Current issues in asset management outsourcing

Financial IT executive offers timely advice on whether and how to outsource back-office operations

New York, Sept. 29, 2009-- Patrick Schena, principal of investment management services for Headstrong Inc, was one of the few top industry leaders offering his insights on back-office outsourcing at this year’s Technology Solutions for Asset Management Conference (TSAM).

In his discussions, Schena addressed a distinguished audience on the topic of how insourcing or outsourcing back office operations can impact asset management firms, sharing a panel presentation that included executives from BNY Mellon Asset Servicing, BlackRock, Ivy Asset Management and several other industry insiders.

“There are certainly many reasons to consider outsourcing”, Schena told the TSAM audience. “Asset management firms can enjoy better scalability, quicker ramp-up of IT functions and access to best practices when they turn operations over to a cutting-edge IT consultant”, he noted.

Outsourcing can make it easier for asset management firms to cope with emerging technology challenges, such as platform changes, upgrades and scalability issues. Outsourcing firms also offer ready assistance when asset managers need to build or improve their support for specific asset classes or account types, such as derivatives, non-USD securities or multi-currency accounting and reporting requirements.

“However, there’s plenty of heavy lifting to do when firms consider outsourcing as well”, Schena argued. “Before considering whether to outsource back or middle office operations, companies should make sure they do a very thorough assessment of their current needs—as well as be sure that they have the resources to manage the contract properly”, he warned.

“Vendors can’t solve back office problems as a black box,” he told the conference attendees. “Asset management firms have to make sure that tasks are well-defined, functions are designed into the firm’s operational model, there are well-defined service level agreements and execution metrics around the tasks, and that there is ongoing monitoring, governance and feedback.”

Before signing an outsourcing contract, Schena recommends that firms take a careful look at the cost of their in-house operations servicing function, including the level of assets under management, complexity and mix of assets they’re handling, the number of accounts they manage and the number of specialized services they offer.