When Advisors Should Outsource

Outsourcing in Financial Advising Outsourcing can be one of the most important aspects for financial advisory businesses. Studies show advisors who spend more time with their clients tend to be the most successful and compensated. In the financial advisory world, time is money. The more time independent financial advisors spend with their clients, the higher their revenue.

Outsourcing can maximize your time and get you back in front of your clients. For example, if you currently spend an hour a day scheduling appointments, you could, instead, hand tasks off to an assistant and use those five hours meeting with clients each week.

According to the Rydex/SGI Advisor Benchmarking survey, advisors who spend less than 30 percent of their time with clients make, on average, $248,000, while those who spend more than 60 percent of their time with clients make more than $2 million. On average, most of your peers spend less than 30 percent of their time with clients. Only about 10 percent of advisory practices spend more than 60 percent. These firms generally deliver the highest service levels and have the most loyal clients because the owners are in tune with their clients’ needs.

To achieve a high level of success, you are going to have to delegate certain tasks. You need to understand how you currently use your time. This will help you determine what actually needs to be delegated. One best practice among top advisors is the completion of a weekly time audit. Your assistant should track your work day activities for an entire week. At the end of the week, you should have a better understanding of how you spend your time and be able to determine what needs to be delegated. The goal is to mimic a top shop by spending 60 percent or more of your time in front of clients. The time audit will show you exactly how much time you are spending with clients and help you decide what you should give to an internal assistant or an institutional partner.

There are many jobs in your practice that can be outsourced. Many advisors outsource advanced planning, business development, back office, compliance, technology, PR and team building. You may not need all these outsourced, so it’s important to define your needs.

What does it take for your outsourcing to be effective? As with all successful businesses, planning is key. You must first define your needs for outsourcing. This includes conducting a cost analysis to compare current costs with the potential costs of outsourcing. You’ll also want to analyze how new strategies could improve customer service and responsiveness. If another firm can help you increase your current level in these areas, it is more likely the firm is worth the expense you pay.

Once you identify your needs, you need to decide which jobs you want an outside contractor to provide – these can range from advanced skills needed in technology to administrative work. Finally, you need to determine the potential challenges or issues which may arise, such as a lack of skills or resources to meet the outsourced demands or confusing components found in the outsourcing contract. To avoid these issues, meet with the outside provider’s team and develop an emergency plan on how to overcome problems, should they arise.

After deciding what will be outsourced and developing a plan, the next step is selecting whom you will use. Since outsourcing is popular among financial advisors, you should be able to get referrals for the best contractors in the business. After pooling together a list of potential candidates, invite the most qualified firms to interview and evaluate their proposal for working with you.  After you have identified the candidates you want, talk to those who have done (or are doing) business with them before making a final decision. Lastly, make sure your choice for outsourcing will add overall value to your firm and there is a strong connection for building a lasting relationship.

The last stop on the road toward effective outsourcing is the implementation stage. Top level firms develop written outsourcing contracts with their chosen candidates. This contract defines the project’s details, deliverables, deadlines and benchmarks. It should also include the payment process, any intellectual property issues and non-compete provisions, when they are applicable. After finalizing the agreement, start the contractor off slowly with small projects to evaluate the performance. Many of these outside providers are freelancers and must be able to work independently. They are asset managers, consultants, brand managers, IT specialists, attorneys and many other service providers. Monitoring their results is very important in case there are any problems or confusion. In order for outsourcing to be most effective, you will need to treat them like any other employee by giving feedback to them and helping them to understand their role within your organization.

For more information on Summit Brokerage Services, an independent broker-dealer, visit www.joinsummit.com or contact us at (800) 354-5528.

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