Making co-sourcing work

Co-sourcing arrangements allow responsibilities to be split between staff members and agencies for maximum business effectiveness and efficiency

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Guy Swarbreck
Published: 28 Aug 2018 Updated: 13 Jun 2022

When asset management firms begin to bring functions such as finance and human resources (HR) or legal and compliance in-house, it can be beneficial to maintain relationships with external providers, usually by co-sourcing the functions.

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Co-sourcing often starts with employing someone to direct the outsourced function; this direction can more closely align the outsourced process to the firm’s needs and decision making requirements. Co-sourcing arrangements allow responsibilities to be split between staff members and agencies for maximum business effectiveness and efficiency.

More developed co-sourced arrangements may involve the firm having their core functions such as finance and HR covered internally, but then retaining external co-sourced advisers to provide the broad technical skillset that staff may not have. Having sound relationships with outsourced providers who provide a breadth of skills and can act as your trusted adviser across a range of issues is invaluable. Co-sourcing providers may, for example, be able to advise on an emerging VAT matter before it becomes an expensive issue. Or they could identify that the employee benefits your firm provides could be improved, enhancing staff retention.

For co-sourced relationships to be most effective it is important to be clear about where responsibilities lie. Defining routine matters, such as who will produce the management accounts and who will turn them into statutory accounts, is usually easy. What is harder to define is agreement on how to respond to, and the cost of doing so, of ad-hoc or emerging business issues in the financial, regulatory, HR or legal spheres.

It is crucial to sit down with co-sourcing providers regularly to re-agree the scope of work and objectives as your and your firm’s requirements evolve – and to monitor performance. If providers routinely fail to provide timely strategic advice on issues that have been flagged as important to you and your firm then it may be time to work with another adviser.

Firms often ask how many outsourced providers they should work with. While it is rare to find a one-stop shop that can provide everything from legal to strategic financial support, it is worth finding a discrete number of advisers that can cover your business effectively. Advisers need to be able to demonstrate a thorough understanding of your business and act as a trusted adviser.

Guy Swarbreck, Partner, Smith & Williamson

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.