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Investment management outsourcing delivers greater client-service impact

Outsourcing investor management helps advisers to deliver a stronger, more holistic service

Sep 12, 2019 @ 3:27 pm

By Matt Matrisian

In today's ever-evolving marketplace, financial advisers' businesses are growth and scale challenged. They face a fine balancing act as they look to engage new clients, while continuing to support and manage existing investor accounts — without significant additional resources and staff.

In concert with this challenge, clients are increasingly demanding breadth and depth of services, looking for digital technologies and goals-based approaches as part of their advising experience. As financial advisers are pushed to tailor solutions for individual client needs and time becomes an increasingly precious commodity, it's crucial that advisers make deliberate decisions about how best to spend their time.

Outsourcing is one solution that advisers can leverage in order to carve out more time with their clients and help them deliver a stronger, more holistic service. A recent study reveals that 86% of advisers who outsource investment management agree that it has made them more successful. Despite this, little is known about the tangible benefits of outsourcing, including enhanced business performance and stronger adviser-investor relationships.

Better business performance

The pressures on financial advisers are changing and growing — increasingly, investors are seeking individualized and transparent goals-based advice. As baby boomers continue to retire, there will also likely be higher demand for advisers. Delivering a superior investment management experience is one way advisers can attract new clients and address rising demand.

Outsourcing investment management gives advisers access to a broad range of investment products, portfolio management oversight, and sound due diligence processes, better positioning advisers to provide added value to their clients. In turn, this can contribute to stronger business performance.

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Study results show that as advisers outsourced more, they experienced a growth in total assets and personal income, while also experiencing lower operating expenses. Further, as businesses become more profitable and margins increase, advisers can experience a range of personal benefits, such as income growth and reduced stress levels.

Greater outcomes

Study results show that the more financial advisers outsource their investment management, the greater the benefits. Those who only tangentially embrace outsourcing often do not experience the full potential of the value it can provide in terms of scale and efficiency.

Many in fact struggle with trying to self-manage the greater complexities that come with disparate solutions.

A study looking at the value of outsourcing categorized advisers into different groups based on the percentage of their business that they outsource. Across all key performance indicators, including operating costs, mean increase in total assets, business growth, and personal income, the results show that advisers who outsource more of their business experience greater outcomes, with the most significant being those who outsourced 90 -100% of assets under management.

Holistically curated platform

As investors are increasingly demanding personalized solutions tailored to their individual financial goals, outsourcing platforms need to be able to provide holistic solutions focused on addressing specific client needs. Working with a firm that has a curated platform, rather than a supermarket of solutions, has been shown to provide greater benefits to client deliverables and business impact, as well as advisers' personal lives.

By enabling advisers to build products and solutions that serve their clients' individual needs, holistically curated platforms have been shown to deliver advisers the greatest returns.

Financial advisers today face mounting pressures industrywide. As such, it's crucial they are intentional about where they're spending their time. When considering the decision to outsource, advisers should focus on how it will enable them to scale their business and dedicate more time to client-facing activities.

By offloading work from advisers and providing tailored solutions to meet investors' needs, investment management outsourcing can allow advisers to be more impactful in their work and their clients' lives.

Matt Matrisian is senior vice president of strategic initiatives at AssetMark.

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