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Practice Management > Building Your Business

How Outsourcing Benefits Wealth Management Firms: Fidelity

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A study released Tuesday by Fidelity Clearing & Custody Solutions shows that wealth management firms can realize client-related and business value by hiring outside consultants and specialists.

Forty-three percent of advisors in the study said their firms currently used external consultants, third-party providers or individual specialists for certain business functions.

Half of respondents said they outsourced such functions as investment management, legal and compliance and marketing/communications specifically to create value for clients. Doing so allowed them to focus on deepening client relationships by focusing on planning-centric and goals-based financial advice.

As well, outsourcing of investment management allowed them to provide a seamless experience for their clients.

Another benefit of outsourcing by wealth management firms seems to be that it is good for business, according to the study.

Eighty-one percent of advisors who said they outsourced two or three of the three top outsourced functions reported an increase in number of clients in the past year, compared with 71% who did not outsource.

Likewise, 95% of outsourcers experienced growth in assets under management, versus 89% of non-outsourcers.

At the advisor and individual team level, advisors who outsourced key functions were able to manage more assets — $145 million vs. $110 million — which resulted in greater compensation — $365,000 vs. $335,000.

“We believe the future’s most successful financial advisors won’t allocate their time and energy the same way they do today,” Todd Roadman, senior vice president for Fidelity Clearing & Custody Solutions, said in a statement.

“We’re asking wealth management firms to take a hard look at their firm’s functions and ask themselves, ‘Is this driving value?’ Advisors shouldn’t be afraid to consider letting go of the areas outside their core competencies.”

The outsourcing trends study was fielded in May by an independent firm not affiliated with Fidelity Investments. Participants in the study included 383 advisors who manage client assets either individually or as a team, and work primarily with individual investors.

The study found that 48% of firms outsourced the IT/technology function, 40% investment management and portfolio construction, and 37% legal and compliance. Seventy percent said they hired specialists to optimize overall firm efficiency and productivity, 62% to fill a gap in internal expertise in the outsourced area and 60% to save time.

About half of advisors also said outsourcing allowed more time to dedicate to client service and enabled them to create more value for their clients.

Eighty-four percent off the firms and advisors who hired specialists reported that they’d had a successful experience. Here are their reported main reasons behind that success:

  • Helped save time: 77%
  • Vendor had qualified expertise: 70%
  • Helped increase productivity: 66%
  • Helped optimize efficiency: 57%
  • Allowed firm to focus on deepening client relationships: 53%


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