Making Sense of Your Outsourcing Options in 2014

If you’re a busy advisor who has considered outsourcing any area of your business, then you already know you have many good options. Our consulting team often has conversations with advisors who are either overwhelmed with, or unaware of, all the choices available to them today. It can be tough to differentiate between the benefits of outsourcing services offered by various providers—and even tougher to find a reliable source which lists them for advisors in a simple, unbiased manner.

We devoted time in 2013 to researching the myriad outsourcing service providers in today’s marketplace. That said, to start off the new year on a positive note, we thought we’d share this list we compiled with you.

7 Key Business Activities Advisors can Outsource Today

1. Performance reporting: You have many choices in this area, depending on your unique needs. If you’re considering outsourcing performance reporting, think about what you’d ideally do and create for clients. Do you want to send printed reports quarterly? Annually? Would you prefer to send these electronically to some or all clients? Are you satisfied with basic reports (realized gain/loss, 1099, etc.), or do you need to find a service provider who will help you create something more customized? You may also want to think about taking your performance reporting to the next level by incorporating your investment philosophy into the suite of reports you share with clients. This is a recent reporting innovation we’ve accomplished for some of the advisors we support and it’s been really well-received by their clients. By integrating your investment philosophy into your reports, you give yourself the ability to sit down with your clients and discuss how you as an advisor are managing their assets as part of your overall plan for them—that your management process is not based solely on returns, rather, that you have a bigger picture perspective of your clients’ planning needs.
2. Billing: You can entirely outsource your billing responsibilities (i.e. quarterly billing calculation and statement generation, deduction from your client accounts, and payment to your account; access to a preliminary billing report for you to review for accuracy prior to fees being pulled; a final billing statement for your delivery to clients if you choose; and regularly generated householded client billing statements) to an experienced provider. You can also hire a firm whose systems will simply allow you to customize and/or run these reports/statements whenever you need to.
3. Uploads/downloads/reconciliation: Most outsourcing service providers will handle these basic tasks for you.
4. Trading/rebalancing: Many firms offer a platform on which you can trade/rebalance your portfolios yourself, or choose from a list of managers’ portfolios on that platform which the firm will trade/rebalance for you at the managers’ instruction if you’ve chosen to invest your clients’ assets there. If you’re not interested in handling the trade execution yourself, or if you have accounts which don’t/can’t fit 100% into a portfolio with an outside manager, there are a handful of service providers who will trade your accounts at your instruction as well as assume the burden of trading liability.
5. Investment management: You can outsource this completely to an outside manager; in this case, the expectation is generally that you’ll be putting 100% of a client’s account into the strategy of your choice. On the other hand, if a portion of your clients’ assets need to remain as-is, you can shop around for a service provider who will help build around these existing assets. If you plan to keep doing the investment research on your own but are interested in outsourcing the operational aspects (establishing model portfolios, setting accounts to those models and maintaining them per your ongoing instructions, etc.) you also have options.
6. Compliance support: If you’re in the process of forming your own RIA, you can hire a firm to help you do so (you can choose to work with a compliance consulting firm or attorney who will typically draw up and file the documentation you need to open up your doors and do business as an RIA). Beyond this, you can also outsource the vast majority of your RIA compliance responsibilities (onsite activities that must be done at your place of business are the exception) either on a retainer or as-needed basis. Cost varies depending on the scope of your needs and the type of firm you hire. On a related note, if you’re outsourcing other areas of your business to a service provider who likely has line of sight into your client accounts and data, they can often assist with any applicable documentation associated with audits as needed.
7. Technology: You can outsource to firms who will offer you access to individual pieces of the technology puzzle (i.e. CRM, portfolio management software, online document management, client portal, account aggregation, risk profiling software, even email hosting). There are also service providers who give you access to a comprehensive suite of software or virtual office that may include any and all of these pieces.

Full disclosure: While some advisors have chosen to engage our firm and outsource various back office activities to our virtual team, after consulting with many others, we often point them to another outsourcing provider that we feel could better meet their needs.