A New “Operations Bill of Rights”

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Operational outsourcing isn’t the investment manager’s best kept secret anymore. BNP Paribas calls it a “crucial strategic choice.” BlackRock notes that all investment management firms outsource at least a part of their business. Still, as more firms look more closely at outsourcing – whether that’s taking on a collaborative operations partner for the first time or expanding the relationship with their current provider – they are also wisely looking to define what an ideal relationship is for their needs.

On the surface, an outsourcing relationship may seem straightforward: an investment management firm pays a fee for third-party operational support. But the most successful relationships between investment management firms and providers are so much more than that. They are built on a set of principles that create a beneficial environment for both sides. Over the years we have been providing operational services, the fundamental traits of our most successful relationships have become evident.

Throughout all of our relationships, we encourage conversation and we expect input. By maintaining active interaction and communication, clients and service providers create a mutually beneficial solution that helps them thrive. We believe that these principles are the foundation for building a highly productive partnership with investment managers who choose to outsource:

1. Be Treated as a Business Partner

Outsourced operations should be viewed as an extension of the firm’s business made up of more than just task-takers. The value of a provider is in its ability to collaborate with the investment firm about business strategies and offer insight beyond daily services. For example, technology can solve data transfer issues to unlock a new distribution channel or asset class. You have the right to develop processes by which you can properly leverage your operations expertise to unlock new opportunities for your business. And your operations partner has a responsibility to help you get there.

2. Benefit from Continued Innovation

The investment management world is capitalizing on advances in technology like never before, and the best operations providers need to keep up. For example, process automation – artificial intelligence and robotics – has become a tool used in all facets of the firm, including operations. Third-party providers know that focused innovation leads directly to success. Innovation solves complex problems in order to create a state-of-the-art system that facilitates growth. Part of the value that you get in working with a provider is the innovation that it brings to the table. You have the right to expect ongoing innovation and to create goals and measures in place to foster it.

3. Be Provided with Consistent Support

There are different moving parts to every operations-related relationship. Behind the scenes, different teams will handle parts of the process – before, during and after the conversion – and must constantly communicate with each other. It’s a practice that ensures firms are receiving the highest level of service. When it comes to communication between the investment management firm and the provider, you have the right to consistent points of contact for any updates, questions or concerns – regardless of where they are in the process. Investment firms will be able to truly get to know their team and their experts, and establish a process to vet questions, concerns and changes.

4. Success Is Measured by Your Needs

Clients sometimes come into a relationship with an outsourcer uncertain of what they should include in the scope of the project. The result is sometimes accepting “standard” solutions that omit critical functionality. Both sides should speak openly and comprehensively about what the full project entails. Specificity is critical. The success of an outsourcing relationship is based on how the provider solves the firm’s unique operations and technological needs, not on how well the provider checks boxes. You have the right to insist on a set of goals and needs that are specific to you, and can be measured, evaluated and updated throughout the relationship.

 5. Accommodate Reasonable Change

Change orders are never ideal mid-project. Most providers would prefer to have technical specs fully ironed out before the go-live date. However, operations doesn’t live in a vacuum. You have room to adjust and change throughout the process, and plan for a learning curve once the conversion is finished. You have the right to collaborate on a method by which you can identify changes allowable under the scope of the project, and ensure smooth and timely action takes place. This is most frequently seen with reporting capabilities – which require customization based on a firm’s investor-base – and trade order management.

6. Expect Transparency

Transparency can mean a lot in the investment world. When it comes to operations and a conversion to a new system, we’re primarily addressing two areas:

  • Data – You have the right to look at your data at any time. After all, it’s still your data. An operations outsourcer is helping manage it. The best providers will encourage you to interact with that data, so you see exactly what the operations team sees.
  • Education – You have the right to learn about your new operating platform. This will allow you to fulfill basic requests and access information that may help identify and expedite solutions.

Using these rights as a guide, operations providers and investment management firms will be able to create and foster the productivity and communication that can make a good relationship even better. Good outsourcing relationships create scalability for investment management firms and align costs with growth, while allowing the front office to focus on their business. But great outsourcing relationships help firms thrive and grow by unleashing innovations and empowering strategic goals.

Bill Wright
Bill Wright
Executive Vice President, Service Delivery

Bill Wright is Executive Vice President of Archer’s Service Delivery Department, where he oversees a team of investment operations professionals who provide middle and back-office operations services and serve as strategic partners for investment managers looking to increase efficiencies and scale their business for growth. Bill has 26 years of experience in asset management and asset servicing. He has held roles in relationship management, operations, trading, and portfolio management, with a focus on separately managed accounts. Bill joined Archer in 2016 and has been an integral part of the firm’s transformative growth over the last five years.

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