Mon, 22/08/2005 - 07:13
Swiss family offices are changing their attitudes on outsourcing back office custody and fund administration operations to specialist providers.
A study undertaken jointly by Scorpio Partnership and Northern Trust's Wealth Management Group for Europe, Middle East & Africa (EMEA) earlier this year, has revealed a significant change in the attitude of Swiss family offices toward specialist asset servicing solutions.
The research, which was carried out by Scorpio Partnership on behalf of Northern Trust, was conducted amongst family offices and family office intermediaries in Switzerland, working with families with at least EUR 60 million (USD 75 million) of assets advised in Switzerland.
The research showed that, overall, respondents felt that outsourcing a family office's back-office operations would lead to more effective risk management whilst freeing up resource - both human and financial - within the family office to focus on core activities such as the provision of investment management and investment advisory services to family members.
Respondents indicated that the outsourcing of asset administration processes is seen as an efficient solution to the problem of the high costs associated with the ongoing development and maintenance of leading-edge technologies. These are needed to support complex investment strategies and to meet increasingly demanding requirements from family members for more frequent and transparent reporting.
"The changing dynamics of the wealth management industry in the last five years have thrown the spotlight onto the role of family offices as providers of independent services to wealthy families, yet the future shape of the family office segment in Europe remains unclear," commented Sebastian Dovey, Managing Partner and Head of Consulting at Scorpio Partnership.
The research also showed that the most pressing strategic imperative of the family offices interviewed is the provision of detailed, consolidated reporting to family members.
"At present, this process seems to be hindered by a lack of transparency and poor quality data from some managers and custodian banks, as well as the lack of tailored systems within the family offices themselves to handle the complex investment accounting necessary to the task," observed Lucille Knapp, Head of Wealth Management EMEA, Northern Trust. "The role of sophisticated, robust technology in improving data quality, format, delivery and eventual processing cannot be underestimated - it's critical.
The most notable trend highlighted by the research was the acknowledgement that outsourcing may be an effective solution to the problems in the back office and, therefore, that many Swiss family offices are starting to seek third party partners for their asset servicing needs.
"The trends highlighted by this research do clearly point to a major change in the attitude of Swiss family offices regarding the provision of custody and fund administration services by third party asset servicing specialists as, traditionally, Swiss family offices have tended to perform back office functions in-house, mainly for reasons of confidentiality. However, advances in technology and the increased complexity of the family asset mix are acting as powerful motivators for change," concluded Dovey.
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