As the demand for advisors to become more holistic increases, the outsourcing of key advisory functions is growing in importance. Clients expect more from their advisors than ever before and the role of personal or family ‘CFO’ is a position to which many savvy advisors are gravitating.
This is where outsourcing fundamental functions, like portfolio management, becomes so crucial because no matter how conscientious or efficient an advisor is, there simply isn’t the time to service every client need to the highest level. Real CFOs don’t specialize in everything; they are forced to learn a very important skill in order to be successful: delegation.
“Even though they are symbiotic and go hand-in hand, financial planning and portfolio management are distinct activities and it is difficult to specialize in both,” says Tyler Mordy, President & CIO at Forstrong Global. “An advisor can’t be talking to clients all day and managing money - there is just too much complex work involved.”
In the aftermath of the financial crisis, many advisors were forced to re-evaluate their value proposition as sentiment around the whole industry plummeted. It was during this era that the importance of outsourcing investment management to specialist firms became a selling point among advisors who realized that client demand was shifting.
Clients want specialists working on their behalf in every corner of their financial picture, whether that’s tax, estate planning, or business consultancy. The advisor who is able to be proactive and invite these specialists to the table is better positioned to ‘own’ the process and become the conduit between which all information flows and all decisions are made.
Outsourcing the money management aspect also gives clients peace of mind. They know that their advisor is scouring the country in order to find the best investment manager to meet their specific financial goals. It’s a process that enables the roles and responsibilities of each party to be clearly defined and is, according to Mordy, “a much cleaner way of doing business”.
“There is a significant difference between an advisor who just picks mutual funds from the corner of the desk and an investment team that has a focus on a particular investment strategy that can be tailored according to each investors’ risk and return tolerances,” says Mordy.
“It’s a clear segmentation of roles, which enables the advisor to sit on the same side of the table as the client. Ultimately, outsourcing investment management to a portfolio manager allows advisors to demonstrate greater value by dedicating more time to managing their clients’ household balance sheets.”
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