Watch Empaxis CEO Stephen Van de Wetering’s recent interview in New York with Nasdaq on operations outsourcing (video below).
As investment managers face increasing challenges in their back-offices, operational solutions are needed. Outsourcing is one way to overcome operational issues, allowing money managers to focus on their core competencies, which is investing.
In the interview, Stephen addresses the challenges investment firms are encountering, how outsourcing plays a role in solving their problems, as well how back-office outsourcing companies keep their clients’ data secure.
Thank you to #TradeTalks host Jill Malandrino and Nasdaq for meeting with Stephen, who has been invited to return at the end of the year to discuss other investment operations-related topics.
Operations Outsourcing: Stephen’s Views On…
“There is fee compression happening in the market, and there’s a tight labor market. The work is more complicated. It’s very technical now, where before it used to be very simple; you could have a lot of people — anybody could do the work. So it’s very challenging for investment advisors these days to manage their own operation.”
How outsourcing plays a role as a solution to these challenges:
“It enables them to focus on their core competency. Aside from that, there are potential cost savings involving an outsourcing partner. There’s a way to mitigate key-man risk if you’re a smaller firm and there’s only a few people that are good in the operation.
People leave, they go on vacation, and it becomes very difficult to keep the trains running on time, so there are lots of benefits to using an outsourcing provider.”
On RIAs transferring their operations to a third-party:
“The way that we work — and a lot of firms work this way — is we’ll connect people right into their environment. So in essence, the investment manager is controlling all the work anyway, it’s just now you have a bunch of remote employees who are specialists in doing the job.
You have complete transparency into the data and what you’re working on, and we work with our clients on coming up with audit reports and different controls that they want to see, so (investment managers) know exactly what we’re doing.”
How back-office outsourcing companies protect client data:
“There are a lot of basic and technical controls you can put in place — firewalls, passwords — basic things everybody does. Lately, though, there are a lot attacks coming over email, phishing attacks.
We spend a lot of time training our people on social engineering, looking for emails that sound like a friend or somebody you know, so that they’re not accidentally clicking on a link in there and exposing our clients’ information.
Social engineering is a really important part of (protecting our clients’ data). Aside from that, there are requirements around GDPR, making sure people know their information is used. Those are very basic things you can let your client know how that information is being used.”
On trust between the third-party outsourcing provider and the investment firm itself:
“Most outsourcing firms have a third-party go in and do an audit of their environment. Someone like an Ernst and Young can go in to do a report on the controls that are in place, the SSAE 16 report as an example.
We share that (report) with our clients, so they know exactly what kind of controls we have in place around information, how we use it, and who has access to what.”