Outsourced investment management a plus for advisors

Survey finds a majority experience better client relationships, improvement in solutions delivered, and AUM growth

Outsourced investment management a plus for advisors

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.


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