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A Decade of Research on Advisor Efficiencies

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FlexShares and Northern Trust Asset Management is sharing insights to help advisors adapt to increasing competition in providing financial planning while managing the rising pressures on their bottom-line. Ten years ago, we committed to researching how advisors were creating efficiencies in their businesses. We sought to understand if and what advisors were outsourcing to free up time. Specifically, we dove deep into the topic of utilizing external investment managers for client accounts. The 2020 survey report, The Race to Scalability 2020: Current Insights from a Decade of Advisor Research on Investment Management Trends, is our latest and sixth biennial project in this knowledge area.

We surveyed more than 500 respondents in the advising profession, including RIAs (33%), independent broker/dealers (35%), hybrid/dually registered RIAs (13%), regional broker/dealers (8%), Insurance broker/dealers (6%). The size of assets under management across the respondent pool ranged from under $50 million (27%) to over $3B (13%). The resulting data offered a deep dive into the practical use of external investment managers and related tools along with the benefits advisors realize from using them. It also delved into how those that keep the investment function in-house are finding efficiencies in their businesses.

Key Takeaways

  • Advisors want more time with clients
  • There are multiple paths to efficient scalability
  • Understanding where you add the most value is key

Not enough time to do it all

Results indicate that advisors across the industry are seeking efficiencies to scale their businesses and to spend more time with clients. For the 60% that maintain the investment function in-house, they are increasingly outsourcing functions like investment product analysis (66%), information technology (60%) and Marketing (39%) to free up time. However, attitudes of these advisors on using external investment help appear to be evolving. The percentage of non-outsourcing respondents saying their opinion won’t change has dropped dramatically – to 30%, down from 52% in 2010.  

For those that use external investment managers, they report that reaping benefits such as freeing more time for clients (54%), providing a consistent investment process (51%) and having more time for business development (49%). Of those that outsource investment management, 71% of respondents report that the decision has increased revenue. On average, the estimated increase across the respondent pool is 31.6%.

      We asked advisors about how they are preparing to emerge from the COVID-19 era and target new clients.

Some other ways advisors are building efficiencies
We also engaged respondents in forward-looking conversations. A newer part of this 10-year discussion included an examination of the rise of digital advice platforms and how advisors are implementing them within their practices. We collected information on how model portfolios and were impacting firms. And we asked advisors about how they are preparing to emerge from the COVID-19 era and target new clients.

While we realize that looking outside isn’t always the answer, we remain committed to sharing what we learned in hopes of supporting advisors in their efforts to grow. What we do know is that advisors need to understand where they add value and focus intently on those functions. We invite you to check out our white paper, The Race to Scalability 2020: Insights from a decade of advisor research. It provides in-depth coverage of our survey results to help you understand how peer firms are strategizing to stay on the competitive side of a rapidly transforming industry. Also, please follow our blog series to get more snapshots and insights from our research.


Created in conjunction with Tasha Williams of TTW Consulting

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