Financial Planning: Is it Time to Hand Over Part of Your Biz?

Even the best financial advisors can begin to hit a wall at about $500 million in managed assets. Some registered independent advisors just find that there isn’t enough time to handle everything–adminstrative and operations issues, client asset management, and then also spend time with clients and prospects.
These same advisors have been able to unlock tremendous growth by outsourcing some tasks to third parties. It’s important to evaluate your business at different stages and when you decide to focus more on your core strengths–outsourcing can be an efficient way to streamline the aspects of your business that you’re not adept at.
Every task during the day should fall under scrutiny. Advisors should be asking themselves: ‘Is this the highest and best use of my time?’ ‘Would offloading this task to someone that can complete it more efficiently be a better move for my business?’
When contemplating using outsourcing, it’s important for advisors to research the most effective options in order to best prioritize their time. Here’s some of the most frequently asked questions:
1.) Why Outsource at all?
Outsourcing allows a financial planning advisor to spend more of their time engaged in tasks that leverage their core skills. In financial planning, this often includes client-facing activities that are helping deepen client relationships and strengthening the financial planning advisors‘ business. If an advisor’s goal is to structure to grow to scale, outsourcing can be an important part of their strategy.
The 2013 Cerulli Advisor Metrics breaks down how financial planning advisors spend their time:
Client-facing activities (51%)
Investment management (26%)
Administrative issues (19%)
Business development (4%)
The two most effective tasks for a financial planning advisor’s time are client-facing and business development activities. Administrative issues still take up nearly 20% of the average financial planning advisor’s time, despite not being an effective use of their time. It’s possible that if an advisor outsourced some of this labor to another party and reduced that percentage to 9%, they could shift that valuable excess time over to client-facing and business development activities.
Outsourcing options also exist for assistance in investment management– this can free up some of that time spent management investments (26%), allowing the financial planning advisor to spend more time with clients and prospects.
2. What is the cost of outsourcing?
The actual cost of outsourcing is a wide range, depending on what a financial planning advisor outsources. Advisors are able to outsource technology, research, marketing, as well as legal and financial components of the business.
Let’s say, as an example, outsourcing the bookkeeping function to a firm that specifically handles bookkeeping for multiple businesses may cost $1500 every month, but it may also save you 20 working hours. This gives the financial planning advisor an opportunity to divert attention to business development activities.
So you need to ask yourself: what is the opportunity cost of not outsourcing?
3. What’s the risk of diminishing my value to clients when outsourcing investment management?
Done properly, the outsourced CIO platform is a benefit to both clients and financial planning advisors, not a risk. A recent survey states that 90% of clients were happy with their advisor while using an outsourced investment platform.
There are fantastic tools and features that can make the investment management process more efficient. UMA tech vastly improves the efficiency of managed money portfolios. It’s suggested to financial planning advisors to explore rebalancing tools and advisor  as portfolio manager capabilities and ask the following question: ‘Can I handle investment management in a more efficient way?’
Outsourcing financial planning tools does not mean that advisors are not in charge of the investment process.
Cerulli Advisor metrics state that 26% of an advisor’s time was spent on investment management…if an advisor can reduce that number by half, they would substantially increase the time they can spend with clients.
4. Who is in control of my business if I outsource my operations and administrative issues?
An oursourced COO platform does, in some, ways, place the business more firmly in the financial planning advisor’s control– they are more able to focus on their current clients and growing the business instead of handling administrative tasks.
In essence, the outsourced COO platform is a positive for both financial planning advisors and their clients. Handled correctly, outsourced operations and technology take a huge burden off the advisor and enable them to focus on client issues, referrals and business development.
Outsourced capabilities include reporting and billing, financial planning tools, CRM, P&L analysis, and legal and compliance services.
5. What are the biggest mistakes advisors can make in outsourcing?
The biggest mistake advisors make is thinking of their outsourcing capabilities as a vendor — ‘I’ll buy a service from someone,’ they say.
Financial planning advisors should instead think of outsourcing as a partnership, ideally an extension of their business. Evaluate the resource partner in the same way they might a new employee. Do they understand the business? Is it a cultural fit? Will it be additive to client relationships?.
Done correctly, outsourcing components of the business can create a more scalable and sustainable model, allowing the advisor to focus on clients and growth.