There is a sweet irony to the merger plans of F&C Management and Isis Asset Management that will not be lost on longer-toothed custodians. For the past decade or more, all talk of consolidation in the industry has been about the mergers and acquisitions of service providers, with asset managers fretting about the long-term commitment of their custodians. As service relationships have deepened to include a broader range of products, managers have had to think longer and harder about exit strategies and the risk of provider failure.

The F&C/Isis deal stands the thought process on its head. Custodians have to look carefully at the prospects of their clients and decide for themselves whether it is worth taking the risk of building a service relationship with them. With significant manager consolidation looking increasingly likely, custodians only want to do business with the winners.