Adrian Whelan (AW): It’s increasingly evident that market expectations in areas such as taxation and investor onboarding are becoming differentiators that can directly impact the investor experience. What trends do you see evolving in this space?

Steve Vescio (SV): As a bank ourselves, we understand the technical aspects and the importance of certain aspects of the business central to our financial institution clients. Among these are tax and investor onboarding. Both are critical in building and retaining trust with underlying clients – as such we are dedicating resources to these areas at a time when we see others shying away.

AW: Just why are tax support services so important to clients?

SV: Tax is inherently complex and specific to the investors’ profile. Giving support in this area is often seen as a thankless task with limited upside or as a zero-sum game. However, when tax servicing is done incorrectly it can result in significant financial and reputational damage. That erosion of trust can be hard to recover from with your clients.

With complex market dynamics and constantly changing rule sets, global tax remains a significant challenge. But at the same time, it does represent a sizeable opportunity to differentiate. Where others might run away from the fire, financial institutions can stand out by embracing the challenge head on and investing in tax technology solutions to automate and garner efficiency gains in an area of crucial importance. A bespoke, high touch and customized client servicing on tax reporting can be a tangible differentiator in a real-world challenge.

AW: Might I ask for an illustrative example where a shared infrastructure partnership was particularly effective in the tax reporting space?

SV: Probably the best example was when our bank clients were tasked with finding a solution to the IRS Section 1446(f) relating to US withholding obligations for foreign partners of interests in partnerships. That became effective in 2023 and represented a significant tax reporting challenge to non-US private banks.

As a bank ourselves, we needed to address the rule change, but it also gave us learnings and a product solution that we were willing and able to provide to our clients. We can bring both technical competency and technology that we are willing to share with our strategic partners. This is something a traditional tax consultant or pure play technology partner cannot bring to the table in the same way as a peer financial institution can. We commit to solutions like this because it is core to our own business but we have also managed to leverage our tax solutions to be of added value to our clients and their underlying clients.

AW: When it comes to the tax life cycle could you highlight some key areas financial institutions should consider?

SV: Tax withholding calculations must be systematic, timely, accurate, and based on all relevant asset, account, and event attributes. It is also important to remember that reconciliation is not just for year end, it’s a year-round function. Waiting until year end to reconcile tax records can cost financial institutions and their clients more than they think and can mask both risks and opportunities. As a bank, we fully understand intermediary banks’ obligations. Interim, tax reporting is no longer a nice to have, it’s a competitive differentiator.

AW: What role can tax support services play in helping clients evolve and develop their businesses?

SV: The bidirectional trust that builds through solving complex tax matters means that as the inevitable “next big thing” appears on the horizon, we must look to engage, educate, and ultimately collectively solve for the change working in lock step with our partners. I’m pleasantly surprised at how often our approach to tax solutions resonates with our clients and provides a solid foundation for building out other mutually beneficial solutions to new challenges as they emerge – and they always do!

Financial institutions that invest in expert tax support and collaborative solutions will not only safeguard trust, but also position themselves to thrive amid future challenges.