Responses reveal a need for a more active approach to address inefficiencies and build stronger operations
While in-depth conversations, coaching, and education are all part of delivering a great client experience, technology is playing an ever-expanding role. For a financial-advice firm, that means ensuring that two facets of operations — the front office and back office — work seamlessly and efficiently.
But despite knowing its importance, advisors appear to be unhappy with their firms’ front and back office. In a new report titled Running an Advisory Business: Costs, Challenges and Opportunities, US-based turnkey asset management program (TAMP) provider FTJ FundChoice found nearly 40% of advisors who were surveyed had no involvement in their firms front and back office decisions. In addition, only 24% said they were satisfied with their firm’s front or back operations.
“It’s clear that advisors, whether at a large wirehouse or running their own practice, are keenly aware of how critical front and back office operations are to the client experience,” said Cory Kendall, executive vice president of sales for FTJ FundChoice. “But even though they understand the importance, it’s surprising to see how many advisors are bootstrapping their operations.”
Survey results showed nearly 60% of advisors maintain their back office in-house; among the 35% who use a mix of in-house and outside vendors, most used more than one provider. These practices, Kendall argued, result in inefficiencies and decrease advisor productivity — problems that could be addressed by outsourcing operations.
It would make sense to think that firms use internal staff or settle for cobbled-together solutions in order to minimize costs. But when the survey asked advisors to rank their considerations when planning their back office, cost was dead last. In fact, they considered meeting compliance requirements (78%), efficiency (65%), and ease of use (61%) as more important issues.
To bolster their back office, the report also suggested that advisors consider automating tasks to free up time for client meetings. Advisors should also find detail-oriented, accessible, and client-focused talent to build, maintain, and manage the back office.
Moving to the front office, more than 25% of advisors said they were only somewhat or not at all satisfied with their front-office operations, which consist of customer relationship management (CRM) systems, sales database software, key marketing materials including the firm’s website, and advisor sales and support materials. While most advisors reportedly spend less than US$10,000 for each of those components, some report higher price tags: nearly 30% said they spend over US$10,000 a year on advisor sales and support, and 21% said they pay more than $10,000 yeary on CRM software.
“Figuring out where to spend resources depends in large part on the customer experience the advisor wants to deliver,” Kendall said.
To build a stronger front office, he recommended that advisors solicit outside opinions on the practice’s approach to serving clients. They should also set up an advisory board that makes use of top clients’ feedback, improve efforts at staff retention — which would keep institutional knowledge in-house — and not let compliance concerns unnecessarily hinder their marketing or outreach efforts.