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For global custodians 2006 was a year to celebrate. Assets grew across the board: JPMorgan's were up 25 percent, Citigroup's rose 20 percent, and Bank of New York, State Street, Mellon and Northern Trust grew their assets under custody, as well. However, take note: The gains may not translate into a hiring bonanza during 2007.

The merger between Bank of New York and Mellon Financial created a $15 trillion mammoth custody business, threatening to set off a wave of consolidation. Observers say jobs will be eliminated, and firms like State Street, Northern Trust and JPMorgan may soon pursue dance partners of their own. Job losses from the Bank of New York - Mellon, with a combined 42,000 employees, could reach 10 percent.

"Things have already begun to stagnate this year," says Brian Drum, chief executive of Drum Associates, an executive search firm. Even while custodians await the next pairing and the shoe to drop on BONY-Mellon, there are other strains on hiring. For example, automation has made derivatives and hedge fund processing more efficient, says Drum.

An exception might be Northern Trust, where hiring is on an upward slope. The company has capitalized on hedge fund trading, adding 40-50 clients. Northern Trust is bulking up in Chicago, but an agreement with Bank of Communications in China to act as custodial agent may make Asia its carrot.

In general, 2007 may bring fewer hires and a higher bar for those making the cut. Custodians are sniffing out highly skilled people to manage complex alternative investments like derivatives trading and risk management and are targeting buy-side professionals and accountants.

Across the Pond

Instead, growth is in the UK, where hiring is brisk, according to Emily Ayre, manager of the Asset Management Division at London-based search firm Morgan McKinley.

Growth in fund management has a trickling effect as firms expand their management offering into structured products and outsourced back office functions. In addition, penetration into derivatives has driven demand for custodial processors, Ayre says. "Custody houses need to follow suit to deal with the operational implications of this expansion," she says.

Although global custody jobs aren't the highest in financial services, salaries in the UK are rising as houses struggle to attract and retain individuals. "Experienced transitions candidates have seen a 10 percent increase in salaries and can now earn about £34,000," Ayre notes.

Firms growing include RBC Dexia, which entered the space in 2006 with $1 trillion in assets. It has added three veteran industry executives and is poised to expand in Europe and Asia.

For now, custody professionals must wait. The news will be bad if Citigroup and JPMorgan flex their global muscle to make acquisitions. Once this shakes out, custodians can march ahead with their parade of new products. And, search firms may hear their phones ringing again.