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Outsourcing Can Make Smaller Accounts Profitable

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Many financial advisors would be more than willing to serve clients with smaller account balances, but unfortunately, it’s often not possible for them to do so, because running a business is so costly.

But at a time when the advisor-client relationship is so important, and there’s such a large number of clients with smaller balances who also need financial planning advice from professionals that they can trust, advisors must be able to reach out to those clients, says Dean Cook, president of FTJ FundChoice, and develop relationships with them.

FTJ FundChoice specializes in helping advisors service the “99%” by making these smaller, non-high-net-worth accounts profitable. The company handles all back-office work for advisors such as performance reporting, monthly fee billing, trade reconciliation and more, so that advisors can focus on growing their businesses and better servicing their clients. FTJ offers a platform with more than 1,700 investment products for advisors who like to run their own portfolio models, and access to top-notch third-party institutional asset managers for those who prefer to outsource portfolio allocation decisions.

By leveraging infrastructure and technology, FTJ provides a cost-efficient way of handling these accounts, which encourages advisors to take in the business that they would normally turn down.

“It’s very hard to build your business around smaller size accounts, there’s no denying that, and so many advisors have to turn away clients with smaller account balances even if they want to work with them, they don’t have efficient means to do so,” says Cook. “It’s one thing to have upfront meetings with clients, but then advisors have to manage the assets, the billing, the performance reporting, etc., and it all adds up.”

Outsourcing that work to a third party like FTJ—which started out as a mutual fund platform for 403(b) and 457 plans and was able to build upon its existing infrastructure—not only saves both time and costs by letting advisors outsource important parts of their business to a trusted, high-caliber partner, it also enables them to focus more on developing and strengthening relationships with their clients.

“One of the primary roles an advisor has is helping clients to avoid the emotional mistakes they can sometimes make in investing,” Cook says. “Without guidance, people will continually make the same emotional mistakes, and this holds true for a client with $50,000 in assets and a client with a $1 million account. Advisors need to be able to properly guide all kinds of people, so to the extent that they can free up time and resources to do so, it benefits everyone.”

Cook believes being able to service a greater number of smaller accounts is also important for advisors given the changing demographics and the increased number of people who have less money to invest. In particular, he says, there are many younger people who are at the start of their careers, and while they may not represent a great deal of business in the present, it’s worth their while for advisors—in particular younger advisors—to cultivate them for the future. 

“One of our industry’s greatest problems is we haven’t had too many young people coming into the profession, but in order to reach out to the smaller accounts, we are seeing more advisors hire younger professionals in their businesses to work with clients aged between 25 and 30, who typically have less assets.”

Ultimately, Cook says, developing these relationships from the outset can help benefit independent advisory firms in the long term.


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