Investment Executive - - BYB - Ge­orge Hart­man is CEO of Mar­ket Log­ics Inc. in Toronto. Send ques­tions and com­ments re­gard­ing this col­umn to ge­orge@mar­ket­log­ Ge­orge’s prac­tice-man­age­ment videos can be viewed on­vest­mentex­ec­u­

Less time spent do­ing fi­nan­cial plans and man­ag­ing port­fo­lios leaves more time for client ser­vice

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 ac- cept, 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 wealth­man­age­ment 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, re­bal­anc­ing 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.


Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.