Vendor Management Best Practices for Money Managers

Good vendor management is about reducing complexity and controlling costs. Money managers can minimize hassle by keeping a close watch on all systems and service providers.

At Empaxis, we have long advocated the benefits of leveraging third-party vendors, as you can enjoy cost savings, increased efficiency and scalability.

And advisors recognize the benefits.

According to a TD Ameritrade study, 71% of advisors outsource at least one function.

In addition, cloud-based systems and applications help firms become more efficient with their data and reporting, like our turnkey asset management platform, TAMP1.

How well you leverage third parties is key to overall efficiency, and ultimately achieving organizational objectives.

Consider these vendor management best practices below.

4 Vendor Management Tips and Best Practices for Money Managers

1. Periodically Review Your Vendors

Within an investment organization, there are a lot of moving pieces. You're working with different software and service providers, and RIAs must do their due diligence.

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As we mentioned above, these vendors can certainly help you achieve organizational objectives, and their presence at times is a necessity.

But from time to time, you should review the vendors. Are you still getting the value you expect?

Have you ever paid to access a database or investment research platform? How often do you use it?

Do you still use legacy technology? Is it still effective?

Do you work with outsourcing providers? Are they delivering?

Is there any risk associated with these vendors? Are they compliant with industry requirements and guidelines?

Check if they have certifications or audit reports, make sure they're up to date. At Empaxis, we provide middle- and back-office services to money managers. We are audited regularly, and we make it known to our clients and the investment community at large, like when we got our ISO 22301 certification.

Put time on the calendar and have conversations with team members who use these systems and work with the providers. Decide who and what to keep, as well as what to move on from.

2. Consolidate

If you mismanage vendors, you might run into a host of problems:

  • You'll pay for two or more services when all you really need is one.
  • Systems won't integrate or interact well with others.
  • You'll have a mix of third parties and internal resources working on a project, leading to double work or simply insufficient outcomes.
  • There will be communication issues plus wasted time and energy managing numerous third parties.

Find vendors that can help solve these pain points. Let them know your pain points and what you're trying to achieve.

Consolidate as much as you can. As part of vendor management best practices, you should manage fewer moving pieces.

3. Keep Track of Renewal Dates

If you no longer need a system or service provider, keep track of when your contract ends. Do this with all vendors.

If there is a certain timeframe you have to notify the vendor of your wish to discontinue, put a note on your calendar or set a loud reminder to take action.

What happens too often is that you use the software or application a lot at the beginning, but over time, usage falls. Soon enough, the system is out of sight and out of mind.

If you're not careful, your subscription or account membership will automatically renew for the next year. And because the new billing cycle has already started and the fine print said you can't be refunded, you're stuck.

4. Keep Cards on File Up to Date

Maybe you are happy with your third-party solutions.

It would be terrible to have services disrupted because of an expired credit card on file.

An expired credit card could deny you entry into systems when you really needed access. In other cases, like a website, the page will be taken offline. Prolonged site downtime is bad for business, as we mentioned in a previous post.

And if you fail to renew the domain after a certain period of time, that URL is back on the market, ready for a new buyer.

Just as you keep track of dates when contracts expire for services you'll no longer need, you also want to track expiration dates for things you do need.

Put a reminder on the calendar for when a new payment is needed or set up automatic payments if you prefer. Put reminders in your calendar or CRM system for when any cards on file are set to expire.

Sure, activities will resume once the new card is on file, but why allow for  disruption when it can be avoided?

Money Managers Must Maintain Control of their Vendor Relationships

Reducing complexity is a key component in vendor management best practices.

RIAs can do that by reviewing vendors periodically, determining who and what is really needed. In addition, they can consolidate systems and look for all-in-one solutions.

Tracking contract and credit card expiration dates are also important steps for managing vendors. You don't want to end up pay for things you don't need or lose access to services you are willing to pay for.

By following these practices, investment advisory firms will keep minimize costs, maximize efficiency, and avoid unnecessary hassle.

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