Wealth management firms expect improvements from outsourced services, Financial Objects survey reveals

68% of private client wealth managers in the UK outsource […]

August 13, 2008

68% of private client wealth managers in the UK outsource to third party administrators (TPAs), yet 54% would consider taking outsourced processes back in-house, according to a recent e-survey jointly sponsored by Financial Objects and Microsoft, and conducted by Summerson Goodacre.

75% of survey respondents stated that they felt improvements could be made to outsourced services, particularly in the mid-front office functions of asset management, client reporting, and performance and trade execution. Furthermore, while outsourcing is deemed to deliver more cost benefits, when it comes to the quality of client service, insourcing was overwhelmingly favoured.

Quality and cost were deemed the most decisive factors for wealth management firms looking to outsource and the TPAs surveyed also cited this as the most important aspects their clients look for.

When asked about pricing model preferences, most wealth management respondents opted for a hybrid of fixed fee and volume based. While most TPAs said they offer this, most also offer pricing models with additional charges for ad hoc user requests, which – in stark contrast – is the pricing model wealth management firms least prefer.

“Our survey results show that in most cases, third party administrators are in tune with what their clients want and as a result, most wealth management firms are satisfied with their outsourced services,” said Brent Randall, managing director of the Wealth Management division at Financial Objects.

“However, the findings also show that some needs still aren’t being addressed. For example, less than 15% of respondents were satisfied with client reporting and performance measurement services. Clearly, technology can improve this, so TPAs must ensure they are using the right tools to best service their clients.”

Ian Wilkinson, Financial Services industry manager at Microsoft commented: “Most wealth management firms want their third party administrator to provide portfolio modeling, yet the majority of TPAs don’t yet include this in their service offering. If service providers are to fend off competition, they must listen to the needs of their clients and make better use of technology to show differentiation.”

The survey results also found that 85% of third party administrators would consider adding a third party tool if it increased their competitiveness. 83% of wealth management firms already use third party systems and 85% said that technology was highly important in supporting business growth.

The e-survey, which was conducted in June and July 2008, was designed to source information on the use of third party services conducted in June and July 2008. 60 wealth management firms responded to the survey and 25 third party administrators. The survey results were presented at an industry seminar at the City of London Club on 18 July, which was chaired by Michael Wilson, business editor of Sky Business News.


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