Operating Model: What Supports Your Firm’s Business Strategy

Jul 22, 2021

The Operating Model is your firm’s backbone. It defines the capabilities you must have in place in order to deliver the services you intend to provide to your client segment. After establishing your business strategy, the operating model helps you narrow your focus on what you need to do well. This piece will focus on developing an operating model. It is the second in a series of four posts that address business strategy, operating model, operational processes and client interactions and technology implementation in wealth management.

What is an Operating Model?

A firm’s operating model includes all of the front office (client facing) capabilities and middle office (supporting advisors through portfolio management, executing trades, cash management) and back office (removed from client interaction, but critical for providing foundation for tax reporting and risk reporting) you need to deliver on your offering. This includes both people with the right expertise for your needs and the technology to deliver the services.

The operating model establishes which capabilities are critical enough to the business strategy to have in house versus outsource.

Developing an Operating Model

Making decisions that establish a business strategy lead to the decisions that firms need to make to establish an effective operating model.

The first step to building an operating model is to refer to your business strategy and identify the key functions of your firm.

From there, you can align internal technology solutions with your firm’s core competencies and consider outsourcing the others. Think about the most effective and efficient way to handle each function. Not all functions need to be housed internally. Outsource capabilities that don’t differentiate your firm to people who have more expertise in those areas, or capabilities that you don’t want to focus on or significantly invest in. Examples might be compliance or outsourced CTO (OCTO). Outsourcing these functions to experts can free up your internal resources to focus on more important value-add activities.

Next Steps

By defining the operating model, you’ve defined the firm from a functional perspective and aligned capabilities and resources to each area. Now it’s time to move on to mapping out the client journey. Understanding the client journey from prospecting to reporting will help you map out the operational processes and, finally, client interactions and technology implementation—and plan for growth. The next piece in this series will break down the steps required to establish operational processes and how to support them with technology.

Need help developing your operating model? Get in touch and we’ll put you on the path for strategic success.

Latest Insights