Over the past decade, programs to onboard institutional clients’ middle office operations to a service agent have seen visible progress. A typical program in 2010 might have run for 2-3 years but today it is done in much tighter timeframes of 6-12 months. In this blog I will talk about the changes that have happened and the new models that can be leveraged for client onboarding. I will follow this up with the challenges in onboarding in my next blog.
A movement toward “standardization” of service offering is partly responsible for this progress. For example, an investment manager that can leverage the service provider’s existing report libraries or extract files could limit the number of client-bespoke service needs, which are expensive to support and at the same time complicate onboarding exercises. Aligning around the standard could improve migration timeframes by up to 50%.
Aside from the impact of services standards on onboarding programs, the most critical element of a successful service model today is the precision and accuracy of the data and information delivered to the investment manager. These investment managers consistently prioritize data accuracy above cost and speed. Attaining an acceptable level of accuracy around the data and information a service agent provides is the most defining measure for success of an outsourced service model. The accuracy of data supplied is also the most influential aspect of an onboard program time line and the predictability of staying on plan.
The changing market dynamics disrupt the current frameworks for onboarding as:
- New business platforms need to be developed
- Contingency measures need to be updated to mitigate the higher risk of unforeseen demands
- Broader ecosystems need to be adapted as integration extends to specialized business applications and additional external parties
Let’s look at three market dynamics in detail for onboarding.
First, at selection, a rigorous due diligence review is needed that allows the service agent and potential client to understand the current environment of the investment managers and agree on the detailed service model as well as the scope of incremental requirements. Historically, the quality and sufficiency of the due diligence output is directly correlated with the reviewer’s expertise and ability to understand as well as capture the complexities of the investment manager’s environment. It zeroes-in on the pertinent interdependencies for transition and provides a clear view of development and integration efforts. When done correctly, due diligence should result in a well-defined scope of effort as a critical baseline for the onboarding program.
Next, once the scope of the transition is clear, service agents typically utilize a series of playbooks and frameworks that have been built to lay out the program plans and governance to drive the effort. These playbooks reflect years of lessons learnt from past migrations and provide a critical framework for planning. Reflecting back on the notion of a continually changing service model, these same forces will need to continually shape and refine playbooks over time.
Lastly, a blended team comprised of resources from the new client, contractors, and consultants that supplement the service agent’s own teams is required. The result should create an agile staffing model that ramps up quickly and globally aligns with the required program and business expertise including investment operations, development skills, platform and data integration, and program management.
I would like to hear your observations on the new models for client onboarding so please do share your feedback and comments.