day, as evidenced by this post. If you haven’t watched it, I suggest you do. Then watch it again. Here’s the link. I’ll try to relate some of the key lessons of the speech to my own career and my challenge to you is to search for these in your own life. I deliberately name many people in this blog, few are still engaged but all have had an impact on me – impact is an important part of the speech.

My journey started in the early spring 1980 at the Canadian Depository for Securities (CDS). I began as a messenger running through the dirty, half-melted snow in the Toronto streets and fortunately was promoted very quickly and given opportunities. But I was 19 and maybe not so mature. So when the senior clerk in the department felt he was the only guy that knew anything, I found it frustrating and by the time Christmas rolled around I was fed up listening to him, marched into my boss’s office and quit. Ken Willis listened to me, called in Paul Douglas my supervisor and we had a chat. They convinced me to go to the Christmas party that night, think about it over the weekend and we would talk again Monday. An EPIC Christmas party later, it was now Monday and I recognised that Paul and Ken had taken care of me at the party and given me opportunities to get a start in financial services. Maybe I would withdraw the resignation. “Good” was their answer because they had decided to reorganize the department, move the difficult colleague elsewhere and make me a supervisor. LESSONS – “Never, Ever, Quit” and “You Can’t Go it Alone”

I moved to Royal Bank of Canada at a time when DTC introduced a requirement for participants to electronically affirm trades cleared in the US. We didn’t have any ability to do that, no plans for anything and DTC was naming and shaming firms that didn’t hit 70% affirmations on a monthly basis. I had been working on a solution for Canada using a platform developed by a Canadian company IP Sharp with a product directed and inspired by Stan Deudney, the CEO at CDS when I was there. The woman running RBC’s US custody business, Lorraine Mann, and I agreed that the product was our best option to meet the DTC obligations. While we got no support or money from management in either Toronto or New York, they also didn’t block us from doing it ourselves as long as we were willing to take total responsibility for it. So we went live a few months later. The day we went live, NO TRADES CAME THROUGH! People freaked out and my anti-perspirant spectacularly failed … Then we found out there was a brown-out in NY and NO ONE received any trades. When the power came back on, everything was fine. Job done. LESSONS – “You Must Dare Greatly” and “You Can’t Go it Alone” (again)

I joined CIBC and crossed the Atlantic to live in the UK in the summer of 1987, enticed by John Kennedy, my original mentor at RBC who had made the move a year earlier (and I took on his role at RBC). John convinced me CIBC was aggressive and innovative. My UK boss, Clive Gande confirmed it and within 3 months of being here we had 7 sub-custodians connected electronically following the same path as Lorraine and I followed for DTC. That may not sound like a major accomplishment, but in 1987 that was unique. I also set up my first borrowing/lending desk using Lotus123 as our “system”. Then the market crashed in October 1987, CIBC retrenched and not long after I left as their ambitions didn’t care about our ground-breaking efforts. My whole reason for changing continents evaporated and the securities business overall was in a downturn. LESSONS – “Rise to the Occasion”, “You Can’t Go it Alone” and “Life’s Not Fair – Drive On”

I was invited to join Chase Manhattan Bank by the legendary Colin Grimsey – Chase had been one of my RBC clients. He gave me the opportunity to manage a team of custody relationship managers, interim manage the entire RM department on two separate occasions. But they wouldn’t put me permanently in charge of the department because they felt I was too immature and had failed to convince them – I had the knowledge, but I didn’t have their confidence and for the third time in three years there was another head of RMs! But six months later I moved into securities lending full time essentially for the rest of my career (so far). I also started working with Mark Tidy the first of three times, in my opinion the best partnership of my working life. LESSONS – “Rise to the Occasion”, “Failure Can Make You Stronger” and “You Can’t Go it Alone” (notice a pattern here?)

I have many, many stories from my time at Nomura, where I was the first securities lending front-office person in London. I’ll share one – when I took over Prime Brokerage near the end of my 5 years there, we were challenged to make the business more profitable or shut it. Jag Hirani was running our securities lending collateral activity and suggested we mobilise the static PB collateral to transform the funding of the business. It had been a central tenet of Nomura’s PB that we didn’t do anything with the collateral so clients could always be sure their long sales would be met. But it was crippling the business financially yet no one wanted us to change. But Jag promised he could manage it and did. This drove internalisation and radically improved the business financing to almost self-funding. That was 1997, about 10 years earlier than the GFC forced most firms to rethink their financing requirements including internalisation. LESSONS - “You Must Dare Greatly” and “You Can’t Go it Alone”

I took a team to Rabobank with a plan to start with securities lending, financing all assets including commodities and buy Nomura’s PB business using Rabo’s AAA rating and low funding costs as an edge. Then, while in discussions with Nomura, LTCM blew up, and Rabo’s ambitions were severely cut back and my reason for joining disappeared. But not long after that John Foley, one of my Nomura transferees told me we should set up an Index Arb desk. I said, “we’re securities financers not prop traders”. He convinced me, we convinced the bank and started the business creating our own supply, bolstering our demand and making money. LESSONS – “Life’s Not Fair – Drive On”, “You Must Dare Greatly” and yes, of course “You Can’t Go it Alone”

At Deutsche Bank collateral had an impact early on – we had been funding everything with cash borrowed from treasury. Given my Nomura experience I suggested to Jean-Paul Musicco that we should be looking to use our long inventory instead. He had joined about 9 months before me, agreed with the sentiment but had a bigger set of changes and priorities. He asked me to get involved in addition to my Sales and Relationship responsibilities. We moved Richard Casey into the collateral team, he made a difference then we upped our game even further with the addition of David Lane. I knew a lot about collateral before, they taught me tons more. That is also when we had major engagement with the amazing Jim Malgieri who sadly recently passed away. RIP Jim. My DB experience ended sooner than I expected, I was mentally exhausted and took the following year off. LESSONS: “Rise to the Occasion” and “Failure Can Make You Stronger”

At the end of that year, I joined ICAP to build an electronic trading platform for borrowing/lending equities. In building the pilot group I called on Lehman, a firm that years before had interviewed and rejected me for a role in equity finance. I made the call half-heartedly and less than 10 minutes into the meeting Ben Challice asked me to stop the pitch I was making. I thought to myself “here we go … how quickly can I get back to the office?” Instead, he had called the IT team in and informed me that Lehman had been number one in turnover on the London Stock Exchange for 18 months in a row and were strong believers in automated execution. Before I had been 15 minutes into the meeting I didn’t think would be worth having, instead I’d found a cornerstone user that after launch was always the #1 or #2 client on my platform. They also suggested ETFs would be good to add to the equities we traded. Adding ETFs almost doubled the user base in 3 months from 12 to 23 – had we finally reached the tipping point?. Sadly, Lehman’s demise was the practical end of the platform. LESSONS – “Never, Ever Quit” “Life’s Not Fair -Drive On!” and clearly “You Can’t Go it Alone”

I moved into consulting a couple of months after the Lehman default. I believed my knowledge, experience and passion for the business would help market participants at a time of unprecedented turmoil. Yet most people thought I was just consulting until I got my next job so few firms were willing to hire me, have me learn about their business and potentially move to a competitor. I had a dream and a vision, but nobody was buying into it. Then I bought a training company and people started to take me seriously. Mohamed Moursy of ABN AMRO became a huge supporter of the training business and a regular client and promoter. Bill Foley was instrumental in getting me an assignment for JP Morgan that gave me credibility as a consultant. LESSONS – “Never, Ever Quit” “Life’s Not Fair -Drive On!”, “You Can’t Go it Alone” and “Only the Size of Your Heart Matters”

HSBC became one of my regular consulting clients and Cian Burke gave me the opportunity to implement one of my consulting assignments – the transformation of the HSBC agency securities lending business. It was 5 years in the making, full of challenges, obstacles, adversity, and opportunities. Support and execution from many people, but particularly Wayne Burlingham and Reshad Mullboccus who translated my vision into reality. Cian’s support was essential and his tragic passing had an impact on people’s lives way beyond securities lending. RIP Cian. LESSONS – “Life’s Not Fair – Drive On”, “Rise to the Occasion”, “Failure Can Make You Stronger” "Give People Hope" and inevitably, “You Can’t Go it Alone”

Finally, back to consulting since 2019. I am doing so many interesting and exciting things I could write another 2,000 words, but instead I’ll thank the various Pierpoint colleagues and collaborators (so far) that have contributed to our success: John Arnesen, Zafirah Jeetoo, Raymond Blokland, Jeroen Bakker, Andy Stephenson and Julian Eyre. Of all the lessons, the “You Can’t Go it Alone” is the most important.

Here is a summary of the 10 lessons which are intelligently and wittily told in the video. Today I also bought the book. A casual weekend conversation that means so much more. And yes, I make my bed every morning now.

  1. Start Your Day with a Task Completed

  2. You Can’t Go It Alone

  3. Only the Size of Your Heart Matters

  4. Life’s Not Fair – Drive On!

  5. Failure Can Make You Stronger

  6. You Must Dare Greatly

  7. Stand Up to the Bullies

  8. Rise to the Occasion

  9. Give People Hope

  10. Never, Ever Quit

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