In-House or Lift-Out? Uncover Hidden Operational Costs

Many firms are navigating tighter budgets, growing compliance demands, and the constant need to scale operations. This often leads to a critical question: is your in-house operating model still the right fit? While maintaining all functions internally offers a sense of control, it can also introduce significant hidden costs and operational risks.

There is another way. The lift-out model allows you to transition existing teams and functions to a specialized provider. This approach preserves valuable institutional knowledge while giving you access to greater operational scale and efficiency. We can help you compare the in-house and lift-out models, looking closely at the real costs associated with staffing, compliance, IT and operational risk.

Understanding the Two Operating Models

It's helpful to start with a clear definition of each approach.

In-House Operations

With an in-house model, your organization holds full responsibility for your people, processes and platforms. This gives you direct control and flexibility, but it also means you own all the associated costs and responsibilities.

The Lift-Out Model

In a lift-out, specific operational functions and the teams that run them are transitioned to a provider who assumes responsibility for service delivery, compliance and support. Your firm retains its subject matter expertise while shifting accountability for scale and resilience to a dedicated partner. Compared to a traditional, multi-year conversion, a lift-out offers a more controlled and less disruptive transition, delivering results with greater flexibility.

A Line-Item Cost Comparison

When we look beyond the surface, the cost differences become clear.

A Deeper Look at Core Cost Categories

Let's examine the key areas where hidden costs often appear.

Team Structure and Capacity

In-House: Recruiting, training and scaling internal talent requires significant time and budget. This is especially true for specialized roles that demand deep regulatory knowledge or operational precision. Replacing a single employee can cost as much as 200% of their annual salary when you factor in recruiting, onboarding and lost productivity.

Lift-Out: A lift-out transitions your current team, preserving their knowledge while offering them new growth opportunities within a broader delivery model. The provider takes on the responsibilities of management, training and scaling the team to meet new demands.

Talent Resilience and Continuity

In-House: High turnover, reliance on a few key individuals and over-utilized teams with limited backup create single points of failure. When an expert leaves, their knowledge often leaves with them, creating serious operational gaps.

Lift-Out: With built-in team depth and support from shared services, providers reduce the impact of turnover. Knowledge becomes institutionalized within the provider's platform, ensuring it is not dependent on any single person and securing business continuity.

Compliance and Regulatory Oversight

In-House: Managing increasing regulatory complexity demands dedicated staff, modern systems and constant readiness for external audits. These are all direct costs on your balance sheet and divert focus from core business goals.

Lift-Out: Specialized providers already operate within strict regulatory frameworks. They are equipped to absorb the compliance burden as a fundamental part of their service, helping you stay ahead of new requirements.

IT and Infrastructure

In-House: Owning your infrastructure means managing technical debt, defending against cybersecurity threats and facing unpredictable and often costly upgrade cycles. Keeping pace with technological advancements requires continuous capital investment.

Lift-Out: You gain access to enterprise-level systems, advanced analytics and secure cloud platforms without the upfront capital expenditure. This allows your firm to benefit from modern technology while maintaining a more predictable cost structure.

The Strategic Advantage of a Lift-Out

While an in-house model may seem predictable on paper, a closer look at the line-item costs reveals potential blind spots in staffing, compliance and technology. A lift-out model offers a clear path to achieving greater scalability, compliance assurance and operational consistency without losing the institutional knowledge that makes your team unique. It transforms hidden liabilities into strategic advantages, allowing you to focus on what you do best.

Download our Lift-Out Success Checklist to explore how this strategic solution can elevate your operations. Take the first step toward unlocking greater efficiency and scalability today!