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8 Strategies for Investment Firm Cost Optimization | SS&C Eze

Written by Kimo Kouletsis | Oct, 14 2024

In recent years, economic uncertainty and other industry headwinds have put pressure on firms, impacting their profitability and forcing them to adopt a more cautious approach. Meanwhile, firms’ clients have become increasingly fee-sensitive, gravitating toward lower-cost options like index funds and ETFs.  

To preserve profit margins, many firms are turning to cost optimization strategies. However, simply cutting costs isn't enough; any successful strategy must not only focus on immediate savings but also ensure long-term resilience and growth.  

As Ernst and Young highlights:  

“Identifying and executing the right cost optimization strategy can be a game changer. While most manage costs for stability, the winners will be those that manage for both resilience and future growth.” 

In this post, we explore 8 key areas firms should consider when developing a comprehensive cost optimization strategy to achieve both goals. 

Cutting Costs Without Limiting Future Growth 

Below is a list of strategies you can use as a starting point in your cost-optimization journey. Once you learn the cost optimization techniques available to you, you can build a personalized strategy that will benefit your firm's operations today and support your future growth. 

  1. Leveraging the Cloud 

    Cloud technology is often a more cost-effective solution compared to on-premises infrastructure managed in-house. It can reduce costs associated with hardware and maintenance while giving you the freedom to scale as your business changes in the future.  

    If you are currently hosting and managing your technology on-site, consider moving your solution to a cloud-native microservices architecture maintained by your technology provider that can evolve as the needs of your firm grow.

  2. AI and Automation 

    AI and automation have the potential to free up employees' time so they can focus on higher-value work.    

    For instance, tools like algo wheels and rules-based order routing enable trading desks to automate low-touch orders. This allows traders to focus on high-touch trades, improves their productivity, and enhances trading desk ROI. 

    In addition, this type of technology can reduce the need for additional headcount, helping your firm grow its human resources more strategically.    

  3. Outsourcing Non-Core Tasks 

    As part of their cost optimization strategies, many firms retain in-house only the processes that add value to their business and differentiate them from their competition. Tasks that can be completed less expensively, more efficiently, or more accurately by partnering with specialist providers will be outsourced.      

    Outsourcing allows you to focus on core competencies and hire external teams to handle non-core tasks. You can also expand or reduce your level of outsourcing as the needs of your firm change down the road. 

  4. Proactive Compliance and Risk Management 

    Being proactive about risk and compliance assessments – and investing in the right tools to support that effort – helps to identify potential issues before they arise and mitigate costs and penalties.   

    For example, to remain on the right side of trade and portfolio compliance, be sure your technology tightly integrates the compliance process with your trading and modeling workflows.   

    As investor mandates and regulatory requirements evolve, this integrated compliance functionality gives you the confidence to adapt and grow. 

  5. Data Management and Analytics 

    Investment firms increasingly recognize the role traditional and alternative data play in their decision-making processes. 

    Robust data management can streamline processes and reduce costs incurred due to manual data entry errors. Furthermore, using data to inform decisions can empower you to optimize resource allocation and cost management, supporting your future growth. 

  6. Process Optimization 

    As your business evolves, your processes need to evolve, too. It’s crucial to regularly analyze and streamline workflows, as this ongoing commitment to improvement can help you identify inefficiencies that are costing you time and money. 

    Some vendors have a workflow review team to help you identify processes that may have fallen out of step as your business evolved. Work with your vendor to understand the best course of action for maximizing your resources and ensuring they keep pace with your future vision. 

  7. Vendor Consolidation and an Investment Ecosystem Approach 

    In looking to make cost optimizations, many firms wonder how to best leverage their technology investment to achieve operational success.    

    The answer is an investment ecosystem that ties together workflows and data seamlessly across systems and partners. The simplified operational framework created by this approach lets you easily adopt new technology to keep pace with shifting market conditions while minimizing TCO.  

  8. Tax and Insurance Optimization 

    Work with your tax professionals and insurance providers to ensure you’re not overpaying in these critical areas.   

    To maximize profitability, explore tax-saving opportunities you can harness while remaining compliant with tax regulations.  

    It's also important to regularly review your firm's insurance coverage. This ensures you’re always receiving adequate protection at the best possible cost and not paying for coverage you don't need.  

Creating a Culture of Continuous Improvement Across Your Firm 

No matter what cost reduction strategies you choose, be sure to support them with a culture of continuous improvement. That means building in time to revisit opportunities for improvement in expense management control and tracking processes.  

Employee buy-in is also critical to a successful cost-optimization plan. Be sure employees across your firm understand the importance of cost optimization and their role in making it successful.  

Finally, work with your vendors to ensure you have successfully covered all areas where cost is a concern. Your vendors should be partners in the process, helping you make decisions that meet your current cost optimization requirements while setting you up for future growth.

A Partner to Grow With 

SS&C delivers more robust functionality at a greater value.   

Increase your ROI with one vendor for front-to-back technology applications, architecture, service, and a growing ecosystem of plug-and-play solutions that save you money on new features and tools as you grow.   

With transparent pricing, you’ll know what to expect. Instead of hidden fees, SS&C offers hidden values, like R&D commitments—$110M annually across SS&C wealth and investment technology offerings—a client-first service model, and ease of scalability.   

If you are ready to take control of your technology costs, learn more about optimizing your existing operations, or start switching to a solution with a lower TCO today.