How outsourcing operations can enable improved productivity

Recent research conducted by Solve Partners and FoxRed Insight showed that wealth management firms self-score their productivity as 6/10 on average. Focusing on productivity in operations alone, firms consistently cited lack of technology, inconsistent processes, and unreliable data as a barrier.¹ 

With one outsourced firm estimating they saw a 30-40% increase in their operations productivity, outsourcing has become a popular strategy for wealth managers looking to address these challenges. The research acknowledged that business process outsourcing (BPO), if done right, can bring significant benefits across wealth management businesses that extend beyond cost savings.¹ In response to this, we have outlined a selection of these below.

Some key benefits to outsourcing

1. An increased focus on core revenue generating activities
   For BPO providers, operations are a revenue generator. For wealth managers, they are a cost centre. This demonstrates the difference in focus. By outsourcing non-core activities, wealth managers can focus their resources and productivity on their revenue-generating functions. 

   Relationship management activities, particularly face-to-face client interactions, are the hardest to scale. In fact, on average, relationship managers were only spending 43% of their time on ‘golden-time,’ defined as revenue-generating activities.¹ Removing as much of the administration burden with straight-through-processing can re-focus attention on client service.   

   An experienced outsourced provider gives you access to a larger pool of experts and specialised skills. This can be particularly beneficial as the wealth management industry changes, where specialised knowledge is required to support specific functions.

2. The ability to grow with confidence
   Outsourcing can deliver the ability to scale operations up or down quickly based on fluctuations in demand without the need to invest in physical infrastructure or permanent staff. There can be fierce competition for experienced operational staff driving increased costs in operational areas. 

   Outsourcing can deliver cost transparency in the longer-term. Firms no longer need to maintain and train specialist operations teams, transferring these responsibilities to specialists in these areas. This flexibility can lead to more efficient use of resources and greater agility in responding to market changes or opportunities. 

3. Improved risk management
   Areas of operations with the highest manual intervention are not only the hardest to scale, they also have the greatest potential for error. For the UK regulator, operational resilience is a high priority. Working with the right strategic partner can help mitigate risks by addressing inconsistent and highly manual processes and enabling improved operational resilience.  

4. Investment in innovation and technology 
   As outsourcing is a revenue-generating function for BPO providers rather than a cost-centre, these firms are able to make investments in technology to benefit their client base and introduce more efficient ways of working than a wealth manager might be able to. A single-code base enables all clients to benefit from technology updates and an extensive range of APIs allows integration with existing or new technology.*

   When operations is their core business, providers will invest in technologies and intellectual capital. By leveraging outsourcing effectively, you can solve various productivity challenges and also enhance your ability to adapt in the future.

5. Increased access to reliable data 
   Getting data to the right people at the right time can drive productivity across your business. Wealth managers can have access to extensive data on their client and their business, but it is not just about bringing the data together. It needs to be accessible and usable. 

   Reliable and up-to-date data can deliver improvements and intelligent decision making across the back, middle and front office and up to executive management levels by boarding your knowledge across the organisation, whilst delivering improved data to your relationship management teams can help to enable rich conversations and a more personalised service to your clients. 
    

¹Research conducted by FoxRed Insight, Solve Partners and commissioned by SEI “Maximising productivity: How wealth managers can turn challenge into opportunity,” 4 June 2024. The research incorporated findings from a survey of 65 wealth management firms and qualitative interviews with 25 C-suite individuals. The research was conducted in late 2023.

* A Single code base is a unified source code that is shared across multiple environments and platforms, allowing for all clients that use the relevant technology to benefit from consistent version control and unified release deployment timelines.

Application Programming Interface (APIs) is a way for two or more computer applications or programs to communicate with eachother.

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