Almost two-in-five sell-side firms expect to outsource front office

Sell-side study by FIS finds 39% of firms expect front office functions to be outsourced by 2020.

The sales and trading aspects of sell-side businesses are likely to be outsourced by 2020, according to a study by FIS.

A poll of 464 sell-side executives revealed front office functions to be the next most vulnerable to outsourcing, with almost 40% suggesting it will likely be outsourced over the next three years. 

“Sales and trading activities are likely to move to electronic trading or white label utility services that are provided by trusted third parties,” FIS explained. 

The report added that the trend could allow remaining front office staff to concentrate on generating added value for their most prized customers

It could also see firms introducing lower pricing and highly automated financial technology services for new markets.

Back office functions are currently considered the most vulnerable to outsourcing with 51% of respondents stating their business will likely outsource these functions by 2020.

FIS also revealed banks and broker-dealers view outsourcing very differently. 

The report said that 21% of broker-dealers do not expect to outsource any front, middle or back office functions, whereas only 7% of banks said the same.

FIS explained broker-dealers place more importance on the maintenance of close personal relationships within their institution. 

“Broker-dealers have also retained more trust with their customers or have more to keep secret and cannot afford to share the investment strategies and trades with outsiders, even if it saves them some money,” it said.