The scope of a financial advisor’s job is mind-boggling; from their core competencies of investment management and financial planning to the ancillary areas of marketing, technology, compliance and human resources. Essentially, they are small business owners with an endless list of responsibilities. Add to that their clients, who often have unbelievably high expectations and ever-evolving needs. It is a wonder how advisors get it all done, though many would probably admit, they don’t.
It is almost impossible to accomplish all of the daily tasks alone, and do them well. But advisors are forced to do so because clients, and regulators, expect this of them. So how can an advisor stay on top of everything and maintain a healthy business, not to mention a healthy balance in their personal lives?
Most hire staff members to spread the responsibility. This makes sense in certain areas which require limited skills and experience. For example, hiring a receptionist is certainly simpler and less expensive than hiring an HR manager or an analyst. For more specialized disciplines, such as marketing or compliance, advisors can determine where they lack proficiency, and find cost-effective solutions for outsourcing the work.
However, for areas of their practice that require highest-level expertise and client interaction, we encourage advisors to embrace insourcing, as opposed to outsourcing. Outsourcing has a stigma attached to it; the buck is being passed to someone else, instead of the advisor maintaining the responsibility themselves. Many people look at this in a negative light. Outsourcing is seen as just “getting things off your plate”. It also is not appropriate when client engagement is required, as the advisor should always be the main point of contact for the client.
Insourcing is the key for advisors to offload the work, but maintain control and responsibility over the deliverables to the client. Insourcing is traditionally defined as bringing in a specialist to train existing personnel to perform a task that would have been otherwise outsourced. But what if you took that one step further and just brought in a specialist to handle it all.
Consider the complementary professionals that advisors often work with:
- Trust & Estate Attorneys
- Insurance Specialists
Hiring someone with the appropriate experience and knowledge to provide these resources internally can be costly. Meanwhile, farming out these services distances the advisor from the client interaction, and opens up potential problems, especially if something goes wrong. Instead, advisors can bring in professionals, almost like a board of advisors, to utilize as a resource and to engage with clients as needed.
Advisors should look at themselves as the client’s Chief Operating Officer; someone who oversees the both the client’s plan, and the professionals who manage each “department”. The advisor is ultimately responsible for managing the account and reporting back to the CEO, in this case, the client. As the COO, everything falls on the advisor’s plate, but they shouldn't be the one doing the work in each department. Employ and oversee a “department manager” for each of the areas that you are not an expert in.
As a small business owner, it is important to assess your business’ hierarchy. Are you sitting at the top of everything? Or are you managing the work yourself? Even worse, is your staff being delegated everything in a stream-of-consciousness each day. Staff members should not be expected to have the expertise of professionals, who have specialized education, licensing and experience. It is not fair to the staff member, nor the client, who expects the highest level of service and advice.
What Should Insourcing Look Like?
How do you offload the work, but not the responsibility?
First, establish an agreement with the professional you’ve chosen. This should include the following five items:
- Acting as a knowledge resource to you and your team on an ongoing basis for questions, review of client information (trusts, tax returns, insurance policies).
- Providing recommendations for client plans and working with you, the advisor, to determine the best strategies.
- Making themselves available for client calls or meetings as needed.
- Implementing any strategies once you and the client agree to move forward.
- Servicing the client at a level that mirrors your own.
Second, agree upon a fee structure that will be mutually beneficial and fair.
Third, make your clients aware of the relationship and the resources you have made available to them.
Fourth, leverage the relationship. For insourcing to succeed, it requires the advisor to be proactive in identifying clients that need the respective resources. This makes the advisor more valuable to the client, and the professional.
Fifth, identify how the professional relationship might benefit you. Will they help you find new clients? Will they help identify opportunities within your client base? Will they provide ongoing education for you and your staff?
Once an agreement is in place and the steps above are addressed, the relationship should be run on a turn-key basis.
- When a client needs specialized services, you will send the information to your insourced partner.
- A call should take place to discuss the client’s details, and brainstorm ideas. The partner should then take the information and complete any research and/or analysis required, and prepare recommendations.
- They will submit those recommendations to you, and then schedule another call to discuss and finalize them.
- Either the advisor or the partner will present the agreed-upon recommendations to the client. This eliminates surprises on both sides.
- If there is an action to take, and the client agrees, the insourced partner will take over and keep the advisor in the loop until all items are completed.
- The partner will then maintain all follow-up and repeat-services in the future, while keeping the advisor up to date.
As with any relationship, evaluate your insourced solutions on an ongoing basis — every 6–12 months, to make sure they are still reducing your own workload, profitable, and most importantly, beneficial to your clients.
Kellan Goldberg is Managing Director for Insurance Decisions www.in4fa.com, providing insurance resources for Registered Investment and Independent Advisors.