Top 5 Reasons for Investment Managers to Outsource Their Middle and Back Office

Middle and Back Office OutsourcinfHere’s a situation that will sound familiar to a lot of investment managers.

You want to spend your day focusing on managing money and keeping clients happy. You are an asset manager after all.

Instead, a lot of your team’s time is eaten up with affirming trades, investigating and correcting trade discrepancies, processing corporate actions, reconciling transactions and portfolios, producing reports …

It’s inefficient, expensive and distracts you from your firm’s real purpose.

So what do you do? Most of your peers just carry on, lurching from one firefighting exercise to another, wasting time and money, thinking “there has to be a better way.”

And there is.

Benefits of outsourcing

There are a multitude of reasons why outsourcing your middle- and back-office functions can help. But here are five of the biggest:

1) Cost savings

costYou only pay for the services you need. No need to worry about employing a full-time hire for what might be part-time work. Or paying the recruitment fees to find staff, then their ongoing salaries, benefits, and training expenses.

Chances are, an outsourcing specialist will have developed far greater operational efficiencies than you can achieve too, enabling them to handle the work at a lower overall cost.

2) Scalability and flexibility

Scalability and flexibilityYour business is growing. Perhaps you want to move into a new market. But you’ll have to employ extra staff to cope – with all the time and expense that entails.

Outsourcing provides the scalability to handle any change in workload, allowing you to ramp up – or down – when and wherever your operational needs demand.

For instance, we have a client that lost two of its five-member operational team in the same week. By engaging us, we could quickly back-fill the employees who left.

And how ever many clients you have, you know you’ll be able to provide them with the high-quality services they expect.

3) Time-to-market

time-marketHaving operational expertise and support capacity on tap means you can come to market with new products and services faster and more efficiently, without the lengthy up-front operations bottlenecks that often occur when trying to handle expansion in-house.

 

 

4) Quality assurance

qualityAccuracy and quality are essential to supporting clients. Which means validating all data points to minimize breaks that cause trading errors, speed up reconciliations, and improve client reporting.

Whereas most small to mid-size firms don’t conduct rigorous quality control audits,  quality controls can be built right into the middle- and back-office services you chose, even if you are not doing these checks now. That ensures data is accurate, processes are efficient, and reporting is fit for purpose.

5) Reducing risk

riskHigher quality and more efficient middle- and back-office processes reduce operational risk.

Plus, by outsourcing you guard against “key man syndrome,” where much of the knowledge critical to running your firm’s operations is concentrated in the hands of one or two employees.

In short, outsourcing gives you the operational excellence you need, while freeing staff to focus on those areas that will have the biggest impact on your firm’s profitable growth. And there lies the key to increasing your competitive advantage.

Stephen Van de Wetering is the Founder and CEO of Empaxis Data Management, a premier providers of back-office services to small and medium asset managers, hedge funds and wealth management firms. You can reach him at 310-356-5831 or via email at Stephen@empaxis.com

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