Don’t outsource unless you’re tiny: Cuffe

Backoffice outsourcing makes sense for nobody but the smallest start-up funds manager, former boss of Colonial First State and Challenger, Chris Cuffe, told an audience in Sydney last week.

Making a brief cameo back in financial services from the not-for-profit sector, Cuffe said he was bemused by the growing trend to do nothing internally but manage money. “When you outsource, I think you are giving away responsibility for some of your core functions as a funds manager. Sure, you are there to produce investment returns, but you should also care about delivering decent client statements and accurate, timely information,” he said. “It seems to me that outsourcing hasn’t really delivered that. It only makes sense if you are really small,” Cuffe said, adding that good administration was integral to good customer service and a strong brand, the importance of which he had come to realise in the second half of his financial services career. True to his legacy, both Colonial and Challenger retain high levels of internal administration. Free to offend industry sensibilities, Cuffe went on to slam the “alarming build-up” of derivatives-based structured products, especially those offering a capital guarantee. “Why would you pay someone else to manage uncertainty that no-one is sure about anyway?” he said. Cuffe also derided what he sees as unnecessary complexity in today’s financial services offerings, which have strayed too far from the core basics of equity, debt and property. “When we brought out Colonial FirstChoice, there were articles in the press quoting people who said this was too simple and had nothing to offer. Well, it did have something to offer – it was simple, and it worked. It’s got $32 billion in it now so something must have gone right,’ he said.