Advisor says: Now that we are into the final quarter of the year, I am doing my traditional annual review of my business and developing my plan for next year. As I look back, I realize I spent a lot of time over the past year or so doing things I don’t particularly enjoy as much as I used to. As a result, I’m probably not doing them as well as I should.

Reluctantly, I also admit that some of those things have been core to my value proposition – such as financial planning and portfolio management. Don’t get me wrong; I am confident my clients still are well served, but the thought of doing a bunch more financial plans that will look very much alike and creating portfolios that will probably end up falling into one of the four models I have designed doesn’t inspire me as it once did.

I don’t want to hire another staff person to do these things, so I’m thinking of outsourcing them. Would I be shortchanging my clients?

Coach says: The answer to your question of shortchanging your clients depends on what you offer as a substitute for your personal involvement. If what you offer is as good or better, you shouldn’t feel any guilt. Recognize, however, that some clients are likely to notice your outsourcing of services and perhaps complain or even leave.

The good news is that outsourcing some aspects of a financial advisory practice is far more commonplace and acceptable today than even five years ago. That’s partly because there are more options and providers, but also because technology has made delivery of these types of services easier, faster and less expensive.

So, if your plan is to add resources from outside your firm to perform certain tasks, what can and should they be? I’m going to dispense quickly with those that I assume you already have engaged someone to perform, such as accounting and technology. An advisor spending his or her high-value time on these basic operational activities rather than on practising his or her craft as an advisor rarely makes sense.

That leaves the two essential functions in a successful practice you have identified – financial planning and investment management – as candidates for outsourcing. Let’s look at each in turn:

Financial planning. Although much of financial planning can be rendered as a standardized process, your recommendations always should be tailored to each client’s unique situation. From my perspective, using a comprehensive software program to do the number-crunching and to ensure you touch all aspects of your client’s personal state of affairs that are important to their long-term financial security is essential. With the broad parameters of a financial plan addressed by that technology, you’re free to tweak the recommendations to account for the unique requirements of individual clients’ circumstances.

The opportunity for outsourcing lies in having someone else use the same software to do the basic financial planning, leaving you to add the personal touches based on your deeper insight into a client’s needs and objectives. Who can that third party be? I think there are two options: a fee-only financial planner or the client him- or herself using a self-service digital planning tool, a.k.a. a robo-advisor.

I suspect the first option is easier to accept, so you might establish a relationship with a qualified fee-based advisor who gets a bigger kick out of doing financial plans than you do. Agree on a software program to create consistency among the financial plans he or she does on your behalf. Agree on a fee schedule for each financial plan, perhaps varying the fee by the complexity of each client’s situation and the amount of work. Many fee-based financial planners I know would welcome the opportunity to collaborate with someone who could bring them a steady stream of financial plans to work on.

The “digital advice” side of the equation is, perhaps, a little more difficult to get our heads around because many of us still view robo-advisors as poorly qualified and inadequately equipped competitors. That was certainly true of the first generation of robo-advisors, for which the emphasis was much more on capturing assets to manage than on creating comprehensive wealth-management strategies.

Today, however, the industry has advanced to Robo 3.0 status, and there are digital platforms in the marketplace that perform many of the standard financial planning calculations that once were the exclusive purview of bulky desktop software applications. In fact, some digital advice tools are built on the same powerful engine that drives their “big brother’s” versions and incorporate many of the same capabilities while simultaneously modernizing the user experience.

What’s more, many robo-advice platforms have been made so intuitive that a client can do much of the initial data inputting and report generation themselves, opening the door for you to work collaboratively with these clients to produce a final plan. Anecdotally, I’m hearing that clients who go through this self-serve process become better informed and more engaged, thus making the financial planning process more efficient and more effective.

Investment management. Depending upon which studies you read, somewhere between 25% and 50% of all advisors today outsource some or all of their investment-management functions. That may be as simple as relying on one mutual fund or ETF provider’s model portfolios or as sophisticated as having your own stable of portfolio managers whom you choose and oversee. There also are organizations that not only manage the portfolios, but also look after order entry, re-balancing and reporting.

Here’s another opportunity to leverage technology, and the salient points are much the same as those I made in favour of robo-advisors. Consequently, we don’t need to go too much deeper into this, except to say that there are many robo asset managers from which you can choose. Price, of course, is a consideration, along with reporting and other services; but a more essential determinant will be investment performance. Clients will assess the value of their relationship with you based at least partly on the returns you generate in their portfolios, regardless of whether you’re making the investment calls yourself or hiring someone to do that for you. This makes your choice of an outside resource one that should be made carefully.

Although there are significant advantages to outsourcing, there are trade-offs. Here are some of the benefits of outsourcing:

1. It puts the emphasis on growing your firm. Less time spent doing financial plans and managing portfolios leaves more time for new-business development and client service, which leads to referrals.

2. It requires simplified systems. Maintaining internal systems to support financial planning and investment management can consume time that might be utilized better.

3. It puts you on the client’s side of the table. When you outsource planning and investment management, you can be more objective in evaluating strategy and results.

4. It can maximize succession value. Practices in which all the planning and investment expertise will not walk out the door when the founder retires are worth more to buyers.

And here are some drawbacks to outsourcing:

1. It costs money, so you must ensure you’re getting the value you seek at a price that works for your business’ profitability targets.

2. You must accept that you probably will have to give up control of certain aspects of your business in order to fit into the operational model of the outside entity. When you do all your work internally, you are No. 1 in line for service. If your outside resource has more than one client, you may not always be the top priority.

Outsourcing is not for everyone, but it can be a great way to re-energize your practice at a time when you might feel you’re letting it down.

“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to George’s practice-management videos can be viewed on

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