The outsourcing piece in the advice gap equation

outsourcing paraplanning Virtual Business Partners AZ NGA financial advisers

25 March 2024
| By Jasmine Siljic |
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Australian financial advice firms are increasingly looking towards outsourcing as a tool to optimise their business, two industry professionals share.

With just over 15,600 advisers remaining in Australia alongside millions of Australians seeking advice, advisers are feeling the strain of longer working hours and potential burnout.

Speaking with Money Management, Jaimie Ramsey, founder and principal consultant at Advice Business Consulting, highlighted outsourcing as a trend she expects to flourish as more advisers look to reduce key-person dependency in their practice.

“What they’re doing is looking for efficiencies within the business so they don’t have to drive everything – so the business can drive itself. Advisers are really reassessing: How do we do things? How do we best make use of the resources we’ve already got?” she said.

“Where they do need to hire, practice principals are really looking to outsource overseas. There’s businesses like Vital Business Partners or 5 ELK that are offering fabulous services for advice practices at a much reduced cost.”

David Carney, chief executive at Vital Business Partners (VBP), also spoke with Money Management regarding the growing trend of outsourcing in the advice profession. The Australian company has operations in the Philippines and offers outsourced paraplanning services, financial planning administration, bookkeeping, accountancy and mortgage broking.

With over 1,200 Philippines-based staff, VBP services approximately 270 firms. Advice administration is one of the largest services they offer, as they have 550 financial planning assistants, similar to client service officers, as well as over 200 paraplanners.

Last year, the firm acquired specialist financial planning consulting and coaching firm Elixir Consulting. Following the deal, VBP rebranded from its previous name Virtual Business Partners to Vital Business Partners to better reflect its future direction and desire to be a vital partner in their clients’ success.

“Outsourcing, for any business looking to grow, is definitely on their radar,” Carney remarked.

Shifting perceptions

However, both the CEO and Ramsey noted the preconceived understandings some have of outsourcing, such as it being cheap labour for poor services.

“One of our challenges is trying to educate people [about outsourcing], because just like in financial planning, there’s different models and different service propositions,” Carney said.

Ramsey added: “There’s definitely been a shift that outsourcing isn’t seen as an evil anymore. It’s seen as necessary and people are getting used to it. They’ve been doing it in the accounting world for such a long time that it is becoming less scary for clients now to have their data accessed by someone in a different country.”

According to both professionals, the key purpose of implementing outsourced services into an advice business is to offload burdensome tasks and allow advisers to focus on what they’re best at doing.

Carney explained: “The reason we started in business was because I really value what good advice is, and when a good adviser is in front of a client helping them set financial goals and achieve outcomes, that’s a hugely noble pursuit.

“We’re so often caught up with all the tasks we have to do, and so how do you free people up? We want to take duties off your plate because the Australian people should be client-facing – clients are really buying an experience. If we’re able to free people up, then they can focus on those client relationships. That’s what we’re all trying to achieve.

“What we really want to do is add immense value to our clients. If you’re not considering [outsourcing], you’re probably to some degree at a disadvantage.”

The benefits of outsourcing

By accessing overseas talent at a competitive price point to complete administrative duties, advice firms can then invest further in their Australian staff onshore to build client relationships.

The CEO continued: “The biggest challenge that this industry faces is people not entering the profession. The days of being able to get advisers from banks or larger institutions and bring them in [are gone]. You now have to train them up, which takes time, energy and money. So if you can save a bit here with [outsourcing], you might be able to invest in that [onshore] person knowing that there’s an ultimate payday.”

Carney gave the example of Invest Blue, which is one of VBP’s largest clients and shareholders. The financial advisory business co-invested with AZ NGA in VBP in 2022. Under the deal, AZ NGA and Invest Blue acquired a 40 per cent interest in VBP, with the group’s management team increasing their holding to 20 per cent and VBP’s founding shareholders, Carney and David Deegan, retaining a 40 per cent stake.

The deal concluded VBP’s extensive search for an experienced long-term capital partner to help manage key-person risk and succession, and fuel the group’s growth and expansion plans.

“As a result of outsourcing, [Invest Blue] has been able to significantly grow their business. They have expanded their staff here in Australia because they’ve been able to grow and scale up due to the benefits that outsourcing enables,” he said.

Since the deal with VBP, Invest Blue merged with Ironbark Asset Management in November last year to create one of Australia’s largest diversified financial services firms. The merged entity has $64 billion in funds under management, trusteeship and advice, and more than 500 staff across 35 locations.

Diverger, which has since merged with Count Financial, was another firm which recognised the benefits of outsourced services. In 2022, Diverger partnered with Atlas Outsourcing to provide virtual administration and paraplanning services to its client network through a network of staff in the Philippines.

Fellow licensee Sequoia acquired a national paraplanning service Clique Paraplanning last year to provide outsourced paraplanning services to financial planners and AFSLs, particularly around statements of advice and ongoing documentation reviews.

As more advice practices look to offload repetitive administrative tasks, advisers will have more energy and time to focus on what they actually enjoy, Ramsey shared.

“I think that outsourcing is absolutely on the rise, and we’ll see a continued trend of people engaging with [overseas] firms to do those activities,” she said.

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