Outsourcing is a common business practice to reduce costs, provide access to specialist expertise and place a greater focus on non-core functions in small and large companies.
When handled and managed appropriately, outsourcing can improve the overall quality and speed of services your company provides, enhance and widen your proposition, help support business growth and provide a wide range of benefits to clients.
But what is outsourcing, and what are the key benefits?
For Financial Conduct Authority-regulated companies, the FCA defines outsourcing as a business involved in an arrangement where a service provider performs a process, service or activity on behalf of a company that the company would otherwise carry out itself.
In summary, outsourcing is where a company relies on a third-party service provider for the performance of an operational or critical function.
It is important to note that while you remain fully responsible for your company's regulatory obligations, there are many potential benefits to outsourcing, including:
Access to better technology
Outsourcing can give a company access to resources and/or advanced technologies that would not otherwise be available to it.
Outsourcing can make processes run more smoothly and improve business efficiency.
Cost and time-effective
Outsourcing can greatly improve services and reduce operational costs.
Third-party service providers will manage service delivery, as well as liaise with you to establish, measure and review key performance indicators and ensure business strategies are being met.
Providing access to expert knowledge and skills, without the costly headcount and recruitment, is one of the reasons outsourcing is very popular.
Third-party service providers often specialise in exactly the areas and tasks a typical business undertakes. It is likely that they will get the job done cheaper, quicker while still maintaining a high standard.
Free up staff to focus on core business functions, strategies and customer service
Outsourcing can help to free up the time of staff within your business, helping them to focus on the development of new ideas into concepts and ensuring a faster and efficient delivery of services in the competitive market.
What can be outsourced?
Some of the most common examples or uses of outsourcing among financial advice and discretionary management firms include:
Firms that outsource some of their administrational tasks to experienced third-party administrators reduce the need to recruit or train staff internally.
IT functions and support
As mentioned earlier, you can take advantage of the latest technology and software upgrades without having to invest in expensive systems or keep up to date with industry trends.
Most IT functions can be outsourced, from network management to project work, website development and data warehousing.
But be mindful, there are requirements around data security and cloud outsourcing, so ensure you check these before outsourcing any functions that rely on IT.
Although you cannot outsource your regulatory obligations, and you will always be fully responsible for ensuring your firm complies with its regulatory requirements, the sheer volume and complexity of FCA regulations can be overwhelming for some firms to manage solely by themselves in-house.