Asset management firms today are under mounting pressure to adapt to shifting market conditions, evolving regulatory demands, and rising cost challenges. As the complexity of managing investments grows, many firms are turning to outsourcing asset management operations, not just as a strategic move, but as a vital component for staying competitive. This blog explores why outsourcing asset management has become a mainstream strategy and highlights its key drivers, such as cost efficiency, market complexity, and regulatory compliance.
the drivers for change: why outsourcing asset management is gaining traction
Previously a niche strategy, leading asset managers are now increasingly embracing outsourcing asset management operations. Several factors have driven this shift, enabling firms to optimise their operations while maintaining high levels of service and compliance.
cost pressures in asset management
Asset managers are facing increasing cost pressures as they strive to balance performance with operational efficiency. Maintaining a full in-house team for compliance and operations requires significant capital investment in technology, talent, and infrastructure. By outsourcing asset management, firms can reduce operational costs significantly.
Cost efficiency in asset management outsourcing is one of the primary reasons firms turn to external providers. Outsourcing eliminates the need for substantial investments in technology and infrastructure, as third-party providers offer scalable, cost-effective solutions. This approach not only reduces costs but also allows asset managers to focus on core activities, such as portfolio management and client engagement.
navigating market complexity
Today’s financial markets are more complex than ever. With rapidly changing economic conditions, geopolitical uncertainties, and shifting investor demands, asset managers must continuously adapt. Outsourcing allows firms to tap into specialised expertise and scalable resources that can efficiently handle the growing market complexity.
Outsourcing providers can offer expertise in areas like big data analytics, AI, and cloud-based solutions – technologies that many firms cannot maintain on their own. These innovations help asset managers stay ahead of the curve, while delivering more effective and timely market analysis, which is critical in today’s fast-paced markets.
regulatory compliance challenges
Regulatory compliance in outsourced asset management is another key factor driving the trend. The ever-changing regulatory environment presents ongoing challenges for asset managers, especially when it comes to navigating jurisdictional complexities and data protection laws.
Outsourcing asset management operations allows firms to leverage providers who are already well-versed in meeting these requirements. In fact, a 2024 report noted that 38% of registered investment advisers opted to outsource their compliance functions to ensure they adhered to evolving regulatory frameworks.
Outsourcing partners also help firms stay agile and adjust operations as regulatory landscapes shift. This reduces the risks of non-compliance and penalties, while providing a robust framework for managing compliance efficiently.
outsourcing: high-speed, low-risk, low-cost path to transformation
Outsourcing asset management operations offers firms a high-speed, low-risk, and low-cost path to transform their business. By leveraging the expertise of outsourcing providers, asset managers can accelerate operational changes while mitigating risks.
The combination of advanced technologies, streamlined operations, and industry expertise enables firms to scale rapidly without the burden of managing everything internally. Outsourcing also helps asset managers deploy industry-leading risk management practices, significantly reducing operational risks. Third-party providers often bring tested best practices and compliance frameworks from diverse regulatory environments, ensuring a seamless transition.
benefits of asset management outsourcing
The benefits of outsourcing asset management operations extend beyond cost reduction. The key advantages include:
- Scalability: As firms grow, outsourcing allows them to easily scale operations without incurring additional infrastructure costs.
- Enhanced focus on core functions: Outsourcing non-core activities like customer service and back-office operations frees up resources. This enables asset managers to focus on their core mission of maximising client returns and managing portfolios effectively.
- Access to cutting-edge technology: Outsourcing partners often deploy the latest technologies, such as Robotic Process Automation (RPA) and AI, to automate routine processes. This ensures greater accuracy, efficiency, and speed.
- Risk mitigation: Partnering with experienced providers helps asset managers mitigate risks associated with operational inefficiencies, compliance breaches, and cybersecurity threats.
making the most of your outsourced operations partnership
To maximise the benefits of outsourcing asset management operations, firms must choose the right partners and maintain strong relationships. Here are some best practices for ensuring success:
- Clear communication: Establish transparent communication channels to ensure both parties align on goals, expectations, and timelines.
- Due diligence: Carefully vet outsourcing providers for their technological capabilities, compliance record, and market reputation.
- Continuous monitoring: Regularly review performance metrics and ensure the outsourcing partner meets Service Level Agreements (SLAs). This helps identify areas for improvement and ensures that both parties remain aligned on objectives.
Outsourcing is not just a cost-saving measure; it is a strategic decision that can unlock significant value for asset managers. By leveraging external expertise, advanced technology, and operational efficiency, firms can focus on delivering value to their clients and driving long-term growth.
conclusion
Outsourcing asset management operations offers a strategic path to enhanced efficiency, cost reduction, and regulatory compliance. By partnering with the right outsourcing providers, firms can navigate complex markets, manage regulatory challenges, and transform operations to meet evolving operational and regulatory demands.
Infosys BPM offers comprehensive asset management solutions that help firms optimise their asset management operations. By leveraging next-gen technology and deep domain expertise, asset managers can navigate complex markets and transform operations. They can also support scalable, agile processes and strengthen risk management across the organisation.
