Scott Tominaga discusses the importance of back office functions in the Financial Services Industry

Scott Tominaga believes that when people meet with their financial advisor they have no or little interest in all of the work that goes on behind the scenes. They are actually three classes of office referred in Financial Services and they are called the front office, middle office and the back office. So, what is each of them and what will the people in there be doing? Well, first of all the front office which is probably a term you have come across. This is the client facing part of the process, so anyone who will meet and greet clients and customers is classed as working in the front office.

It is great to have the ability to recommend investments to clients; you can use their cash with their absolute agreement to try out some of the risks or markets you have been interested in. You can watch with happiness as they see their money grow especially as they have you to thank for facilitating that. Of course, it won’t always go that way especially if your client likes high risk investments, but when high risk investments pay out then they pay out big and that is the reason behind high risk investing.

The middle office then is a different concept, somewhere between the front and the back office is where you will find them. If you think of it like dominoes, then it makes sense that the middle office will have the direct support to the front office and financial advisors etc. This is where you will find your staff dealing with financial compliance and technology.

Every piece of financial advice that is given must be complimented by documents that show why this was recommended, that it was at the client’s agreed level of risk and that it was agreed to and fully explained to the client along with any other options that may have met the client’s needs and why they were discounted. The middle office is the place which will bolster up the front office and provide them with support and structure to be able to trade or offer advice. In our blame culture, and with clients being quite rightfully given compensation if support and advice was not as it should have been or not fully explained, such as PPI, then it has become increasingly important to have a firm and professional middle office.

The back office then is the other functions that are done to keep the business ticking over. These will include human resources and accounting; to ensure that the money is coming into the business and is banked appropriately and accounted for. The back office will include typists and secretaries who will take calls and ensure that all stationery and such are available to the team.  

Although the back office will still get talked about the middle office is a term that has become a little outdated. Companies now want to show that all members of the team are required to make any of it work and therefore prefer to use names such as The Federation, or other such terms which denote togetherness.

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