Wealth managers have been progressively outsourcing a variety of (predominantly middle- and back-office) processes and services for years. The increasing regulatory burden and rising cost pressures have been particular spurs. But in the latest WealthBriefing/SS&C Advent Technology & Operations Trends survey, we’ve seen a notable reshuffle in firms’ priorities.
While improving efficiencies remained in top position, wealth managers’ desire to improve service quality jumped to second place, from fifth last year. Given their end-clients’ growing expectations for more responsive, real time and digitally-oriented services, outsourcing to a provider with the technological sophistication and investment budget to keep pace with these rapidly-evolving needs makes sense.
No “magic bullet”
Yet outsourcing is also recognised as being far from a “magic bullet” that will solve all firms’ woes, notes the report. Compromises are involved. And among some institutions, especially larger firms, there is a certain amount of re-evaluation of the merits of leveraging third parties.
On the one hand, wealth managers are up against tremendous efficiency and cost pressures, while they wrestle with how to meet changing client expectations. On the other, there may be concerns about losing control of critical processes or pieces of infrastructure, and perhaps giving up a degree of strategic flexibility, especially at a time of extreme change.
Regulators are also stepping up their focus, especially when it comes to data security.
For instance, The UK’s Financial Conduct Authority has cautioned firms to address the possible operational risks associated with outsourcing, notes the report, asking them to cement a “data residence policy” before entering any agreements with third parties.
Meanwhile, the Monetary Authority of Singapore issued a guidance note in August 2016 requiring institutions to alert it to any “adverse development” arising from their outsourcing arrangements—including the potential reputational damage and any detriment to clients that could arise from an outsourcing failure.
A question of providers
The challenge for wealth managers therefore lies in finding an outsourcing provider that can deliver on the promised benefits of scalability and efficiency, and that also has the skills and flexibility to support your needs and aspirations as they continue to evolve. For the outsourcing relationship to be a real success, a strong and responsive partnership will be key.
 Technology & Operations Trends in the Wealth Management Industry 2017, by WealthBriefing and SS&C Advent
To get a full copy of the report, visit “Technology & Operations Trends in the Wealth Management Industry 2017”.