Blog Entries by Peter Dugery, Senior Vice President, National Sales, Morningstar Investment Services

Is Outsourcing for You? Five Things to Consider

Every industry and service goes through periods of change. Sometimes, they’re lightning-fast. More often, they play out in a steady, deliberate way. For the past thirteen years, I’ve traveled and worked with advisors across the country. Along the way, I’ve witnessed one of these seminal shifts: the move to outsourcing investment management.

Many advisors now recognize a strong case for outsourcing the day-to-day investment management and related duties to a trusted third-party asset manager. Contemplating the switch?  Here are some factors to consider:

1. Find your market. Outsourcing may not be for every client in your practice.

Size up your services and your market to see if delegating investment management is an approach that fits your long-term business strategy.  An analogy I find helpful is to imagine that you own a gym or fitness studio. What market niche would it serve? How would you compete against the low- cost, “big box” gyms? Once you go through this, you’ll see how your array of services are often much different than other alternatives that investors have. Seek first to understand that before you consider outsourcing.

2. Embrace delayed gratification.

Using a managed money program means that you won’t get a fee up front—instead, your compensation will be much more gradual. For many advisors, this can be a significant shift. Perhaps you’ve built your business using up-front commission loads as your means of compensation.

Beyond the initial adjustment, consider the long-term impact on your business and your level of client service. Could you use more time to spend on client meetings and prospecting? Don’t forget about your succession plan. Could outsourcing the investment management of clients’ portfolios make it easier to transition your practice in future years?

3. Educate, Educate, Educate.

Establish the value of big-picture, holistic planning—and make sure you’re offering your clients integrated services. Start early by positioning your value beyond just managing investments.  Advisors successful in making the transition seek to become experts on financial planning—and focus on building a rapport with clients, educating them on the value of a holistic approach.

When it comes to comprehensive planning for your clients, your competitive advantage is likely your overall expertise. Your ability to communicate what  you know in a credible, trustworthy manner matters. Importantly, this is an area in which robo-advisors aren’t likely to excel.

4. Pick the right partner.

Identifying the firm that you want to outsource to is challenging, and can require some due diligence. When you’re researching, here are some things to ask yourself:

  • Does their investment philosophy match yours?
  • Do they communicate regularly, in clear, easy-to understand terms?
  • What does their performance track record look like?
  • Are they easy to work with, and do they provide reliable service?

5. It’s not all-or-nothing.

There are a lot of reasons to make the transition. There are just as many to do it slowly. Advisors who make the transition successfully firmly believe in the value it provides. They also realize it takes time to incorporate, and isn’t for every client situation. Provided you understand the value and know how and when to delegate, outsourcing can help you shift to a more productive practice to help satisfy your clients.

Peter Dugery is the Senior Vice President, National Sales, at Morningstar Investment Services.
With more than 20 years of industry expertise, Peter Dugery provides Morningstar Investment Services with expertise in client service, sales, and marketing. Before joining Morningstar, he was involved in sales at Investor Force, Inc., a technology company serving the institutional pension community. In previous roles, Peter has worked in the research and client services department for Compu-Val Investments, a nationally focused Registered Investment Advisor. He holds a Bachelor's degree in business administration from the University of Denver and an MBA from Villanova University.

Morningstar Investment Services, Inc. is a registered investment adviser and wholly-owned subsidiary of Morningstar, Inc. Morningstar Investment Services and ByAllAccounts are both owned by Morningstar, Inc.
The opinions expressed herein are those of Peter Dugery, are as of the date written and are subject to change without notice, do not constitute investment advice and are provided for informational purposes only. Morningstar Investment Services will not be responsible for any decisions, damages, or other losses resulting from, or related to any use of the information or opinions expressed in this document.

Image courtesy of

You might also be interested in:

Key Insights on Today's Investor [Webinar Replay]

How Some Alternative Funds Producers are Building Infrastructure to Scale Efficiently [Blog Post]

Why Investors Hire and Fire Advisors and How Gamma Enhances Retention  [White Paper]

comments powered by Disqus