For the last several years the investment management industry has seen a seismic shift towards outsourcing middle and back-office activities.
This shift and the development of a successful outsourcing model has come with some degree of skepticism. But outsourcing is a reality that, with the right service provider, can help investment management firms to better focus on delivering performance returns and quality services to their clients, while helping them to mitigate risk, streamline operations and manage total cost of ownership.
To achieve these results, firms are moving beyond tactical arrangements to be more strategic in their selection of service providers, often by leveraging larger providers and several key areas of a service providers' experience.
When making the commitment to outsource, finding a service provider with a global reach, financial stability and a proven commitment to servicing is of the upmost importance. A provider with a strong investment profile and a proven track record of servicing and stability can help to reinforce the outsourcing decision to the firm's clients.
Modern outsourcing arrangements are multi-layered and intricate, and often require more innovative operational and technology expertise to service them. To fully support their front office, firms are requiring robust capabilities that can support integrated middle and back office services across multiple books of business via a single platform.
All this can often add up to a substantial capital investment in technology and establishing services around that technology. Considering a global outsourcing provider can help firms manage the total cost of ownership and the sometimes unpredictable costs associated with implementing regulatory changes and continued technological investments to keep up with current market trends.
When selecting an outsourcing provider, due diligence is a must. A superior reputation of client service, including transparency, responsiveness and collaboration, are important considerations. Successful outsourcing relationships start with clear communication and teamwork with one common goal-to understand the firm's needs and to set up a roadmap that will help the firm achieve its business goals.
The outsourcing world has evolved to see new entrants into the marketplace, specifically from the areas of traditional trading and portfolio management. The result is data management solutions with differing models for accessibility and ownership of data, comprehensiveness of the data solution and timeliness of information delivery. Outsourcing providers with an integrated data management services strategy can help firms to automate and streamline processes and data to the front office.
The decision to outsource can be daunting, but the right provider can work with a firm to understand its needs and offer solutions to help the firm achieve greater efficiencies in processing, monitoring and measuring investment data, allowing the firm to better focus on delivering performing returns and service to clients.
The views expressed within this article are those of the authors only and not those of BNY Mellon or any of its subsidiaries or affiliates.
Paul Gately is managing director and head of global outsourcing, BNY Mellon.
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