In his article, Davidson suggested that financial planning businesses could increase both their short term profitability and long term value by outsourcing such operations as regulatory compliance, investment management, human resources, business management, accounting, legal services, paraplanning, administration, IT, marketing, public relations, client research and even reception services.
I agree. What is more, I believe that even more than onshore, the international marketplace needs trusted, professional providers of these services, so that smaller firms can benefit from shared economies of scale, pooled resources, and solutions that actually deliver clearly-defined outcomes to both the firm and their underlying clients.
Why, then, doesn’t this happen? My thoughts are that there could be several reasons, but possibly include:
- The absence of a strong international regulator, which means that some principals, unfortunately, just aren’t interested in proper authorisation, TCF or long term value, but simply wish to make hay while they can.
- A general environment of mistrust, which means that many highly professional advisers work in isolation, struggling to build their businesses without a trusted partner with whom they can collaborate and leverage off of.
- Ego. While lawyers and accountants clearly realise the benefits of working in partnerships, the IFA market still has principals that prefer to muddle through all the above areas without ever mastering any.
Done well, it is obvious that outsourcing has an exponentially beneficial effect on organisations that go down this route. Increased cash flow, focus, turnover, quality, employee retention and reduced friction and attrition are all obvious benefits.
However, it clearly isn’t without its risk – particularly in the highly complex international, cross-border marketplace.
I believe that successful advisers in the future must look for partners who can address whole processes rather than just discrete functions, bring experts and specialist capabilities to the table, and then integrate all of these into the advisers business.
In selecting this partner, advisers need to identify firms that fully understand their specific marketplace and possess key competencies implicit within it – international/offshore specialism, a global/multi-currency outlook, professionalism, and a genuinely fully compliant, seamless approach.
This type of service provider can take on much of the integration and delivery that advisers or advisory firms promise their clients. Examples of this include the delivery of online functionality, reliable and efficient servicing, investment management in line with agreed mandates, regular reporting and associated marketing, selection and recruitment of advisers, access to a wider range of beneficial services such as tax, legal, banking and corporate.
Such a relationship goes further than just outsourcing non-business critical functions – we term this ‘co-sourcing’. Any effective co-sourcing does and will require a degree of trust that is unusual in international business today.
The onus, therefore, is on the chosen organisation to demonstrate the strengths so critical to trust – professionalism, integrity, competency, reliability, transparency, delivery and the unswerving devotion to the client’s best interest.