The Top 10 Ways Advisors Use an Outsourcer (And Why You May Want to Consider It, Too)

By Amy McIIwain, President, Financial Social Media on Friday, August 5th, 2011

Deciding what activities are “core” and what are “non-core” is one of the most crucial business decisions you’ll make, regardless of whether you are a sole proprietor or a financial advisor in a small RIA. If you are the “rainmaker,” you’ve probably thought about how to maximize the core time you spend with customers and potential customers and ways to minimize the time spent on some back-office functions. 

So that’s why I was surprised that 34% of advisors we surveyed are not using an outsourcer (for some or all of their back-office functions) because they are not familiar with that an outsourcer can do. To me, this is a very loud wake-up call for outsourcing firms – many advisors see a need to outsource non-core activities but don’t know that outsourcing firms can handle these functions.    

If you are considering utilizing an outsourcer within the next 12 months (and 8.2% of the people we surveyed are), take a look at the ways that your colleagues are currently using one. According to the survey we conducted, the function most frequently outsourced was IT. Next up, approximately one in four advisors using an outsourcer today indicated that they do so for client reporting, portfolio management and reconciliation, and/or data aggregation

Top 10 Ways that Advisors Use an Outsourcer
(Q3 ByAllAccounts Industry Survey, multiple responses allowed, 167 responses to this question)

Looking at portfolio management and reconciliation services in particular, it is fair to state that the choice of whether to outsource these services is a personal one—and is also based on your firm’s philosophy. Take into consideration:

  • Do you run a wealth management system (PMS) in-house? If you don’t, then you may consider selecting a partner to manage the daily processing of all of your data. This includes held-away data AND your other assets.

  • If you do run a PMS in-house, do you (or your operations team) do daily data reconciliation? Perhaps you don’t have the staff to do daily recon, or you want to save your time for client-facing activities. In that case, select an outsourcer who will not only create files that are ready for reconciliation, but will also perform the actual reconciliation, so you receive data that has already been reconciled. Many outsourcers will do this for aggregated held-away data as well as your other assets.

The bottom line is that freeing up time for marketing and business development is difficult. If you are considering outsourcing as a solution to this problem, start by speaking with a colleague who is already outsourcing, so they can give you their perspective. And, check out our latest Smart Decisions paper: “Outsource Non-Core Activities to Free-Up Time for Marketing and Business Development” that features an interview with independent, fee-based consulting and investment advisory firm Asset Strategy Consultants – Boston.

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