Podcast Center
Video Center
Webcasts
Resource Center
Events
By 
September 21, 2022 at 02:32 PM
What You Need to Know
- Ninety-five percent of firms surveyed said they were satisfied or very satisfied with their outsourced solutions.
- The share of RIAs who outsource investment management grew since 2020; the share of BDs who did so remained constant.
- While some advisors say cost concerns have kept them from outsourcing, that focus appears to be receding.
The financial advisory industry’s use of outside investment managers has continued to gain traction over the past two years, particularly among RIAs, according to results of a biennial survey released Wednesday by Northern Trust Asset Management’s FlexShares Exchange Traded Funds.
About equal numbers of firms that were already using external managers reported that they either increased their outsourcing activities or kept them consistent.
Ninety-five percent of firms surveyed said they were satisfied or very satisfied with their outsourced solutions. Fifty-three percent said they directly correlated their outsourcing activities with allowing them to generate more revenue.
The new survey is the seventh in a series examining advisor views on external investment management. It was fielded by Informa Engage in January, and received responses from some 550 advisors and closely related professionals.
RIAs Increase Outsourcing
A smaller proportion of RIAs than independent broker-dealers choose to outsource, but that is beginning to change, according to the survey. In 2022, 32% of RIAs said they outsourced, up from 27% two years ago. The figure for IBDs has remained largely unchanged at about 50%.
Moreover, RIAs reported higher levels of outsourcing as a percentage of assets under management. On average, they outsource about 50% of assets, while IBDs outsource 39%.
FlexShares noted that RIAs’ increased adoption may be a function of business size. Because they tend to be smaller enterprises, many RIAs require greater external support amid recent market disruptions.
Within each advisor channel, differences also crop up in what the firms are choosing to outsource. RIAs are more likely than IBDs to outsource back-office operations, while IBDs put more of their outsourcing efforts into investment manager research and due diligence/monitoring.
The Pandemic Effect
In the 2020 iteration of this survey, pollsters asked participating firms that handled investment management in-house whether their opinion of outsourcing had changed as a result of the pandemic.
