Back-office operations is an important function, but also an expense for RIAs. As costs continue to rise, the cost of NOT outsourcing is too great to ignore.
Ever feel like you missed an opportunity? Bought too high? Sold told too low?
Those feelings are excusable. After all, nobody wins them all. Even the best stockpickers have their "could've, would've, should've" stories.
What’s inexcusable is avoiding the low-hanging fruit: cost savings with back-office operations outsourcing.
RIAs have a lot to gain by grabbing the fruit in front of them. Here are 10 things you are missing out on by not making this easy decision.
From 2020 to 2023, operating costs have risen 9%, and data and technology expenses have gone up 13%, according to a survey done by Casey Quirk and McLagan Performance Intelligence.
Certainly, asset and wealth and managers must find ways to cut costs.
Doing the work in-house, think of all these expenses, beyond labor itself:
With outsourcing, you are no longer responsible for these aspects. And when investment firms outsource to Empaxis, they save on average 30% in operations costs each year, with some clients saving as much as 50%.
Now if you plan to hire internally, do it where it generates the most revenue and where humans are needed most.
It's not just about saving money. There is a correlation between outsourcing and increased revenue.
And outsourcing is best for non-core, non-revenue generating functions.
Back-office functions are the perfect candidate for outsourcing because those activities are typically non-core. They're important, but not revenue-generating either.
Simply put, firms lose that opportunity to earn more without back-office outsourcing.
Back-office work is best performed early in the morning when custodian and trade data is first available, but most people don’t want to be up and in the office in those wee hours.
Back-office outsourcing specialists can run the reports while you and the team sleep, and they will have the reconciliation reporting completed before the market opens.
At Empaxis, we're available 24/7 and begin the reconciliation reporting as soon as the trade data is available.
Let someone else do the worrying so you don’t have to!
Managing the data, the data feeds, the pricing files...
Running the software, generating the reports, performing quality checks...
Handing over these processes to an operations outsourcing provider is the better option. They'll handle the nitty gritty of the back office so you don't have to.
Back-office outsourcing services providers invest more in cutting-edge technology and quality controls than a typical COO or CFO would invest in their operation.
Operations is just one area of focus for a wealth and asset management firm, whereas an outsourcing specialist focuses mostly or exclusively on investment operations.
With the concentrated focus and resources, it's more likely that a third party will produce better quality of work, faster and at a lower cost.
Back-office services providers not only relieve you of doing non-core tasks, but you get a team of people who have experience with many different operations.
This team gives you a deeper set of capabilities to draw upon to help you solve your operational needs rather than a small internal group, focused solely on one company.
When you outsource non-core work, your team can work on tasks that provide more value for your company, and in turn, employees know their work is meaningful. The result is people more satisfied with their work and more likely to stay working for you longer.
Sometimes your business is booming and other times it’s contracting.
In a ramp up, you pay to hire, and during a ramp down, you feel pain laying off those you paid to hire.
With an outsourcing provider, you avoid the cost and pain. Back-office outsourcers have the resources to adjust to your labor needs with no trouble at all.
Small and medium-sized investment advisors in particular struggle to provide adequate backup resources when people are out or leave an organization.
By outsourcing, you can still have people do the work internally and have some work done by your provider. If you lose your internal person, the outsourcer is happy to help you with the additional work while you find a suitable replacement for your team.
Not every firm is an expert at everything, nor do they have to be.
Partnering with a back-office services provider gives the investment manager an opportunity to re-engineer their overall operational process to a much more efficient workflow. Providers providing services on a flat fee basis are constantly looking for ways to optimize the process.
There are many great reasons not to do things. Making no decision is a decision, and unfortunately it can be costing you. As you can see from above, outsourcing is a quick and easy way to improve your business. It takes some time and effort to set up, but once it is going, you will be reaping the benefits for a long time.
And with your greater attention to what matters most, your clients will be thanking you for it.
As seen, there's a lot to gain by outsourcing and much more to lose by not doing so.
And the benefits go beyond more than money. Having back-office portfolio accounting experts always there to support you .
And RIAs in increasing numbers recognize these benefits of outsourcing, especially with the right provider.
A FlexShares survey revealed that 95% of RIAs that outsourced have are either "satisfied" or "very satisfied" with their outsourcing solutions.
Your firm deserves that same satisfaction; don't miss out any longer.
Curious to learn more about outsourcing for your firm? Speak with Empaxis.
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