Posted by Mary Milorrie Campos
Nov 04, 2024
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To be effective in their roles, wealth managers must focus on what they do best: managing, protecting, and maximizing their clients’ wealth. However, labor-intensive administrative tasks — along with the pressures of dealing with complex regulatory requirements — can often get in the way.
Wealth managers can address this by reaching out to back-office outsourcing companies that specialize in finance and accounting. Here are the benefits they can expect.
Benefits of back-office outsourcing for wealth managers
Eighty-three percent (83%) of wealth managers believe that outsourcing can give them a strategic advantage, a 2022 report revealed. These managers also shared that they “have outperformed those which retained their in-house technology and operations infrastructure, both in terms of assets and revenue growth.”
Back-office outsourcing, which is defined as the business activity of delegating administrative tasks and other non-client facing duties to support professionals, enables both wealth managers and advisors to focus on investing and client servicing. For wealth management firms, outsourced providers can serve as an extension of their practice that can give them their much-needed boost to addressing rising operational costs and persistent talent shortage.
Below is a more intensive discussion of the benefits of back-office outsourcing for wealth managers.
1. Increasing the firm’s capacity
A wealth management firm can only grow their clientele as much as they’re willing to increase their headcount. There’s a limitation to how much work each wealth manager can handle. Anything beyond it could result in burnout, subpar performance, client dissatisfaction, and even high attrition rates.
Outsourcing back-office functions aim to prevent this. By acting as an extension of the firm’s operations, outsourced accountants can increase wealth managers’ bandwidth and allow the latter to accommodate more clients and focus on diversifying investment portfolios.
Specifically, accountants can assist wealth managers in the back end through the following means:
- Eliminating inefficiencies and improving workflows by producing documented standard operating procedures (SOPs) for relevant processes.
- Assisting in gathering detailed financial information as requested.
- Preparing compliant advice documents such as Statements of Advice (SoA) and Records of Advice (RoA).
- Providing detailed projections and analyses that can be used in the development and evaluation of financial strategies.
- Producing reports on interim portfolio valuations, execution-only letters, and investment strategies, to name a few.
- Helping with administrative tasks such as email monitoring, calling investment and insurance providers, and creating internal administrative reports.
- And different other functions based on the firm’s specific needs.
Given the scope of what outsourced accountants can do, it’s no wonder why advisors who outsourced reported an increase in the number of clients and assets under their management versus those who did not outsource.
2. Finding and hiring the right staff
Wealth management firms, with their client-oriented nature, rely on their talents’ expertise, skills, goals, and ethics to attract and retain customers.
However, the competition for top talents remains tough, especially when the Big Four are also eyeing the same job candidates that wealth managers need onboard. The rising overhead costs of keeping employees in-house can also add up and affect the firm’s profitability.
With back-office outsourcing, wealth management firms can focus on hiring and retaining their core employees and outsource support functions instead.
Outsourcing companies don’t simply assign their readily available human resources. Instead, they screen potential candidates based on the firm’s requirements to ensure they can deliver commendable performance once the engagement starts.
The key is to find a reputable wealth management back-office provider that cares not only in delivering quality services but also in providing quality work environment to their employees.
Related: Managed Services Provider or Recruitment Firms: What’s Best for You?
3. Increasing objectivity in managing wealth
Working with an outsourced team can also make investors feel more secure.
In Private Funds CFO’s Insights 2024 magazine, the CFO and chief operating officer at MPM BioImpact Kristen Laguerre says that investors believe in the capabilities of outsourcing.
“They feel as though there is a second pair of eyes on everything,” Laguerre says, adding that investors like how “there is an objective third party involved.”
Outsourcing companies like D&V Philippines exert efforts in assuring the work of their accountants. With clear quality assurance processes — and through the close supervision of senior employees — we see to it that everyone adheres to good accounting practices and industry regulations that apply to our wealth management clients.
4. Dealing with regulatory and reporting complexities
The wealth management industry continues to fall under deep regulatory scrutiny, KPMG reported. Professionals under the said industry — fund, wealth, and asset managers — must then be aware of these five common regulatory themes:
- Sustainable finance
- Systemic risk, market risk, and liquidity risk
- Governance, resilience, and substance of firms
- Enhancing investor protection
- Widening investor choice
Dealing with all of these can take a mental toll on wealth management professionals. By working with outsourced accountants who have in-depth knowledge of these regulations, these ever-growing complexities can be more manageable for fund managers.
5. Achieving higher cost savings
Outsourcing can function in two ways: as a cost-cutting tool and as a value-adding investment for wealth management firms.
Time and again, this business activity has offered organizations a strategic way to reduce costs while maintaining service quality, especially if they work with companies from offshore locations.
Given that they work with the right service provider, firms can also consider this as an investment, especially if they plan to use it for the long run. The rationale behind this lies beyond outsourcing’s scalability wherein wealth managers can easily communicate their need to increase their back-office team’s headcount when necessary — or reduce it when the situation calls for it.
6. Providing better client experience
Although they work at the back end, a back-office outsourcing team can make remarkable contributions to delivering better client experiences.
Of course, it’s already a given that wealth managers can dedicate more time to their clients when they outsource. It also allows them to meet more prospects, strengthen their networks, and do other value-adding activities. Administrative tasks are being taken care of at the back end, after all. But beyond this, an outsourced back-office team can be of greater help.
For one, they can assist wealth managers in formulating cash flow management strategies that closely align with their client’s financial goals — thus, giving the latter a more personalized experience.
Outsourcing to specialized providers can ease the growing responsibilities of wealth managers and help them become more effective in their jobs. To get the most of this initiative, wealth managers must build meaningful connections with the outsourced team and let the latter understand why their contributions matter to the firm’s overall growth.
Business process outsourcing for wealth managers
For your wealth management operations outsourcing needs, get in touch with our experts at D&V Philippines. Our accountants have been providing back-office outsourcing solutions to wealth management firms, family offices, and real estate fund administrators, among others.
To learn more about our expansive accounting solutions for wealth managers, download our whitepaper, Unlock the True Potential of Your Wealth Management Firm with Finance and Accounting Outsourcing.
