STP Institute


Elevate Your Thinking: Unleash the Strategic Benefits of Outsourcing Operations

January 2024

Outsourcing investment operations has become increasingly sophisticated, offering faster go-to-market times, new market entry, and ultimately, better outcomes. However, with many options available, firms face the complex decision of whether to go it alone, parcel out operational activities to multiple partners, or find the “one true perfect fit” for their long-term goals.

Comparing in-house vs. outsourcing? Read our free white paper here.

In this Capital Allocators podcast, Dan Houlihan, CEO of STP Investment Services, shares insights on the trends and considerations of operational outsourcing, the common triggers to begin the conversation, what to look for in an outsourcer, and how outsourcing can potentially launch products faster and enter new markets. He focuses on the keys to outsourcing operations including ways you can:

  • Elevate your thinking: Outsourcing can open an expanse of opportunity. The key? Finding the right, single partner to leverage data and make smarter decisions.
  • Simplify the complexities of outsourcing: Outsourcing operations can be complex, but can allow you to go-to-market faster, enter new markets, optimize decision making, and ultimately result in better outcomes.
  • Weighing the options: Outsourcing options plentiful. Firms must weigh the pros and cons of self-sufficiency, juggling multiple partners, or finding the perfect fit for long-term success.

Value of Outsourcing

Outsourcing, said Houlihan, offers two distinct value propositions: tactical and strategic. The tactical value lies in the day-to-day blocking and tackling, such as trade processing, reporting, and reconciliation. This ensures the essential functions of investment operations run smoothly.

The strategic value lies in leveraging data for deeper insights and improved decision making. By analyzing client data and combining it with other datasets, outsourcing providers can unlock new opportunities for investment managers. This can include insights for stock picking, behavioral analysis for portfolio managers, and even pattern analysis for retail clients.

The potential of data-driven insights, allows firms to leverage the expertise and resources of specialized providers, ultimately leading to several triggers that prompt firms to consider outsourcing. These include:

    • Market cycles and fee pressure: Outsourcing can help firms reduce costs and improve margins.

Entering new asset classes: Outsourcing can provide the expertise and technology needed to navigate new markets quickly.

  • Jurisdictional expansion: Outsourcing can facilitate expansion into new markets without the need for a large physical presence.
  • Launching new products faster: Outsourcing can free up internal resources and speed up the development and launch of new products.


Questions to ask when choosing the right partner The success of an outsourcing partnership depends on finding the right partner. It’s important to consider factors such as:

  • Customization: Does the provider offer bespoke arrangements and component-based outsourcing options?
  • Partnership: Does the provider demonstrate a commitment to long-term partnership and support?
  • Data security and control: Does the provider offer transparent data access and prioritize data security?
  • Engagement model: Does the provider offer a flexible engagement model that aligns with your needs?
  • Client maturity model: Does the provider have a clear understanding of your current maturity level and a plan for moving you towards a strategic partnership?

The Future of Outsourcing 

The future of outsourcing is promising, with technology playing a key role. The cloud has enabled faster deployment models, heavier computing power, and advanced analytics capabilities. This opens up new possibilities for firms to leverage data and optimize their operations.

One example of this future vision, says Houlihan, is the rise of high-pedigree startups that outsource everything except core competencies like stock picking. This model demonstrates the potential for complete outsourcing, although it may not be suitable for every firm.

Smart outsourcing is no longer about cost savings alone, but rather about seamless integration and platform-based solutions that enable investment managers to achieve strategic goals and unlock new opportunities.

To hear how it can elevate your operations, help unlock new opportunities, and produce sustainable growth, listen to STP’s Dan Houlihan break this down on the Capital Allocators podcast.

Ready to connect with our team to learn more about operational outsourcing with STP Investments? Schedule a consultation here.

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