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.”