Advice practices that outsource their back-office tasks are often missing out on the practice efficiencies they are looking for by not putting the right system in place to take advantage of it, says Elixir Consulting chief executive Sue Viskovic.

While many advisers have embraced domestic or overseas service provision for paraplanning, data entry and other non-client facing roles, Viskovic says this doesn’t necessarily have a positive effect on their bottom line.

“Outsourcing can be a great option for a business but not always, and there’s not always a direct result in profitability,” Viskovic says. “It’s not just anecdotal, we actually ran the numbers.”

The consultant says Elixir is due to release a report in the next few weeks detailing some of the data behind financial advice business processes and resources, including outsourcing.

What they found is that the numbers don’t categorically chart outsourcing as a net cost saving.

“Those firms with in-house paraplanners had an EBIT of 24 per cent, while it was 21 per cent for those who outsourced paraplanning,’ she reveals, adding that the team was “quite surprised” there wasn’t a direct link between outsourcing and a better bottom line.

Viskovic says there are plenty of variables that go into the success rate of outsourcing, but the one that stands out is a willingness to set the outsourcing channel up in the right way.

“Just outsourcing won’t make you better if your systems and processes aren’t there in the first place,” she explains. “So many times I’ve heard advisers say ‘it just takes me longer to create instructions for them so I end up just doing it myself’… that tells me they’re doing it wrong.”

It takes more time initially, Viskovic explains, but the extra work eventually pays for itself.

Patrick Canion, the ex-CEO of ipac Western Australia who now runs his own consulting firm, believes setting up these processes is “no easy task”.

“It takes time,” he told Professional Planner. “I don’t want to make it sound like a walk in the park.”

Looking critically

Setting up an outsourcing route has a lot in common with traditional human resources, Viskovic reckons.

“It’s just like internal staff; if you don’t train them properly and set them up for success then you’re just not going to get any gains from it,” she says. “It’s not the outsourcing, it’s the fact that advisers aren’t systemising their use often enough.”

Viskovic will be speaking at the Professional Planner Best Practice Forum Digital on August 4 about the importance of utilising the right processes and systems in advice businesses. It’s a topic she’s passionate about.

“It’s about not relying on people doing things intuitively but having an efficient, systemised process in place so advisers can actually keep their mind on their clients,’ she says.

When principals don’t sit down and think critically about their business, she says, they get mired in the habit of doing things the way they’ve always been done. “When they look critically it changes everything,” she adds.

“A perfect example is the adviser who does the modelling because they think no one else they can do it, but really they could have a staff member doing 90 per cent of the work and they do the last 10 per cent,’ she explains. “So the $100 an hour staff member is doing most of the work rather than the $300 resource.”

People and processes tend to go in “different directions” when they’re unchecked, Viskovic says, and businesses tend to put band-aids over pain points instead of standing back and doing the required critical thinking about their overall system.

“It comes to a point where there are just too many band-aids,” she adds.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
One comment on “Outsourcing no automatic panacea for advisers”
  1. Avatar David Carney

    As a provider of outsourced paraplanning and admin support we have seen our fair share of processes and systems. I totally agree with Sue that adviser need to work more on systemising.

    To reduce the cost to serve and increase profitability advice firms should focus on 3 areas in the following order – 1) Optimise (how they are currently doing their work and look for ways to eliminate or refine steps in the process) 2) Automate, better use of technology to automate steps in process and finally 3) Outsource the repeatable tasks.

Leave a comment