The Hybrid Outsourcing Model Explained for Wealth and Asset Managers

Outsourcing is not an all-or-nothing approach, and the hybrid model allows wealth and asset managers greater flexibility in delegating workflows that achieve optimal results.

Rising costs, resource/process inefficiency, and lack of skilled experts make it ever harder for wealth and asset management firms to operate at the highest level.  

For those reasons, many firms outsource.

The benefits of outsourcing are well established, but with growing challenges and complexity in running a business, investment managers need more sophisticated and nuanced approaches.

Enter the hybrid outsourcing model.

What is Hybrid Outsourcing?

Hybrid outsourcing is a business process in which firms can delegate work to third-parties through multiple outsourced channels:

  • Onshoring
  • Offshoring
  • Nearshoring  

Defining Outsourcing  

Most people think of outsourcing in the context of offshoring, where work is done by a third-party in another country.

But that’s only part of the definition.

Outsourcing also includes work done by a third party onshore, or in the same country a business operates in.  

Investment firms can also nearshore, which is a type of offshoring. With nearshoring, firms outsource work to a third-party in closer geographic, time zone, and/or cultural proximity.  

And depending on the type of workflows, investment firms will find it advantageous to outsource activities via onshore, offshore, or nearshore approaches.

Why the Hybrid Outsourcing Model Matters to Wealth and Asset Managers

As mentioned before, outsourcing is not an all-or-nothing proposition.  

Firms don’t have to hand over all their work to a services provider in a solely offshore context.

They need the flexibility that a hybrid outsourcing approach brings, and they need a service provider that delivers the best in hybrid solutions, like Empaxis does.

And here are a few reasons why a combined onshore, offshore, and nearshore model makes the most sense for investment managers.  

1. Assign Work to the Most Suitable Talent  

Some tasks are better performed offshore, and others are better for onshore or nearshore.

Consider this: an asset manager needs help with software implementation, application development, or RPA (Robotic Process Automation),  

An offshore resource would be appropriate, assuming cost advantages and resource is qualified and able to work independently, with minimal verbal communication required.  

Meanwhile, an onshore resource would be suited for activities that require more direct communication with investment management staff. This may include project management, sales and marketing, or any investment and operations activities that require an onshore presence or generally closer geographic proximity.

2. Enjoy Time Zone Advantages

A hybrid outsourcing model offers the best of both worlds in time zone advantages.  

Consider reconsider daily reconciliation and performance reporting, for example.  

For US time zones, custodian data is made available very early in the morning while most people are still asleep, and that is the perfect time for an offshore team in India to immediately begin processing that data and produce the reports, without delay.  

Similarly, when firms need resources at hours late in the afternoon or early in the evenings when offshore talent might not be available, onshore is a preferred option.  

Whatever the case may be, wealth and asset managers can have support whenever they need it and for the most suitable talent.

3. Improve Communication

With many offshore resources located in India, the Philippines, Latin America, or Eastern Europe, that means most if not all individuals will be non-native English speakers.

While there is exceptional English-speaking talent in these regions and outsourcing providers do the best they can to hire them, it’s not always perfect.

These resources could be very good at portfolio accounting or software development, but if they have limited English proficiency and/or heavy accents, it becomes harder for a US- or UK-based wealth manager to communicate effectively with them.

Additionally, cultural misunderstandings may lead to more miscommunication.

In any case, poor communication impedes progress, and the hybrid outsourced model seeks to address this issue.  

The hybrid model allows investment managers to communicate with an onshore resource, available at all needed hours within the investment firm’s time zone and who can effectively communicate the client’s need to the offshore team.

The onshore resource, likely in the form of a project manager, serves as a liaison between clients and offshore staff. Said onshore resource has an understanding of both sides, and this person has the time to make sure their offshore colleagues understand the task at hand.  

Ultimately, this spares wealth and asset managers the time and hassle not having to re-explain things over additional and unwanted calls.

4. Satisfy Requirements for an Onshore Presence

While outsourcing (via offshore) is increasingly commonplace in the investment management industry, some firms keep all the work in-house, or onshore.

They may have concerns about security, communication, quality of work, etc.

These concerns can certainly be addressed, but regardless, some investment firms still prefer or require an onshore presence, at least for certain tasks.

Of course, the hybrid model accommodates those needs.

In this approach, wealth and asset managers can select what resources they want and where they want them (onshore, offshore, nearshore), thus satisfying requirements of all interested individuals and parties.  

The Hybrid Approach with Empaxis

At Empaxis, we are keenly aware that investment firms’ need fully customized and flexible solutions.

And it’s not just customization and flexibility in how the work gets done, but where and when and by whom.

That’s why Empaxis now offers a hybrid outsourcing model to all investment managers.

Acquiring a complementary mix of onshore and offshore resources, Empaxis establishes governance models to ensure succesful outcomes.

Onshore Delivery Model Explained

  • The Empaxis offshore-led governance team will coordinate with the onshore team, which is expected to deliver results to the client.

Middle- and Back-Office (MBO) Governance Explained

Governance Team

Governance includes:

  • Shared Project Manager for onboarding, along with onboarding team
  • Shared Empaxis Vice President for escalation of matters
  • Shared Empaxis Operations Manager
  • Shared Empaxis Quality Compliance Analyst team
Empaxis Offshore Specialists

For offshore resources, Empaxis usually follows a "40-30-30" model:

  • 40% of staff are the most tenured resources
  • 30% are mid-tenured resources
  • 30% are junior resources

    (These percentages are flexible depending on complexity of project.) 

Go Hybrid with Empaxis

By partnering with onshore, US-based investment operations and technology services providers like MD Solutions and Ievers, Empaxis makes it possible for wealth and asset managers to access onshore talent while leveraging the desired talent offshore.  

Perhaps an onshore, native English speaker handles tasks that require frequent and effective communication with the investment management clients, and the offshore team focuses on activities where their technical and reporting prowess is most valued.  

In any event, the onshore and offshore teams work together to ensure optimal results.

Wealth and asset management firms can select their use of resources however they want, and it’s perfectly acceptable in the hybrid outsourcing model.

Anything becomes much more possible and a reality when getting the best of all worlds in onshore, offshore, and nearshore servicing.

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