Wealth managers outsourcing to save costs
Australian financial planning firms are not the only ones who have been finding the going tough in the tougher market and regulatory environment which has followed the Global Financial Crisis, with US firm, Celent, pointing to an upsurge in outsourcing by US wealth management firms.
In a report released this week, Celent has said many of those firms are choosing to outsource significant parts of their operations in order to focus only on their core business and points to much of this being achieved via use of technology.
It said cost-cutting remained the primary driver behind outsourcing, which typically could save between 20 per cent and 30 per cent of costs over a three to vie year period.
The research also suggested that outsourcing also offered scalability which was more relevant as firms either cut down or closed operations in certain markets, while looking to expand in others.
The report has found that the offerings of most of the vendors in the outsourcing space are broadly similar, with all of them having developed strong expertise in mid/back office functionalities "while support for front office is relatively less developed in general".
It said this lack of support for front office was due to the fact that wealth managers were still reluctant to outsource front office functionalities, although things were changing as firms looked to outsource more front office functions
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