- Outsourcing helps advisors manage complexity and build scale
- Clients, administrative tasks, including office management and compliance-related work take up most their time
- One method of outsourcing investment management is using models
According to new research from global research and consulting firm Cerulli Associates, advisors spend less than 20% of their time making investment decisions.
"While investing is a key component of any financial plan, advisors spend more time tending to client-related activities such as acquiring new clients and meeting with current clients," comments Emily Sweet, senior analyst at Cerulli. "They allocate the remainder of their time to administrative tasks, including office management and compliance-related work."
Framing their role as relationship-focused could be difficult for many advisors because their value proposition has historically been investment-centric," Sweet explains. "Our data shows that after tending to important client needs, time available to manage investments is limited. Outsourcing elements of investment management can enhance efficiency."
"With so many outsourced resources available, and given the regulatory environment, it is time for advisors to consider how investment management fits into their day-to-day job description," Sweet explains. "One method of outsourcing investment management is using models. Whether home office, proprietary, or third party, models serve as solid starting points for client portfolios. Models paired with shorter-term, tactical strategies help advisors set a baseline for client portfolios and lessen the time they spend making investment decisions."
"Fewer investment decisions frees up advisors' time, allowing them to focus more on the broad scope of their client relationships," Sweet adds. Cerulli suggests that advisors view models and other outsourced resources not as a conflict to their value proposition, but as a complement to their investment process. Creating a standard starting point for investing client portfolios can help advisors scale their efforts while allowing room to tailor the end portfolio to suit individual clients' needs.
These findings and more are from the 4Q 2016 issue of The Cerulli Edge - Advisor Edition, which examines the benefit of outsourcing and how asset managers are revamping distribution.