Survey finds a majority experience better client relationships, improvement in solutions delivered, and AUM growth
With investment management becoming increasingly commoditized, advisors are likely considering different ways to reorient themselves toward more valuable aspects of financial planning. For the over-committed and over-stretched, that most likely means getting outside help —which could turn out to be more beneficial than they expect.
According to a new study commissioned and released by AssetMark Financial Holdings, a provider of investment and technology solutions, outsourcing investment management can lead to a host of improvements.
“Prior to this study, there had been little documented evidence of how outsourcing positively impacts financial advisors,” Natalie Wolfsen, chief solutions officer at AssetMark, said in a statement.
The study took a poll 702 financial advisors, including 560 who said they delegated part of their investment management to a third party and 142 who said they weren’t doing it at the time. Researchers also performed in-depth interviews with advisors who outsourced more than 20% of their investment management services.
Among the ones who used third parties for their investment management, 78% said they wished they had outsourced assets sooner, and 79% said they intend to increase the percentage of outsourced assets in the next three years. Nearly all (98%) said they were able to deliver better investment solutions due to outsourcing, with 84% saying it enabled greater oversight of portfolios. Overall, 87% said the benefits of outsourcing investment management met or exceeded their expectations.
Over two thirds (67%) of outsourcing respondents said they experienced higher acquisition of new clients following their decision to outsource. Around the same number said the move led to stronger client relationships (68%) and increased client retention (65%), while 48% reported an increase in client referrals.
The research also found that among those who outsourced, 77% experienced an average of 27% growth in total assets under management; 72% experienced an average increase of 26% in personal income; and 67% experienced an average reduction of 17% in operating costs.
The decision to outsource also resulted in time savings. Those who outsourced between 20% and 49% of assets reportedly saved 5.8 hours per week on average; those who delegated between 50% and 89% saved an average of 7.7 hours; and those who outsourced at least 90% noted a time benefit of 8.4 hours.
The report also indicated that advisors who outsourced felt a decrease in stress levels.
“In today’s competitive landscape, outsourcing enables advisors to increase capacity, gain scale and enhance their personal well-being — all while staying on top of a shifting regulatory landscape,” Wolfsen said.