It’s no secret that the wealth management arena is becoming more crowded…and more competitive than ever. It can be difficult and time consuming to compete for and retain new clients, while at the same time maintain smooth business operations. Smaller firms must continue to differentiate themselves and establish investor trust without the luxury of large budgets. The good news is that there are tools available to smaller-sized advisors that 1) can allow them to appear larger, and 2) add scale to their business. In the end, each firm’s owners must ask themselves, “Where do we add the most value to our clients and where should we be spending our time?”

For advisors that believe their time is best spent cultivating current client relationships and seeking out new business, part of the answer lies in outsourcing and leveraging technology. If outsourcing makes sense for you, the decisions concerning what to outsource and who to partner with become critical. In determining what to outsource, it starts with understanding the functions that are the core value proposition to your clients. For some, the answer is to turn over all aspects of asset management to a Turnkey Asset Management Provider (TAMP). These firms will provide a comprehensive, soup to nuts platform for managing clients’ money.

For many advisors, however, the best solution is to retain their independence and outsource some of the components to best of breed providers so that the advisor can focus their skill set and talents on the areas that add the most value for their clients. The primary benefits of most technology purchases or outsourcing services for advisors come in the form of efficiencies (i.e. time savings and scalability) or an improved client experience. Either benefit can translate to looking like a larger, full-service firm without being bigger.

Top six areas advisors should consider for outsourcing or utilizing technology:

  • Portfolio Construction, Manager Selection & Monitoring: According to a recent Northern Trust study, “Outsourcing Asset Management Capability: The Firms That Opt Not To—And Why,” June 2010, these components are where outside help is most used by advisors. This does not come as much of a surprise given the importance of establishing a fiduciary investment process that emphasizes consistent portfolio monitoring. The survey also revealed that investment management related tasks can consume the equivalent of two work days a week and that the time individual advisors spend on these tasks grow with the assets under management of the firm. 
  • Proposal Generation: There are software solutions available that can streamline the proposal process, add consistency, and make proposals look more professional. In turn, being able to efficiently produce professional caliber proposals will allow smaller advisors to better compete with bigger name firms for larger accounts.
  • Client Education: Helping a client understand the value of asset allocation or professional advice can go a long way toward client retention. Also, many firms add value by offering financial education to younger members of the family. Creating and maintaining materials to support these efforts can be tedious and labor intensive.
  • Marketing: The right messaging can ensure that a firm is conveying who they are and what they do in a differentiating manner. Firms that specialize in marketing strategies for advisors can help focus the message on their core competencies and value proposition.
  • Compliance: Rules and procedures aren’t always clearly spelled out in black and white terms. Working with firms that have experience navigating the existing and ever changing investment advisory regulations can provide a layer of risk management and peace of mind.
  • Performance Reporting & Statements: Often overlooked by advisors, high net worth clients put high importance on statements and reporting quality. There are some exciting capabilities being offered in account data aggregation and performance reporting that can add value to clients.

As competition heats up, simply being independent isn’t enough. To attract and retain high net worth clients, advisors need to be looking for ways to offer an outstanding client experience in a scalable way. The most successful advisors will focus their time and resources on the activities they do best and outsource or leverage technology for the rest.