Some financial advisers are finding that outsourcing most of their day-to-day tasks, including many administrative duties, saves time and is cost-effective.
Some financial advisers are finding that outsourcing most of their day-to-day tasks, including many administrative duties, saves time and is cost-effective.
Russ Thornton, a fee-only registered investment adviser and owner of Thornton Wealth Management LLC in Atlanta, outsources several tasks.
"[Outsourcing] allows me to be more focused on my client relationships and less on the business of running a business," said Mr. Thornton, a sole practitioner who manages $20 million in assets.
He outsources his bookkeeping, compliance consulting, back-office operations, portfolio management, investment management and e-mail marketing. Mr. Thornton even has a remote administrative assistant, who is based in Texas.
"I pay her $40 an hour for general administrative work, whether following up with a client, paperwork, etc., and though I could hire someone for less locally, with her I have no [human resources] issues, no additional office space to worry about, no additional computer expenses," he said.
A survey of advisers that was released last month by the Denver-based Financial Planning Association provides some statistics on adviser adoption of outsourcing.
According to the study, "FPA Practitioner Technology Report: Leveraging Technology Solutions," between 60% and 73% of advisers reported that they were "already outsourcing or would consider outsourcing" several services. These include hosting of their firm's website (73%), disaster recovery (69%), statement preparation (66%), all information technology infrastructure management (66%), secure third-party client data transfer (65%), performance reporting (64%), archiving of client data (63%) and account data integration (60%).
Improvements in Internet communications and reliability over the past few years have made outsourcing more attractive, according to the FPA report and Mr. Thornton.
LOCATING SERVICES
One of the difficulties with outsourcing is knowing how and where to find these services, he said. Mr. Thornton said he relied pretty heavily on a list of providers maintained at virtualofficenews.com, an Albuquerque, N.M.-based subscription website and newsletter that caters to advisers, produced by certified financial planners David Drucker and Joel Bruckenstein.
The FPA and the National Association of Personal Financial Advisors in Arlington Heights Ill., also maintain similar lists online that are available to their members.
Mr. Thornton located a certified public accountant to handle his accounting tasks through virtualofficenews.com.
He and 24 other advisers rely on Akron, Ohio-based Soulsby Ac-counting Group for their bookkeeping needs, according to the firm's president, Tracy Soulsby, who is a certified public accountant.
She said her clients range from sole proprietors to a firm with 22 employees. Client firms are geographically dispersed from California to Rhode Island.
"My best clients are paying me between $1,200 and $1,500 a month, and for those clients we are doing a lot of work, from billing to paying bills, payroll, all their reconciling — anything in terms of bookkeeping that they need," she said.
Ms. Soulsby estimated that she can cut some adviser's accounting costs each month by about 20%, depending on the level of services.
Certified financial planner Robert Klosterman, president and chief executive of White Oaks Wealth Advisors Inc. of Minneapolis and Sarasota, Fla., said his fee-only firm has seen tangible results from its move toward outsourcing.
"Two months ago we decommissioned our servers and are accessing many of our services via an Internet connection and have little in the way of needs for infrastructure or IT management," said Mr. Klosterman, whose firm manages $270 million in assets.
He added that his firm has outsourced its website, statement preparation, performance reporting, customer resource management, document storage and data integration as well.
"Having experienced 18 months of outsourcing these functions, we have found it cost-effective and are realizing the benefits of not having to deal with the management of these issues internally. We are able to focus on our intellectual capital more clearly and see no reason to turn back," Mr. Klosterman said.
Aside from difficulty in finding outsourcing options, not all advisers believe that turning to outsiders for certain functions is the right move or necessarily a trend that should be embraced.
"We made a conscious decision not to outsource," Howard S. Haber wrote in an e-mail.
"Industry publications scream about the benefits, while conspicuously absent are the costs. We have no interest in relinquishing control of our brand simply to save a few pennies. We do like the ability [to outsource] for customization and ad hoc projects. We do not wish to contribute to the further commoditization of the wealth management industry," wrote Mr. Haber, a certified financial planner and president of Apollo Wealth Management Ltd., a fee-only financial planning and investment management firm in Lansdale, Pa.
E-mail Davis D. Janowski at djanowski@investmentnews.com.
