The pandemic has effected a significant shift in the financial sector. While the sector has always been a proponent of outsourcing, it is now turning towards it increasingly to cater to its post-pandemic requirements. In particular, it is relying on outsourcing to restructure and recreate itself in terms of digital overhaul. Outsourcing firms help investment banks not only to improve efficiency but also to boost revenue. With their front-office solutions, automation technology and pools of subject-matter experts, outsourcing firms have become excellent sources of support for banks, especially in these trying times.

But Why Are Top Investment Banks Relying On Outsourcing More Than Ever Now?

  1. Cost control: This is one of the primary reasons. Outsourcing service providers offer skill-intensive functions such as equity research and deal advisory at a fraction of the cost incurred on in-house industry experts. Outsourcing provides access to experienced professionals without the hassle of hiring or the expense of onboarding. Especially when it comes to on-the-ground research, investment banks choose outsourcing companies that would deploy as many professionals as needed to complete the task. Such companies would charge a fee in return for their services and expertise. They perform front-office functions such as fundamental and valuation analysis, usually performed by a bank’s analyst and associate functions, enabling the bank to cut research costs significantly.
  2. Compliance: Investment banking outsourcing firms ensure asset managers comply more with regulations. Asset managers can manage the research execution and expense, separate from other fees and commissions. Outsource trading providers offer better performance due to their vast network, understandably bigger than individual banks. Ensuring adherence to best practices in-house can be expensive and may require extensive planning and effort. Outsourcing firms take over all such functions, enabling the bank to do what it is best at.
  3. Access to niche markets: Asset managers are always on the lookout for a more comprehensive set of markets, preferably in multiple time zones. Due to their vast networks of offices worldwide, outsourcing service providers can manage multinational trading expediently. If an investment bank is interested in trading in niche markets, outsourcing companies offer that, too. Niche-market trading is usually tapped for a shorter term; therefore, employing full-time professionals to carry out the necessary functions would not justify the cost or effort.
  4. Doubling the pace of work: With mundane but vital tasks such as entering voucher details on Excel sheets and front-office functions being taken care of by the outsourcing firm, the in-house team can focus on the more important trading activities. The investment bank can, therefore, work at double the pace at a fraction of the cost. This increased agility would attract more clients and increase bank revenue and presence in the marketplace.
  5. Improvement in quality: An investment banking outsourcing firm is a business in itself. It hires the cream of professionals to offer quality and expertise to its clients. For the business to function, it cannot provide sub-standard quality; this leads to the investment bank offering higher-quality work.
  6. No long-term commitment: Outsourcing firms offer a service in return for a fee. If an investment bank has concerns about the quality of service, it could terminate the agreement as and when it pleases. This would not be possible with an in-house team. Hiring staff comes with training costs and uncertainty in terms of return on investment. If a project is lost, the investment bank could reduce the outsourcing firm’s services, or increase them, as it pleases.

Outsourcing firms offer streamlined and professional support to investment banks, with minimal risks and low cost.

Acuity Knowledge Partners has been supporting bankers by doing a lot of the heavy lifting and preparing and providing various types of pitch-ready analysis. With this much-needed support from experienced professionals, junior bankers could concentrate on client-facing tasks, be trained on other high-end analysis and, more importantly, work towards building their careers and moving up the value chain.