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The Benefits of Outsourcing: Part 2

Scott's Column |

Last month, we looked at how outsourcing the investment management can help reduce overhead costs and help you build credibility in your investment offering. This month, we’re going to look at how outsourcing can help you buy back a part of your day so you can focus on the parts of your job that truly energize you.

Despite its potential benefits, outsourcing is not for everyone. Depending on which studies you look at, somewhere between 25% to 50% of all advisors outsource some or all their investment management functions. That means many financial advisors continue to manage client assets themselves. But if you find yourself wishing you had more time to do the things you really enjoy in your job, outsourcing could be the answer.

The first question to ask yourself is “why did I become a financial advisor?” Advisors usually fall into one of two camps. Either they love the technical aspects of the business or they love working with people.

If you’re a “techie” whose passion is investing, you are probably not a good candidate for outsourcing. Why deprive yourself of something you enjoy? However, if your technical passion is financial planning, outsourcing could allow you to concentrate on an area that truly delights you.

If you’re a “people person,” consider outsourcing. You could effectively buy back a significant number of hours each week and spend them interacting with clients and potential clients. This could energize you and enhance the quality of your work day.

Whether you’re a people person or a certain kind of techie, here are two ways we believe outsourcing your investment management can help you grow a larger, more efficient, and more profitable practice.

More Time to Grow Your Firm

Firms that outsource have more time to prospect for and service clients. This client-centric focus fosters client acquisition and client retention. Advisors who spend their time researching and implementing investment ideas don’t have as much time to find and service clients.

Not surprisingly many studies have shown that financial advisors who outsource tend to have larger, more profitable firms than those that do not outsource. It is certainly possible to build a thriving practice without outsourcing, but advisors who carve out more time to personally focus on growth and client service often see greater results than those who spend more time on technical investment issues.

The Ability to Concentrate on Areas of Strength

Some advisory firms use outsourcing as a way of concentrating on their strengths and dispensing with investment activities where they add no special value. For example, some firms have strength in areas such as alternative investments or private equity, but have no special expertise in managing broadly diversified core portfolios. Others may want to focus on managing their larger, more complex accounts to make sure they address their special needs. Such firms can selectively outsource investment management responsibilities to complement their areas of special focus or expertise.

Still other firms may want to focus more of their resources on services that have a greater perceived value than asset management. Services such as financial, tax and estate planning and behavioral coaching offer firms the opportunity to address the individualized needs of their clients and provide more customized, high-value services. Outsourcing allows advisors to focus resources on these areas.

Ultimately, the decision about whether outsourcing is right for your firm should be based on the needs, goals and preferences of your firm and the clients that you serve. If you’re interested in learning more, we offer a more comprehensive guide, “Should You Outsource Your Investment Management?” Feel free to contact us, and we’ll send it to you.