Advisors face an increasing number of options to address the challenges of building and managing a successful advisory business. Searching for the right back-office solution, business development system, technology platform and investment alternatives is more than a full-time job.

To grow revenue, advisory firms must either select an outsourcing solution or hire staff—including administrative, technical and management positions—to support their growth. In addition, the expense of attracting and retaining key employees makes it difficult for many advisers to manage their businesses effectively, much less profitably. Moreover, these higher general operating costs and pressures to reduce fees have also reduced margins.

That means what started out as a client-centered business often results in a business with great administrative complexity. To combat that problem, advisers are outsourcing business-related functions to run more-effective practices and to increase the time spent cultivating long-term client relationships.

Defining the Solution
Effective, sustainable outsourcing focuses on what the advisor and team members do best and where they provide unique value and experience, and then delegates the remaining tasks to an outsourcing partner. This involves determining the desired combination of outsourced and in-house services, and identifying the specific functions that are worth doing in-house from both a time and cost perspective.

Questions to Ask When Determining What to Outsource

• How much time is spent on revenue-generating efforts compared with operations and administrative functions?
• How does this compare with firms that allocate a significant portion of their time to client-focused activities?
• How much time is spent on higher-dollar-value tasks versus lower-dollar-value tasks? Could hiring more staff achieve similar costs and results?
• Could adopting an outside technology platform make the firm more efficient?
• How does the time spent on activities such as oversight and training affect growth?