Global regulatory pressures are increasing pressure on businesses to outsource, according to US-based firm Broadridge, which focuses on facilitating investor communications and other services for the financial services industry.
Broadridge Australasia's head of business development, John Ryan, told InvestorDaily that global banks with operations in Australia, as well as Australia-based securities businesses, are being challenged by not just local reforms but global issues such as the Dodd Frank Act and the Foreign Account Tax Compliance Act (FATCA).
These emerging overseas rules affect all players in the global securities industry, Mr Ryan said.
"We also believe there is lots of competition and consolidation within securities businesses generally," he said.
"The focus remains, in the short term, on domestic market regulations around the super industry, with opportunities in [self-managed super funds]."
The main issues for institutions are both how they respond and adhere to new regulations, and also how much work they need to do to meet the new standards, he said.
Having an efficient back office, with costs as low as possible, can assist securities businesses in focusing on other important areas of growing their business - hence the pressure to outsource.
Broadridge's business process outsourcing operation is a "relative newcomer" but Mr Ryan said he sees it as a growth area, having grown from the US offering, with Broadridge servicing major firms including Bloomberg, Fidelity and Charles Schwab.
"Those businesses have chosen Broadridge to run essentially their security or broker/dealer back office," Mr Ryan said.
Advancements in technology are also pressuring businesses, which need to decide whether it is more beneficial to invest in upgrades or stay with legacy systems, he said.
"The challenge is there is a perceived risk of making change versus the unknown or undefined benefits of making the move," he said.
Sometimes the cost of maintaining the legacy platform is prohibitive, while sometimes the supported life of the underlying operating system can be constrained.
"It's part of the challenge around regulatory systems, with regulatory pressures - how can these systems efficiently adapt? In lots of cases, at that point a securities business has to look at best-of-breed alternatives and in lots of cases the decision to change will make sense from a commercial and operational, efficiency and risk reduction basis," Mr Ryan said.
