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Smart Outsourcing Can Be a Game-Changer for RIAs

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What You Need to Know

  • Outsourcing can help RIAs with investment management, marketing and back-office work, but firms must provide oversight and maintain compliance.
  • Remote work can give you more flexibility to utilize outsourced staffing solutions.
  • Always consider the cost while thinking through outsourcing opportunities.

This spring brings fresh hope on the pandemic front as well as opportunities for new beginnings and growth in our businesses. The financial services sector — and RIAs in particular — have experienced a boom in demand and engagement, with clients increasingly seeking tailored financial solutions and advice.

The shift to remote work, digitization and greater scrutiny on the markets will continue to unearth opportunities for firms to grow. But for time-strapped RIAs, it can be tough to find the bandwidth needed to make that potential growth a reality.

If you’re looking to scale up your business or drive greater efficiencies, outsourcing might be the creative solution you need.

Outsourcing: More Than You Imagine

Outsourcing can offer a broad range of solutions for investment management, transaction processing, automation, marketing and back-office administration, but it’s critical to weigh the pros and cons.

First and foremost, always consider how your firm will be able to provide oversight and maintain compliance. Outsourcing can be a potential game-changer, but remember that the buck stops with you — even if you’re offloading certain responsibilities to third-party providers.

Let’s look at some of the key ways you may be able to tap into outsourcing.

Investment Management

Managing individual portfolios can be cumbersome, which may be why 41% of advisors outsource more than 75% of their client assets.

Outsourcing investment management can be a way to free up valuable time and focus on growing other strategic areas of your business. But it’s a viable option only if investment management isn’t a central part of your value proposition.

To help boost your productivity, consider solutions such as model portfolios, commingled pools, or external parties that could help you with investment policy, portfolio design or asset allocation strategies.

Also, it doesn’t have to be an all-or-nothing proposition: You can always keep some core functions in-house and outsource others — like certain types of investments or asset classes, smaller or less profitable accounts, or portfolio management tasks such as investment research and security selection.

Technology

The past year’s boom in digitization is profound: According to Deloitte, we’ve seen more digital transformation in the past seven to 10 months than in the previous five years. This rapid growth has brought new opportunities in technology-related support functions like strategy, compliance, and software implementation and training.

Working with qualified technology or compliance consultants can help you offload non-core business functions while also tapping into expert insights on how to improve automation, scale and efficiency.

Even an ad hoc tech consultation can help you assess how well the new solutions you’re considering will integrate with your existing systems before you make any commitment — saving you time, money and headaches down the road.

Artificial intelligence (AI) can also help you run your business more efficiently. For example, AI can detect data anomalies that could derail transactions. But remember, while AI can potentially enhance and protect key business processes, it requires a knowledgeable person to oversee it and act on any patterns or problems it uncovers.

Supporting Your People

Finally, consider how outsourcing can help support your staff. The pandemic has shown that remote talent solutions can be effective for certain functions, which may broaden the pool of talent you can tap into.

The McKinsey Global Institute estimates that more than 20% of the global workforce (mostly in high-skilled sectors such as finance) could work away from the office most of the time and be just as effective — thanks to progress in automation and digitization.

Remote work can offer your current staff more flexibility, as well as give you more flexibility to take advantage of outsourced staffing solutions.

Choosing the right provider is another way to support the hard work your people do every day, with solutions that help improve scalability, automate back-office tasks, deliver a consistent investment process and streamline client service. Many times your custodian can offer these, so connect with them about solutions for automation, scale and aggregation — and any other support they can offer.

Choosing Your Own Way

As you think through outsourcing opportunities, don’t forget to count the cost. For example, outsourced management typically costs between 20 and 50 basis points of the assets being managed, and you may have to either reduce your revenue or pass the cost along to your clients.

Oversight and due diligence are key, and you may need to carve out additional time or create new processes to make sure everything runs smoothly. Also consider how outsourcing could affect your ability to customize client portfolios, manage communications, collaborate with colleagues and set business goals.

The good news: 96% of advisors who outsourced said they were satisfied with their solution. It’s worth exploring whether outsourcing could free up your firm to focus on more strategic work, unlock your creativity, explore new centers of influence and collaborate with a wider range of industry professionals.


Gabriel Garcia is the head of business management and strategy for E-Trade Advisor Services. He joined the firm in October 2019. Previously, he served as managing director for BNY Mellon’s Pershing Advisor Solutions where he led its Relationship Management & Consulting group and served on the Executive Committee.

Prior to his role at BNY Mellon | Pershing, Garcia spent 15 years with Charles Schwab & Co., where he held several leadership positions in sales, training and consulting.

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