Outsourcing investment operations has become increasingly sophisticated, offering faster go-to-market times, new market entry, and ultimately, better outcomes. However, with many options available, firms face the complex decision of whether to go it alone, parcel out operational activities to multiple partners, or find the “one true perfect fit” for their long-term goals.
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In this Capital Allocators podcast, Dan Houlihan, CEO of STP Investment Services, shares insights on the trends and considerations of operational outsourcing, the common triggers to begin the conversation, what to look for in an outsourcer, and how outsourcing can potentially launch products faster and enter new markets. He focuses on the keys to outsourcing operations including ways you can:
Outsourcing, said Houlihan, offers two distinct value propositions: tactical and strategic. The tactical value lies in the day-to-day blocking and tackling, such as trade processing, reporting, and reconciliation. This ensures the essential functions of investment operations run smoothly.
The strategic value lies in leveraging data for deeper insights and improved decision making. By analyzing client data and combining it with other datasets, outsourcing providers can unlock new opportunities for investment managers. This can include insights for stock picking, behavioral analysis for portfolio managers, and even pattern analysis for retail clients.
The potential of data-driven insights, allows firms to leverage the expertise and resources of specialized providers, ultimately leading to several triggers that prompt firms to consider outsourcing. These include:
Entering new asset classes: Outsourcing can provide the expertise and technology needed to navigate new markets quickly.
Questions to ask when choosing the right partner The success of an outsourcing partnership depends on finding the right partner. It’s important to consider factors such as:
The future of outsourcing is promising, with technology playing a key role. The cloud has enabled faster deployment models, heavier computing power, and advanced analytics capabilities. This opens up new possibilities for firms to leverage data and optimize their operations.
One example of this future vision, says Houlihan, is the rise of high-pedigree startups that outsource everything except core competencies like stock picking. This model demonstrates the potential for complete outsourcing, although it may not be suitable for every firm.
Smart outsourcing is no longer about cost savings alone, but rather about seamless integration and platform-based solutions that enable investment managers to achieve strategic goals and unlock new opportunities.
To hear how it can elevate your operations, help unlock new opportunities, and produce sustainable growth, listen to STP’s Dan Houlihan break this down on the Capital Allocators podcast.
Ready to connect with our team to learn more about operational outsourcing with STP Investments? Schedule a consultation here.