RIA back-office operations is an expense to your firm. As costs continue to rise, the cost of not outsourcing is too great to ignore.
Ever have that feeling of regret when there’s a missed opportunity? Buying too late? Selling too soon? Those feelings are excusable, especially when the decisions are difficult and not so obvious.
Even the best investment managers feel that way from time to time. What’s inexcusable is not picking the low-hanging fruit right in front of you: 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.
Investment management firms will have more money at the end of the year when they outsource. By leveraging third parties, you only pay for the work you need done.
That is a big deal, especially in this current climate. With rising inflation and a tight labor market, wealth and asset managers will pay even more in operations if they don't look at other options.
Otherwise if you continue doing things in-house, you're paying for all these expenses, beyond just the labor:
If you plan to hire internally, do it where it generates the most revenue and where humans are needed most.
Operations work is best performed early in the morning, but most people don’t want to be in the office at 4 AM.
Offshore outsourcing specialists can run the reports while you sleep and have the reconciliation completed before the market opens. Turn off your alarm and rest assured the reports are ready when you enter the office at a reasonable hour!
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 direct reports, multiple deliverables and complex systems requires time, understanding, and management control. Managing an operations outsourcing provider is simpler. You only need to manage them, and they take care of the nitty gritty.
Outsourcing services providers invest more in quality controls and best practices than a typical COO or CFO would invest in their operation. Since outsourcing firms have more clients, they can leverage one investment in quality controls across many different businesses, thereby providing higher levels of quality to firms that outsource.
They can even help you automate your workflows. Check our Automation Guide for RIAs to see what you can streamline.
The purpose of an investment firm is to manage investments for investors, not to waste time on back-office work. Anything that gets in the way of managing others’ money is noise to the process, leading to more complication than necessary and taking you away from your purpose.
Middle- and 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. Middle- and back-office outsourcers have the resources to adjust to your labor needs with no trouble at all.
Small and medium-sized investment advisors 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. Starting with a middle- and back-office services provider gives the investment manager an opportunity to re-engineer their overall operational process to a much more efficient work flow. 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.
Curious to learn more about outsourcing for your firm?