Dealer Back Office Services’ Harry Kontopos, who manages a business specialising in relieving the back-office burden of planning businesses, says many dealer groups who spend their time and money on back-office tasks, especially in the current depressed market, are losing out.
“Some dealer groups spend a lot of time in these areas, which may not be productive or efficient, instead of going out there to build relationships with their clients. They aren’t focusing on the main game,” Kontopos says.
He says a lot of dealers get bogged down in the back-office, spending up to 80 per cent of their time on the “nitty gritty” and only a small amount of time on their core business.
Sealcorp senior technical manager Terri Ho says there are arguments for and against outsourcing, but agrees that outsourcing functions, such as paraplanning, may enable more time for clients.
She says that an average financial plan takes five hours to write, which is five more hours that could be spent on the core business of building and maintaining client relationships.
Outsourcing may also be more cost-effective than paying for an in-house paraplanner, she says, particularly if there are a lot of financial plans to be written.
She gives an example of the fixed cost of a paraplanner’s salary of $40,000 on one hand, and $50,000 on the other. The $10,000 extra in salary makes a difference in deciding on whether to source in or outsource the paraplanning function, depending on the number of plans that are required per month.
However, Ho says there are valid reasons to source in the paraplanning function, including providing client service from the beginning to the end of the process, producing personally tailored financial plans, possible cost-effectiveness in certain situations, a close fit with a business model, and for succession planning purposes.
Vanessa Hall, director ofThompson Hall, which focuses on risk management and compliance support for businesses, says that a key reason to outsource is the experience of the outsourcing team.
Hall gives the example of her own team, which is made up of compliance professionals who have all had experience in the regulation area. It is their full time job to keep up-to-date with compliance issues.
“Planning businesses just don’t have the time to do that, as they are focused on their own business,” she says.
Hall also says that when people try to go in-house, they often don’t know where to go for information and suffer from overload, without knowing exactly what the information means for their individual business.
Kontopos agrees the skill of the outsourced team is an attraction, giving the example of some of his own paraplanners, who he says are highly skilled Certified Financial Planners. He also says outsourcing is more suited to smaller boutique planning groups.
At the smaller end of town, businesses typically can’t afford to employ specialist employees themselves, in areas such as paraplanning or compliance, as they need these resources for revenue generation and business growth.
Small practices struggle with compliance at present because of the introduction of the Financial Services Reform Act. Kontopos argues that it is hard for small practices to retain compliance staff, and the expensive business of continually replacing them can be avoided by outsourcing.
But if outsourcing is the way to go, how should planning businesses go about it?
Kontopos says it is a matter of revisiting the goals and objectives of the business, as well as its strengths and weaknesses, to determine if there is too much time being spent on back-office tasks. The business should also explore the type of offering which best suits its needs.
The next step is to choose a provider, and here Kontopos says the best thing to look for is a good track record, as well as a broad offering that will allow planning groups to have their needs met as their outsourcing needs grow.
The selection of a one -stop-shop means a consistency of service, an intimate knowledge of the company being dealt with, efficiency and cost savings.
“We have an offering that is quite diverse,” Kontopos says, “and if they take services from us, we are able to bundle them at a cost that is cheaper than buying each individually from different providers.”
Hall says both boutique and one-stop-shop outsourcing providers have their advantages, but Thompson Hall has chosen to adopt the boutique approach.
“There are providers that try to cover the whole gamut of services, but potentially lose depth in some areas. They might be particularly good in some but are scratching the surface in others," she says.
Kontopos says that as part of the ongoing service, advisers should look for proactivity of communication, a strong relationship where they can provide honest feedback, as well as being responded to within agreed timeframes.
In the end, Kontopos and Hall agree that outsourcing the back-office is about peace of mind, knowing that the focus is back on the core business and experienced teams are handling the back-office functions.