Post edited 1:59 pm – August 3, 2011 by Steven Lamb

• Have your say: What have you outsourced?

Once a pariah relegated to punch-lines and closed-door secrecy, outsourcing is good business strategy in today’s advisor market, experts say.

Advisors excel at what they do, yet many find challenges in the other day-to-day elements of the business that lie outside their comfort zone, like marketing, trading, asset allocation, data management, specialized investment knowledge or other responsibilities. Even for multi-talented advisors who feel they can juggle certain outside components of the business, outsourcing can provide a strong sense of focus and efficiently streamline your efforts.

Whether it’s partnering with a good tax lawyer, a disciplined money manager or a talented marketing consultant, paying for the expertise of specialists outside of your skill set not only eases your own workload but also makes for the best use of your time.

At the small, family-owned boutique wealth management firm Northwood Family Office in Toronto, outsourcing makes a great deal of sense because it enables the firm to stick to what it does best: big-picture wealth management that works on all levels for their clients. For Northwood president and CEO Tom McCullough a metaphor from the construction industry is apt.

“We’re like a general contractor—we’ve done the plumbing, the electrical and the drywall before, but now we use very carefully selected outside professionals to do the individual jobs instead. We’re an expert generalist and the other firms we work with are real specialists,” McCullough said.

John Amonson, president of Unbiased Wealth Management in Alberta, says his need for a new marketing strategy and a customer relationship management (CRM) software solution created complexities that were outside of his expertise and made outsourcing a natural choice.

Outsourcing his marketing wasn’t cheap—Amonson spent upwards of $75,000 just on consulting fees to determine content accuracy alone—but it was a step that had to be taken and he has been extremely pleased with the results.

“I had spent quite a while with a traditional marketing approach and it simply wasn’t effective. I decided to go directly to consumers and that required a state-of-the-art website, which is something I couldn’t do myself. In the first week of the new setup, a client with $20 million in assets called—it worked,” Amonson said.

Now Amonson pays between $500 and $1,000 per month for outside marketing help and it frees him up from having to take marketing calls himself.

According to Chris Reynolds, president of Investment Planning Counsel, the days of believing you had to do everything yourself should be relegated to the dustbin of history. “Advisors should spend their time dealing with existing clients, gaining new clients and creating a really great client experience because that’s where their most productive time is spent. The rest should be outsourced. It’s not that you can’t do it; it’s just, should you? It comes down to prioritization,” he said.

You’ll know when you need to start outsourcing, Reynolds says. It will be when you reach your “ceiling of complexity,” the point when your day becomes so full of upkeep that you don’t have any time to spend on things which are actually important.

“If you spend your whole day being reactionary, doing paperwork, dealing with logistics, instead of meeting with new clients and taking care of existing ones then it’s time to start outsourcing those parts of your business preventing you from doing what you should be doing to succeed,” Reynolds said.

Jim Burton, chairman and CEO of Calgary-based PPI, which supports independent advisors, says the purpose of outsourcing is to focus on your strengths and partner with people who are just as good as you in their chosen specialty.

“In the new world you have to recognize that every one of us should become a specialist in something and you can’t be a specialist in everything. It does open your door to say, ‘I’m really good at one thing, let’s find someone who’s good at their thing,’ ” Burton said.

As firms get larger, it’s only natural to want to create in-house departments to deal with things outside of your company’s core competencies. Burton suggests resisting that urge. It’s not that you won’t be able to hire the highest calibre people in their field, it’s that doing so is likely to be very expensive and a very inefficient use of your time and money, especially when entire firms often exist solely to master the art of attracting and outsourcing high-quality specialists for a fraction of the hiring price.

Certainly there is a lot of precedent in many other markets for such thinking, so Reynolds suggests advisors shouldn’t deny themselves the competitive advantage that comes with smart outsourcing.

“Even Nike doesn’t really do anything that isn’t their core competency, which is marketing. Everything else is outsourced, even their shoes,” he said.

• Have your say: What have you outsourced?

Raf Brusilow is a Toronto-based freelance journalist.

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