A back-office outsourcer reports a spike in demand among RIAs battling a challenging wealth management market.
Over the past year, back office services provider BridgePortfolio has seen an uptick in demand for its outsourced offerings—which weave in Fiserv’s software—among registered investment advisors (RIAs). But BridgePortfolio is also seeing more RIAs willing to outsource front, middle and back office operations, says Mike Ruane, national sales manager for the Chicago-based vendor.“I manage the pipeline for the company and the pipeline today compared to a year ago is much more robust than it has been,” Ruane says. Yet “firms are thinking, ‘I’ve got to hold the line here and squeeze every last nickel we can from our current technology because we don’t want to jump the gun.’ ”
Ruane says the recent increase in demand stems from RIAs changing their opinions about outsourcing performance reporting, client accounting, billing, daily reconciliation of data and in some cases trading. Part of the new demand is due to new business that is coming their way as the result of the recovery.
“The burden of these operational tasks was growing exponentially,” Ruane says. “The regulatory environment is getting more oppressive … And most of the expenses in this area tend to be in people.”
The new regulations combined with the after-shocks of the Great Recession have caused declining revenues for RIAs and cost structures “that are getting intolerable,” Ruane adds. In addition, many RIAs have invested in software and systems that are not integrated, which results in more manual processes in order to share data among these platforms.
The wealth management business remains a challenge for all participants as evidenced by multiple media reports this week about Morgan Stanley and its efforts to consolidate offices and trim staff at its retail-brokerage, Morgan Stanley Smith Barney, a joint venture with Citigroup.
As RIAs cut costs by using outsourcing to restructure their operations, their clients may be unaware that an outsourcer is working behind the scenes.
“The Fiserv offering is invisible to the clients of an advisory company,” says Ruane, who adds that BridgePortfolio is also invisible to the clients of its RIA customers. The company selected Fiserv’s Portfolio Management and Trading solutions (formerly known as APL) to be its technology platform about five years ago; BridgePortfolio provides additional functions and operational services such as daily reconciliation of data. BridgePortfolio, which has $2 billion in assets under administration, recently extended its contract with Fiserv.
Over the next 10 to 15 years, RIAs may get more comfortable with outsourcing trading as well as the middle and back offices, Ruane says.
“The trading carries the most risk,” he says, adding that the insurance required for a trading operation is expensive. “We think that’s the next frontier—we think that’s the fastest growing piece. … We have over 55 customers and at least one third want both the reporting and trading. Most of our new business is also saying take the trading too.”
A wholly owned subsidiary of Insignis, BridgePortfolio offers private label website development and hosting, online account setup, account administration, performance reporting, model portfolio trading, billing, third-party separate account management and private label separate account platform creation and maintenance. Clients can outsource parts of all of their back-office operations via BridgePortfolio.
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