State Street has no discernible strategy and a largely unimpressive senior management team – no wonder it is losing ground in almost every one of its chosen markets.
What, exactly, has gone wrong at State Street? It has slipped far behind BNY – and, increasingly, Citi – in terms of innovation, product development and client focus, whilst having no discernible strategy for its investment services business (State Street does not have a full-time head of strategy, but instead plays pass the parcel amongst its senior executives). Nothing exemplifies this more than its puzzling decision to buy Mizuho’s global custody book of business. According to informed sources, this USD580bn book is largely composed of U.S. Treasuries, whilst the acquisition will do nothing to help its competitive positioning in Japan, where it competes directly with the same firms it wants to service. Compare that with the BBH model, and you can quickly see why so many in the industry look at the deal as completely inexplicable.
The Mizuho transaction is indicative of a wider problem. CEO Ron O’Hanley has surrounded himself with the most mediocre senior management team amongst State Street’s peer group. Of all the leadership team, only Mostapha Tahiri, COO, comes across as world-class. Some of his colleagues are timeservers who have made it to the top more through longevity than merit. Others have proved themselves to be unfit to perform effectively at this level, proving the Peter Principle.
And this has led to a major challenge for the board. There is a complete absence of succession planning, and it starts at the very top. When O’Hanley was offered a new contract in 2023 – a re-up – it effectively spelt the end of any hope that Lou Maiuri might have had to replace him. Maiuri, president, COO and head of investment services, announced his “retirement” from the bank in 2023 but, when he left in 2024, O’Hanley and the board behaved as if it had come out of the blue. So unprepared were they that O’Hanley had to appoint himself to run investment services, the firm’s single largest business, whilst continuing his duties as chairman and CEO. (Later in 2024, Jörg Ambrosius was appointed as the permanent head of investment services).
What O’Hanley has done – intentionally or not – is set up a rivalry between three of the senior management team, each of which believes that they should be the next CEO. Ambrosius, Tahiri and Yie-Hsin Hung, CEO of State Street Investment Management, all feel they are genuine contenders, setting up rivalries – especially between Tahiri and Ambrosius – that undermine any efforts to promote collaborative working.
Wealth is another problem. State Street is completely off the pace, with the BNY/Pershing X Wove wealth management platform, launched in 2023, almost out of sight. Whilst State Street specifically mentioned access to the wealth sector as a major factor in its decision to acquire Charles River in 2018, that promise has never materialised. Only recently has State Street even chosen a platform (see Product), the start of a process that could take as long as four years before it has a competitive offering.
Perhaps the biggest problem of all is that there appears to be little or no sense at the top of the house of the historic and unique State Street culture. Many of the senior management team, from O’Hanley downwards, are relatively new. This is especially true within the investment services business, where only Ambrosius has had a long career (he joined in 2001). When O’Hanley recruited Brenda Tsai to be chief marketing officer in 2022, he gave her a top priority: revamp the logo and the brand. She obliged, replacing the historic and much-loved clipper with a couple of squiggles. Former State Street executives were left absolutely fuming, and Tsai soon moved on.
Of course, there are high points, most notably its continuing strength in the ETF sector (see Product). But it has repeatedly tried, and failed, to improve its positioning with asset owners, where Northern Trust has opened up a significant gap. State Street denies that it has a problem with asset owners, despite all the evidence to the contrary.
Assuming Ron O’Hanley does not want to go down in history as the worst CEO since David Spina (2000-2004), he needs to urgently address the issues raised in this article, and many more besides. His utter mismanagement of the failed BBH transaction should have disqualified him from a further term, but the board clearly didn’t see it that way. He has yet to demonstrate that he and his management team have a comprehensive plan to deal with the growing threat of Aladdin, or a coherent strategy to rebuild the trust and confidence of asset owners, many of whom now see Northern Trust as their preferred provider. At present, State Street holds almost no industry leadership positions, having watched BNY (O’Hanley’s former employer) run rings around them. It is well past time for a comprehensive evaluation and overhaul of State Street’s entire modus operandi. Don’t hold your breath.
© 2025 Richard Greensted
A version of this article appeared in the Autumn 2025 edition of Scrip Issue Global Report.