The investment operations landscape is rapidly evolving, with an increasing shift towards outsourcing as institutional investors elect to remove the administrative burdens of peripheral tasks and focus on core business activities.
A recent industry survey conducted by WBR Insights outlines the key motivations and barriers encountered by investment leaders when aiming to outsource investment operations, including a specific examination of withholding tax services.
This research surveyed senior leaders from a broad spectrum of financial institutions, including mutual funds, pension funds, hedge funds, and insurance funds, managing assets ranging from $50 billion to over $1 trillion.
Insights from Back-office Leaders
The findings reveal a notable trend: 83% of respondents are currently outsourcing at least one function to third-party specialists, underscoring the widespread adoption of outsourcing within the industry.
Administrative tasks, tech-integration, and tax services are among the top functions outsourced, with the predominant motivations for outsourcing being scalability of operations, focus on strategic priorities, access to specialised expertise and enhanced competitiveness in the market.
Security and privacy concerns remain the most significant barrier to outsourcing, cited by 90% of respondents. Additionally, 74% of firms express significant concerns about the perceived lack of ROI relative to the costs involved.
Challenges aside, outsourcing maintains its upward trend due to its significant advantages. In fact, of the 17% of respondents not currently engaged in outsourcing, 82% plan to do so within the next year.
Withholding Tax Challenges
In the withholding tax recovery space particularly, the survey highlights the need to outsource complex tasks to a specialist provider.
An overwhelming 97% of respondents recognize withholding taxes as a significant challenge, with complex and time-consuming tax processes. These challenges are evident in the significant time allocated to tax paperwork, with 61% spending 40-100 hours and 36% dedicating 100-300 hours annually. This workload is spread throughout the year and is often exacerbated by internal approval processes, continually disrupting operations.
Nonetheless, only 50% of the institutions surveyed receive adequate support for their paperwork, strongly indicating investor demand for an outsourced withholding tax solution.
Is It Time to Adopt Outsourcing?
Outsourcing is increasingly recognised as essential for future success in financial operations. As complexities grow, choosing the right outsourcing partner becomes crucial. This comprehensive report underscores the advantages of outsourcing, enabling firms to stay competitive and concentrate on their core business functions.
For outsourced withholding tax services, WTax is at the forefront, delivering solutions that not only meet but anticipate the evolving needs of the financial sector, ensuring sustained operational excellence and enhanced investment performance.
Click here to download the full report.
Interested in learning more? Speak to a withholding tax specialist today.
