With much fundamental change occurring in the financial
advisory industry, it is fair to say that positioning a firm for strong growth
is about much more than simply adding an extra adviser or two. In many cases, a
better option might be growth through outsourcing, for instance—particularly
for the investment management component of a practice.
The job of scaling up an advisory practice today is
undoubtedly made more difficult by the fact that the basic understanding of
what advice is and should be is shifting. According to recent research from
Cerulli Associates, for example, successful financial advisers today spend less
than 20% of their working time thinking about investments and effectuating
“While investing is a key component of any financial plan,
advisers spend more time tending to client-related activities, such as
acquiring new clients and meeting with current clients,” says Emily Sweet,
senior analyst at Cerulli in Boston. “They allocate the remainder of their time
to administrative tasks, including office management and compliance-related
More important than the simple fact that advisers spend just
a fifth of their time on investment-related work is the fact that those who
outsource more of their recurring investing tasks appear to be much better at
managing business complexity and building scale in their book of business.
Advisers taking this approach may rely more on service partners for investment
maintenance and even the basic portfolio construction work that traditionally
would have been conducted in-house, but they have much more time to focus on
understanding client needs and providing more personalized service dedicated to
building long-term, personalized plans and goals.
Experts in a variety of industry positions agree—this is the
key to not only building scale but to simply surviving in the new fiduciary
future. Repeated—and time-consuming—manual processing-tasks simply cannot be
left to an adviser or another human staffer to complete as profit margins
continue to be squeezed tighter and tighter.
“Framing their role as relationship-focused could be
difficult for many advisers because their value proposition has historically
been investment-centric,” Sweet adds. “Our data shows that after tending to
important client needs, time available to manage investments is limited.
Outsourcing elements of investment management can vastly enhance efficiency.”