Patrick Canion, the CEO of ipac Western Australia, outsourced paraplanning to an Australian service for a number of years.
But last year he decided to outsource back office administration and paraplanning to an offshore service provider, Intiger, which has offices in India and the Philippines.
His decision is part of a growing trend among both small and big adviser groups, including ipac, Fortnum, Countplus and AMP, to outsource and offshore paraplanning to reduce costs and free advisers for client work.
Canion says that financial planning firms are all facing additional compliance and documentation requirements.
“Clients don’t want to pay for it,” he says.
“You’ve got to find ways of making it work out some way.”
Ipac Western Australia spent six months performing due diligence on the Intiger service and started by giving them a simple administration process through Xplan.
No walk in the park
Canion says international outsourcing requires significant work. Ipac ramped up its documentation of work processes, which delivered additional efficiencies.
“It takes time,” he says.
“I don’t want to make it sound like a walk in the park.”
Part of the due diligence was covering ethical aspects of outsourcing.
“I didn’t want to be involved in supporting a sweatshop somewhere,” Canion says.
He is comforted by the fact the staff in India and Manila are some of the best paid people in their community.
“That was really important for me personally,” he says.
The offshore paraplanners perform all traditional paraplanning, including meeting preparation, updating account balances, policy analysis and data entry into Xplan. The only thing they don’t do is client contact or investment placement.
“Anything sensitive like that we make sure we have our hands all over it,” Canion says.
Ipac has dedicated people working for them in India and the Philippines, and they have built a relationship with them.
“It’s not like an anonymous service,” he says.
Not every paraplanner is a fan of the offshore model. Nick Topham, the founder of Australia-based outsourced paraplanning service provider, Clique Paraplanning, specialises in providing paraplanning work for the risk sector.
He says that regulatory changes are driving a quest for efficiencies.
“Because of the changes to commissions coming in July, all risk advisers are going to take a fairly large pay cut,” he says.
“They have to look for efficiencies. They can’t afford to have a full-time person in their office who might not have a full schedule of work all the time.”
Topham says risk advice is typically ‘one off’ work and outsourcing allows participants to use contractors when they have a high level of work. He says a full-time paraplanner might cost $70,000 a year, or $350 a day. When they’re creating an SoA “you have lost them for a full day”.
Attractive career for young people
Topham specialises in SoA production, and turns around a risk SoA in two business days.
“That’s pretty unheard of for the rest of the market,” he says, adding that an in-house paraplanner wouldn’t turn around SoAs that quickly.
He says paraplanning remains an attractive career option, particularly for young people looking to enter the profession, but also because it is flexible and virtual, which allows paraplanners to live anywhere. He has staff in Sydney and Melbourne and he lives in NSW’s Hunter Valley himself.
Topham only employs Australians and he isn’t threatened by offshore operators.
“The quality of international outsourced work isn’t up to standard as far as I’m concerned,” he says.
“I don’t really consider them to be competitors as such. When an adviser gets work back from us they can be presented to clients. When they outsource offshore they have to do work on it.”
Larger institutional dealer groups are also incorporating local and offshore outsourcing of paraplanners.
An AMP spokesman says AMP has an in-house paraplanning team to support advisers in providing high quality service to their clients.
“To ensure service continuity in times of peak demand, AMP has formal partnerships in place with outsourced providers to assist with basic tasks as required,” he says.
“AMP-aligned advisers also have the option of selecting a third-party paraplanning provider under guidelines set by AMP.”
He says that AMP’s in-house paraplanners are based in Australia.
“Some third party providers selected by advisers may be based offshore,” he says.
Advisers can focus on what they do best
Elva Pica, advice implementation manager, at Fortnum, says outsourcing paraplanners enables advisers to focus on what they do best which is providing strategic advice and supporting their clients to achieve their financial objectives. “It also releases them to focus on generating new business and clients. It [also] reduces costs because advisers don’t need to employ an additional staff member. Cost savings can then be directed towards generating revenue as opposed to operational expenses. “
Fortnum’s preferred panel of outsourced paraplanners are trained on Fortnum’s Xplan, Professional Advice Framework and policies to ensure advice documents meet the firm’s compliance regulations, which eliminates the need for advisers to provide training in these areas.
Fortnum outsources to both individual paraplanning operators and groups.
“Fortnum’s preferred panel includes individuals and groups who are highly reputable with strong industry experience,” Pica says.
“They predominately service Fortnum practices.”
Fortnum’s providers are located locally and overseas, which Pica says “provides Fortnum’s practices with a lower cost option to manage cash flow, whilst maintaining the same level of quality in advice production.”
Fortnum has arrangements in place with two outsourced providers located in the Philippines.
“The services provided by the outsourced providers are monitored and managed, both locally in the Philippines and also in Australia to ensure quality control and adherence to Australian laws and regulations,” she says.
Ipac’s Canion says offshore outsourcing has delivered significant business results already.
“It’s allowed our team members to be more client focussed,” Canion says, which is more fulfilling for them because they’re performing work that “touches the client”.
Canion, who has since been asked to join the board of Intiger, has spent the savings on hiring another new business development adviser, and on marketing the firm’s services to win more new clients. He also restructured the office and replaced adviser assistants with client service managers. The move has also reduced costs.
“We only pay for the time they’re working for us,” he says.
“That shifts fixed costs into a variable cost base.”