While there are many reputable organizations that deliver great solutions, there are third-party vendors ready to capitalize on your forgetfulness and limited options.
At Empaxis, we establish long-term relationships our clients, which means their interests are our interests. Our success is tied to theirs.
The same holds true for other reputable third parties. And it's no wonder outsourcing is front of mind for asset managers, as an example.
Despite the good that can be had with a reputable third party, there are vendors that will conveniently take advantage when given the chance.
It's not to say they're doing anything illegal, but forgetfulness and lack of awareness will come back to bite the customer.
Below are some a few things investment managers need to know to maintain control of the vendor relationship.
Some vendors offer subscriptions to software, databases, as well as research and analytics. Investment firms then subscribe.
The provider may end up charging a hefty sum, and that's all well and good, assuming the customer is getting value and using the services to the fullest.
But what can happen is a business uses the service for only a short period, and they quickly forget about their paid subscription. Even worse, they forget when the contract expires, which means the subscription auto-renews.
The business will be automatically charged for the next billing cycle, probably a result of signing a contract without reading the fine print, granting the vendor authorization to auto-renew.
Has this happened to you?
You get an email from the service provider only after they've auto-renewed you. It's no fun explaining to management or executives why the company is being charged x-thousand dollars for a service you no longer use.
But that's what happens when you let your guard down. The service providers will continue charging, and they will let you know right away when the credit card on file has expired.
What You Should Do:
To prevent this from happening (again), keep track of when you or other team members enter in a contract with a paid subscription. Put in your calendar when the expiration date is, as well as when you need to notify the provider your intent to discontinue.
Sometimes these companies require several weeks' notice before the actual end of the contract, otherwise you're in for another cycle.
It's understandable that vendors have different levels of pricing depending on services the customer needs.
However, the pricing structures can be rigid and unreasonable.
You want access to just one new service or feature, but then you have to upgrade to the next pricing tier, which means you must pay for additional features and services you don't need.
What You Should Do:
If you need that one feature so bad, you may have no choice but to upgrade and bite the bullet until you find a reason to use the additional features or find a service provider that is more aligned with your interests.
See if competitors offer better pricing or an à la carte set of offerings. If there are internal resources that can perform what you need at a lower cost than it would to upgrade, try that.
What's most important is knowing exactly what you expect from the system or service before you sign the contract.
Some software providers will charge on things unrelated to the amount of service the customer needs.
This is especially true in the investment management space, where some fintech companies will charge clients based on a percentage of their assets under management (AUM).
AUM is a fluctuating number, and even if work volumes remain the same, the investment firm will pay more when their AUM goes up. (Vice versa, they pay less when AUM drops, which could be financially risky for the vendor in a prolonged market downturn.)
What makes us different at Empaxis is that we focus on volume and complexity of the work. When investment managers use the TAMP1 platform, for example, it is priced only for what they need.
What You Should Do:
Consider a service provider that prices its offerings in a way your organization agrees with. Be sure to let your current provider know your intent to switch.
Who knows? If the company knows you are dissatisfied, they might be willing to renegotiate the contract.
Also related to investment management, some fintech companies are more than willing to help you migrate data onto their platform, but when you decide to leave, they aren't so eager to assist.
Data mapping, dealing with incompatible data formats, and integrating with all custodians and systems is a lot of work.
The provider knows it's a pain to make a big change in software, and they are hoping that the pain in switching (and their lack of assistance) will deter you from making any changes.
What You Should Do:
If you are a wealth or asset manager and you are serious about leaving your current provider, see if the new one can help with the migration process. The current one will drag its feet in helping, and the time is better spent finding someone willing to help you right away.
At Empaxis, when firms move on to our TAMP1 platform, we help them move out of their old systems and migrate their data over to ours. While we do everything to ensure a positive and long-term engagement, we promise to be just as helpful at the end of the relationship as we are at the beginning.
As mentioned earlier, third-party vendors and the services they provide can be incredibly valuable.
That said, you have to know how the game is played, especially when you are have a pricey subscription that you will be auto-renewed for.
Keep track of important dates related to your contracts, and if you prefer à la carte pricing models, find firms that satisfy your requirements.
Businesses have to make money, and so long as the means are legal and confirmed in a contract, vendors do what is necessary to help the bottom line.
It's your responsibility to know what you're signing up for, the benefits you expect to get, and to know your options when ready to leave.