Outsourcing is not for everyone. Depending upon which studies you look at, somewhere between 25% and 50% of all advisors outsource some or all of their investment management functions.
There are significant advantages to outsourcing, but they come with trade-offs. By asking yourself three questions and considering the list of benefits and trade-offs below, you can quickly determine if you are a good candidate for outsourcing.
What’s Your Passion?
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 the activity that brings you joy? 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.
Where Do Your Talents Lie?
The second question is, “What am I good at?” Even if you are passionate about investing, if you are not skilled at it, consider outsourcing. Your clients shouldn’t suffer simply because you enjoy investing.
If you are good at investing, but don’t care for it, pause before deciding to outsource. Your clients shouldn’t suffer simply so you can off-load a task that you don’t care to do.
What Are Your Goals?
Your decision should be based on your goals. If you’re happy with your firm and your work life, don’t outsource. However, if you have plans for changes, outsourcing could help you achieve your goals.
Consider the Benefits
If you think outsourcing may be for you, here is a closer look at some of the benefits:
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.
Operational efficiencies. Maintaining a back office to support investment management activity can be expensive and time consuming. It also takes focus away from areas where you can truly add value. Firms that outsource don’t need back office systems and don’t expend their valuable resources on them.