Wealth Management & Private Banking

Wealth Management & Private Banking

Experts: Farzana Khalil, Multrees with Andrew Waldren, Sandaire    Multrees

Facilitator: Mark Miles

Key message

When a firm devises its overall business strategy and target operating model, all options including outsourcing should be considered. A strong cultural fit must be part of the due diligence that a client conducts on a potential outsourcing partner in order to ensure a successful long-term relationship.


  • Consolidation and increased regulation continues to elevate the attractiveness of outsourcing as a way to meet operational challenges.
  • Outsourcing can lead to increased control, rather than a perceived lack of it, if it allows a firm to focus on its own value proposition.
  • Due diligence on any external partner should be thorough and identify a cultural fit between the firms in order to ensure a potential successful partnership.
  • A successful outsourcing environment depends on clear communication channels and the value of personal relationships built up between staff.
  • There is no ‘one size fits all’ when it comes to outsourcing and it should be considered only if the price is right.

Key themes

The session began with a brief scene-setting on the current status of outsourcing within the industry and reasons to consider it as an option.

There have been several external factors pushing wealth managers to contemplate outsourcing as a business strategy. Ever increasing amounts of regulation have put pressure on cost margins while advances in technology threaten traditional operating models. Consolidation among wealth managers continues to be prevalent with outsourcing becoming an increasingly attractive option in response to challenges which arise with increased scale.

Furthermore, client experience is now a main area of focus for wealth managers as firms want to concentrate on building valuable client relationships rather than on executing purely on back office processes in-house.

Discussion then turned to the practicalities of outsourcing as one delegate shared first-hand experience as an investment manager with a current outsourcing relationship. The investment manager in question found that his firm’s existing operating model was ‘running out of steam’ following a recent acquisition. As a comparatively small business, the back office team faced considerable challenges in dealing with dozens of custodian banks on behalf of family office clients and time spent dealing with different infrastructure systems.

As a result, a new target operating model was identified with outsourcing considered alongside other solutions including global custodian banks and software companies. An outsourcing partner appeared to be the optimal solution to allow the firm to focus on its own value proposition rather than managing operational infrastructure.

Delegates agreed that in seeking an outsourcing partner, a strong cultural fit is of salient importance. In particular, the relative size of an outsourcing firm combined with its client base is seen as two of the main factors to consider in a potential partner. Several delegates spoke of negative experiences when dealing with large outsourcing firms who did not align to their own cultural values. Moreover, one delegate emphasised the need to be transparent with end clients about an outsourcing partner and explain why such a relationship should result in better client outcomes.

Once outsourcing has been established, it is also important to foster a healthy working relationship and continue to maintain it on a daily basis. One delegate highlighted regular office visits from their current outsourcing partner as a means to build relationships on a personal level. Such an approach means that the investment manager knows everyone by name on the outsourcing side and can initiate daily calls to sort out any problems.  

However, whilst delegates were keen to express their views on the benefits of working with an outsourcing partner, several participants of the roundtable were also very mindful of the many potential barriers to working with such a partner. One delegate noted that there were not many reliable outsourcing firms and unless there is a truly compelling offering available, it can sometimes be easier to ‘stick with the devil you know’.

Indeed, all delegates perceived that there is huge risk in the potential upheaval of changing custody relationships, both for staff and clients. Anecdotal examples of cases where the process of transferring client assets from one investment manager to another took as long as a year were shared amongst the group. Another delegate highlighted an individual business need to ensure consistency in their custodians although this could be overcome if the firm no longer had to cover custody costs.

A perceived loss of control was also seen by delegates as a significant hurdle to overcome in an outsourcing environment. Nevertheless, one delegate with experience in this realm stated that rather than losing control, it increased it and ultimately allowed the investment manager to focus purely on execution.

Delegates also highlighted the specific challenges they have faced within their firms which have not been fully resolved by outsourcing various functions within their operating models. One delegate shared an example of having to use an off-the-shelf online valuation software solution from an external provider although it was limited in its functionality. This is currently complemented with the business’s own in-house systems to make the software more engaging for clients as it has been unable to identify a better external solution at an attractive price point. As a result, the business was not willing to risk changing provider unless the price was compelling and the functionality was an upgrade on its current solution.

Another operational challenge for delegates was the ability to efficiently execute transactions across different platforms encompassing different portfolios. Several participants in the roundtable noted the fact that some share classes are unavailable on certain platforms plus the associated timing risk when trying to execute portfolio changes across platforms at the same time. Delegates agreed that the balance of power is increasingly in the hands of large platform providers while regulation is pushing investment managers toward more commoditised products at the expense of client outcomes.

Final discussions were centred on the key ingredients of a successful outsourcing relationship. Cultural fit was re-emphasised as an important factor when looking for an outsourcing partner and it was agreed that one solution does not fit everyone. As with any business relationship, building personal connections and trust is vital to securing a long-term future for both parties. A good mind set is also fundamental to success in being able to perceive an outsourcing firm as a ‘partner’ and not just a ‘supplier’.


  • Consolidation within the industry coupled with regulation continues to push outsourcing to the front of the agenda as wealth managers consider their options for potential business growth.
  • Outsourcing is not a panacea to all operational challenges but can be an attractive option if the price is right and allows the client to focus on its own value proposition.
  • The mind set adopted when dealing with a new outsourcing partner will determine the length of a successful outsourcing relationship - if the firm is able to move from being seen as a ‘supplier’ to a ‘partner’.