9 Questions to Ask Investment Operations Outsourcing Companies

When planning to speak with investment operations outsourcing providers, knowing the right questions to ask will make your meetings more productive.

Finding a reliable outsourcing provider requires good research and due diligence.

Sure, you'll find information online, but only in conversation will you get the most important details needed to make your decision.

Maybe you're new to your role as a COO. Perhaps your boss wants you to speak with outsourcing companies for wealth and asset managers.

In any case, knowing what to look for and what to ask will save you time in your the research and selection process.

What You Should Ask Investment Operations Outsourcing Companies (The 7 C's of Outsourcing):

I. Competencies

1. What are your areas of expertise?

As an owner, manager, or employee of an investment firm, you have an idea of what functions you'd like to outsource.

The key is finding a provider that has true expertise in the area you're looking at.

Outsourcing providers may offer a wide variety of solutions, but realistically they are better at some things than others.

Find ones where there's a match between what you're looking for and their expertise.

2. Can you work with my systems?

You could also phrase this question as, "What systems do you work with best?"

When looking at outsourcing, you want to know the provider is comfortable with your software, be it portfolio accounting or trade order management.

Some vendors may offer support on a variety of systems, and they may very well be good at all of them.

But they're truly great on a smaller number of them.

Ultimately, it depends on the level of expertise you're looking for from the provider relative to other work that needs to be done.

II. Customization

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3. How customizable are your offerings?

No business is exactly the same as another, and an investment operations outsourcing services provider should account for those difference.

A good provider, like Empaxis, will tailor their solutions to fit your needs. You won't have to pay for services or features you won't need, and they won't try and fit you into their box.

In short, pay close attention to how attentive the provider is to your needs.

III. Costs

4. What are you pricing and fee structures like?

Some firms will charge on basis points, or a percentage of assets under management, meaning their fees are derived from the performance of your investments.

Others will charge a flat monthly fee, which in many cases is determined by the volume and complexity of the work. In these cases, it's not likely you'll get a specific price after one call with the vendor. It may require a follow up call and then a presentation of a proposal.

Also, some may charge hourly rates with a minimum number of required hours for a given time period.

There are many different approaches outsourcing providers take when it comes to pricing, and you can decide what works for you.

IV. Controls

5. Where is the work being done?

In some cases, the outsourcing provider will do the work onshore, but in most cases it is offshore.

BPO (business process outsourcing) is becoming more mainstream, as highlighted by a recent Ernst and Young survey that revealed 68% of firms describe their target operating model as a combination of outsourcing and in-house operations, and 62% of firms employing an outsource model that relies on one or two strategic partners. These firms adhere to legal regulations, and ensuring accountability and accessibility are all part of a successful business model.

There are a variety of reasons for outsourcing and doing the work offshore, including labor arbitrage and increased timeliness of task completion.

Aside from geographical location, the outsourcing partner can do the work in your environment.

6. How much control do I have over the processes?

With the right provider, you will have full control over your processes.

For example, Empaxis works entirely in your environment where you set all the controls of what we can see/access. You can see all the work we're doing at any time, and we do not work outside an environment you can't control.

V. Compliance

7. How are you regulated? Who oversees your processes?

Trust, but verify. You can be reasonably sure the provider you speak to follows best practices, but you need verification.

One way to do that is by asking about compliance credentials.

As an example, the outsourcing provider should have compliance audits and certifications like ISO and SOC. These documents verify the vendor adheres to best protocol for data management and cybersecurity. For Empaxis, Ernst & Young is our auditor, and we have our ISO 22301 certification, among others.

Most banks and institutions already leverage offshore talent, in the form of outsourcing or build their own teams. These firms have very strict requirements when it comes to compliance and security, and they've found the outsourced model to work both efficiently and safely for themselves and customers.

VI. Contingencies

8. Do you have contingency plans?

Like any business, things don't always go as you plan. Accidents and turbulent events do happen.

The outsourcing company should certainly have contingency plans. If the power goes down or a pandemic hits, the company needs to be prepared for just about everything. These contingency plans  should be documented, and with COVID, their plans should very well have been put to the test.

In short, make sure the provider has done their preparation so they can serve you through any situation.

VII. Clients

9. Who are your clients? Have you ever worked with a firm like ours?

It's nice to know that the outsourced partner has helped organizations like yours before. Or at the very least, it's important to know if they've helped other firms with similar workflows you have.

The provider may have case studies and client testimonials, and if you're seriously considering the outsourced partner, they may send you contact references

Get to Know Outsourcing Providers for Wealth and Asset Managers

Asking the right questions - and getting the answers you want to hear - are important for knowing if outsourcing your investment operations is right for your firm.

With this information, wealth and asset managers can learn how to get the most out of outsourcing, resulting in lower costs, higher efficiency, and less operational risk.

You may have other questions, but no matter what you ask, simply making the call or scheduling to meet an outsourcing services specialist will have you better informed.

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