Offshoring: silver bullet or poisoned chalice?


January 13, 2017


The financial services industry has undergone significant change over recent years and there is no sign the pace will slow in the future. Three trends will continue to dominate: increasing regulation, digitisation advances and heightened levels of consumerism.

Over the past three years, we have seen the introduction of the Future of Financial Advice reforms, superannuation reforms, the new Life Insurance Framework and professional standards for advisers, to name a few.

These reforms, together with a number of high-profile advice failures, have led to increased margin squeeze for advice practices and financial services firms. While this ultimately will lead to greater professional recognition and improved consumer trust, the costs have been high and will continue to be.

The question now is how to reduce the cost of product delivery and advice provision. Technology is often looked to in order to cut costs, as are outsourcing and offshore processing. The offshore solution is sometimes seen as a silver bullet, but answers are rarely that simple. At the same time, offshoring’s many pitfalls can make it seem like a poisoned chalice as well. So which is the case?

The silver bullet 

There are many benefits to offshore processing. Generally, larger organisations have been the ones capable of accessing them. They have the resources to set up their own processing centres in countries with lower costs for labour and accommodation. In more recent times, there have been some organisations capable of bringing the economies of scale and reduced costs attributable to offshore processing to small- to medium-sized enterprises. However, most financial planning practices still cannot afford to set up their own offshore processing, as they do not have the scale. It is costly to set up in terms of time and money and smaller businesses would seldom bank any savings.

There are, however, alternatives for smaller players – professional contracted offshoring and desk leasing. Professional contracted offshoring provides a customised back-office solution for individual financial planning practices with accountability and measured service levels. Desk leasing is the provision of contract personnel while training, quality and service levels remain the responsibility of the financial planning practice.

The potential benefits of offshore processing are many:

  • Reduced cost of employment and office accommodation of up to 40 per cent after an initial implementation period.
  • Reduced staff management responsibilities, (although this is less so with desk leasing).
  • Shifting fixed costs to variable costs. Incurring costs for processes only when client demands require them provides a business far greater flexibility in managing operating costs.
  • Increased staff morale as Australian-based employees undertake more rewarding work. Completing all the requirements of an advice process can often absorb too much paraplanning or advisory staff time, especially in completing basic administrative client setup tasks such as product research. Using skilled administrators offshore can get tasks completed far more reliably at lower cost, with quicker turnaround times.
  • The ability to free up capital to spend on technology, marketing or advisory staff.
  • The ability to tailor what is outsourced, from simple administrative tasks to paraplanning.
  • Shifting client-facing time, from the traditional 80 per cent administration, 20 per cent client to 20 per cent administration, 80 per cent client. Offshoring a full client advisory process for basic statements of advice can free up a minimum of four hours that would otherwise have been spent on non-client-facing processes.

The poisoned chalice

While the benefits of offshore processing are many, there are myriad hurdles to overcome as well. Any decision to move part of a financial planning business offshore requires careful consideration and diligent execution. The road is littered with the ruins of poor decisions and even worse execution. Those who think they can do this on their own soon realise the difficulty of operating in a different country, dealing with different languages and navigating different cultures.

Here are 10 things to remember for success:

  • Be aware of the additional responsibility and variability of standards in desk leasing.
  • Be clear about what you want to outsource and why.
  • Put it on rails and keep your requirements simple.
  • Take time to navigate language and cultural differences.
  • Embrace offshore teams as part of your own.
  • If paraplanning is outsourced, ensure that any training lost is supplemented for trainee advisers.
  • Ensure your Australian team knows why you are considering offshoring and that their jobs are not necessarily at risk.
  • Bring your team into the decision-making and make someone accountable for making it work.
  • Ensure your policies, procedures and workflows are well documented.
  • Seek out a quality operator and do your due diligence.

To do or not to do

So what’s the verdict? Is offshoring the ultimate solution for reduced costs and increased efficiency or a fraught proposition?

The answer will vary. There are many initiatives that can be considered and offshore processing is certainly one of them. The combination of technology and offshoring can provide tremendous cost benefits. But each practice and each practitioner must make their own value judgements as to the right solution for them.

One thing for certain is that we must ask ourselves, every day: “How can we do this better?”


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