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13 October 2020

Nordic Fund Players, Outsourcing and the Search for a Competitive Edge

By Max Eklund

Nordic fund markets are among the most attractive in the world – resilient and diversified with a wealth of tech leaders and growth companies offering attractive investment return potential. With such strong fundamentals, the long-term outlook for the region’s funds sector, banks and wealth manager distributors is bright.

Yet many industry participants will struggle to profit.

Why? Firms face a familiar predicament—how to meet the growing administrative and compliance burdens of fund order management and distribution while improving service capabilities and controlling costs. What’s the answer? As we discuss in our recent report on fund distribution in the Nordics, the most viable solution is to outsource.

Legacy operations are no longer cutting it
Historically, banking and wealth management organizations in the Nordics shouldered the operational tasks involved in order processing in-house. Since orders were typically sent by fax and processes weren’t standardized, firms that could efficiently trade funds with multiple fund managers could gain a competitive edge.

No longer.

Technology developments and new fund marketplaces have commoditized these activities. Fund platforms and standard file formats mean separate faxed orders to multiple fund providers can be replaced by an electronic file to a single trading platform—allowing everyone to sell the same products and with far greater ease. Trade order processing systems have become more efficient and functional, bringing enhanced automation and scalability.

Keeping pace is getting harder
To stay current with these industry developments requires considerable ongoing investment. Firms will have to replace or update their legacy technology infrastructures, support sophisticated software, maintain connectivity to multiple platforms and providers, and devote staff to low-value middle- and back-office duties.

Order processing involves significant and increasingly complex administration. Clients often invest in multiple funds for multiple accounts, each having a separate risk profile and financial goals. Funds tend to have different cut-off times, notification periods, pricing frequencies, settlement lags, fee structures and base currencies. Tax reporting and regulatory burdens are also on the rise—as are transaction volumes.

Which begs the question: why spend time and scarce resources on commoditized activities that won’t add to the bottom line or help the firm grow its business?

Why outsourcing pays
With competition intensifying and industry margins being squeezed, finding ways to enhance efficiencies and add value have never been more important. Outsourcing fund distribution and order processing will help in multiple ways.

For starters, because a third-party outsourcer provides services to multiple institutions, the economies of scale it achieves will enable banks and wealth managers to reduce their total operating costs.

Outsource providers have the budget and business incentive to develop automated, streamlined operating environments that minimize processing errors and deliver fast, seamless order management and online self-servicing—fostering investor trust and a reputation for high-quality client service.

Market-ready capabilities and connectivity, and trusted implementation protocols ensure migrations are relatively fast and painless. Solution scalability and flexibility also make it easier to distribute new funds, reach different client markets and handle higher transaction volumes.

And crucially, outsourcing frees banks and wealth managers to focus on improving the front-end client and advisor experience—areas where you can develop a real competitive edge.

Maximize the opportunities
Outsourcing fund order management and distribution processes offers firms in the Nordics a clear path from expense to efficiency. But getting the most from the opportunities means picking the right service partner. Proven experience, resilience, efficiency, flexibility, long-term commitment and operational transparency are all vital attributes that outsourcers must possess.

Choose well though and you’ll have the ability to take on more clients, deliver superior client service and grow your business with less effort.

 

SS&C Advent is here to help
Advent, a business unit of SS&C, has unparalleled experience in outsourced technology and services and a long history of supporting clients across the Nordic region. To learn more about how our world-class capabilities can help you minimize risk, maximize efficiencies and focus on delivering excellent service to your end-clients, contact advent@sscinc.com.