A survey conducted on behalf of BNP Paribas Securities Services has found the most important factors for selecting a provider are client service and product quality, with price rated much less important.
The survey, which was conducted by internet-based market research firm YouGov, shows the trend for banks and brokers to outsource their middle and back office functions has reached maturity. Nearly all of the 50 senior figures surveyed, representing some of the UK’s leading sell-side institutions, said they outsource these functions to some extent to specialist providers such as custodian banks.
The drivers behind outsourcing have developed also, as the survey shows the strategic need to focus on core activities such as research and execution, and protect against the effects of market and regulatory change, are significantly more important than short-term cost efficiency. A large majority of 78% rated outsourcing as a long-term strategy to this end.
"The changes affecting our industry create more than simple cost concerns for our clients," said Julien Kasparian, UK head of sales and relationship management for banks and brokers at BNP Paribas Securities Services. "They are facing the pressure of market change, a raft of new regulations and increasing technology costs. Providers of outsourcing need to be prepared to take on this burden for their clients, allowing them to focus on developing their core business; this is the way outsourcing can bring real value."
The survey demonstrates that price is not the deciding factor when choosing a provider, as client service and product quality are shown to be the most important factors by far. Both were rated as ‘extremely important’ by 46% of respondents, where only 24% rated price as highly.
A final key finding shows that satisfaction with providers is not as high as it could be; an outcome which correlates with the complexity of outsourcing setups chosen by respondents. Only 26% claim to be ‘strongly satisfied’ with their provider, while 72% are somewhat satisfied. Broken down, the figures show satisfaction is lowest for IT system providers (5% were ‘strongly satisfied’) while the average outsourcer uses around five different providers for this function.
Kasparian concludes: "We believe outsourcing providers who invest in the highest quality technology and specialist personnel will be the ones that keep clients satisfied. In any case, it is clear now that outsourcing has become the new norm for banks and brokers in the UK."