(Out)Sourcing Success

With rising competition and industry costs, outsourcing is gradually becoming commonplace in the wealth management sector.

With rising competition and industry costs, outsourcing is gradually becoming commonplace in the wealth management sector.

According to a 2014 survey from consulting firm Knadel, more than 40% of small to medium-sized firms are already outsourcing their back office operations.

A large number of firms are outsourcing a majority of functions to specialist providers such as custodian banks.

Additionally, a survey conducted by YouGov for BNP Paribas Securities Services (BPSS) found that 78% outsourcing is a strategic, long term move to focus on core activity, as opposed to only 4% that is focused on cost saving.

In September 2014, Societe Generale Securities Services (SGSS) launched an integrated Wealth and Investment Management outsourcing solution in the UK, aimed at mid-tier wealth and investment managers, private banks, direct dealing/broking firms and advisory firms.

Michael Le Garignon, head of Sales, Business Development & Relationship Management at SGSS in the UK, says:  

“Societe Generale wanted to complement its existing UK business by extending its local services to include its core global services. To do this we needed a market anchor, and the entry point we identified was the wealth segment because of the cross over back to our core service offering.”

At the time Le Garignon joined SGSS to look at the business in the UK, the firm didn’t have “strong brand awareness”.  With no upgraded infrastructure in place, Le Garignon could build a bespoke service for the wealth management segment and create a modular solution for its prospective clients.

As of end of June 2014, SGSS was the 2nd largest global custodian firm in Europe with €3,75bn ($4,40bn) of assets under custody. The firm provides custody and trustee services for 3,500 funds and the valuation of 4,054 funds, representing assets under administration of €527bn.

Since the launch of the outsourcing service, SGSS has been “inundated with requests” and closed numerous deals, with clients lined up for migration till the end of 2015.

“We have made significant investment in the UK to grow the business, and have set quite aggressive deliverables over the next three years against the wealth segment, as we continue to integrate our core global services into the UK we will do so alongside our wealth solution building brand awareness and credibility” Le Garignon says.

Though the unit’s main focus is in the UK, Le Garignon says there have been talks with a number of managers about providing them with managed account solutions across other European locations.

However the intention is to grow the UK market and extend as demand dictates.

Le Garignon is convinced that outsourcing will increase over time. However, he says, despite 7-8% of firms acknowledging the benefits of outsourcing, only 3-4% are “actually doing it”.