So You Say, “My Operations Are Just Fine.” Really?

November 1, 2018 - Andrew Orr

Over the years, we hear people say, “my operations are just fine,” when, in reality, they aren’t.

COOs and operations directors may have trouble with adopting and fully leveraging new technology, dealing with turnover and finding new talent, and doing things the same way because “that’s how it’s always been done” or because they’ve lacked the resources and will to change.

They leave a lot on the table if they try and convince themselves everything’s going well.

Reasons Why Your Operations May Not Be as Fine as You Think

Bad Portfolio Accounting Systems

You may have bought a new software, but you might be only utilizing a fraction of its capabilities. Either you lack the expertise and/or don’t have the time needed to learn all the in’s and out’s of the system.

Don’t be too hard on yourself if you struggle with portfolio accounting software; there is definitely a learning curve. After all, entire businesses have been created for the purpose of helping asset managers, hedge funds, and family offices with their middle- and back-office operations functions.

You’ll find business process outsourcing (BPO) companies that specialize in running your portfolio accounting software and generating reconciliation and performance reports.

For how much you’ve spent on the technology, are you sure you’ll get the maximum return on investment?

Manual Processes

If you’re an investment firm that has a manual steps-heavy reconciliation process, you’re turning away operational efficiency gains.

People thought they were “just fine” using candles until light bulbs came along. Ditto typewriters and the advent of computers.

Automation is the direction the investment management industry as a whole is going, from robo-advising to report generation.

When successfully implemented, robotics process automation (RPA) could help speed up report turnaround times and result in better data accuracy compared to manual procedures, saving your firm time and money in the long run.

Poor Talent

Attracting talent to your operations can be difficult, especially in a tightening labor market and when so many new advisories have recently sprung up that may compete with you for portfolio accounting talent.

It also doesn’t help if you’re in cities like LA, New York, or San Francisco, where high living costs and horrendous traffic could spell longer commute times for your operations staff. This may result in:

Given these conditions, your $45k-$55k annual salary offers for back-office operations staff may not be enough if you want that top talent.

Unfortunately, budgets are limited, so it’s a Catch 22.

Operating Costs

It’s not just an annual salary to pay for; there are benefits, perks, and bonuses to pay for, plus paid time off.

The costs of new technology purchases are magnified when they’re used infrequently or ineffectively.

Turnover hurts, too. It means more money and time is spent on a recruiter and training the new hire.

Should you really accept this as just a “cost of doing business?”

Conclusion: Your Operations Can Be Better

Operations leaders may think their back-office is just fine as is, not realizing what they take for granted as “normal” is inefficient.

Failure to leverage your systems and automate manual processes are two examples. The hiring process and traditional operations costs are less noticeable areas of inefficiency because current practices have been done the same way for so long.

You could invest in training on your portfolio accounting systems, and you could automate processes yourself if you have the resources and skill set to do so.

In any other case, you could team up with a qualified operations outsourcing specialist that works with asset managers, hedge funds, or family offices. They should have expertise on your software and implement RPA for you. This, in turn, can produce timelier and higher quality reports.

The provider may also lower your operating costs as they could charge lower rates for their services, and they’ll handle the hiring for you, providing you talent on an as-needed basis.

Your operations may not be as fine as you think, but there are ways to improve.

And for that for next time you can say, “My operations are just fine. Really.”