The Advisor Turning Point

by | Oct 23, 2018 | Blog

When and How to Know if You Should Outsource Investment Management

Think way back to the beginning. When you started in this business. You were eager to do investment research, create and manage portfolios. Your primary value as a financial advisor was as an investment manager. Word spread quickly about your fresh perspective, market and investment knowledge and you were able to acquire more assets and continued to pursue growth through an incredible bull market ride. You’ve done well, you’ve grown and now have over fifty households, but money management is either no longer as enjoyable as it once was, or you no longer have the time needed to properly manage your clients’ portfolios making it harder to control. Welcome to the turning point of your practice.

The advisory practice turning point usually occurs when you have approximately 50 or more households and greater than $25M in AUM.

Traditional growth for your practice comes from two areas; acquisition or market growth. If you spend most of your time servicing existing clients and managing investment portfolios, then you likely are relying on market growth to fuel practice growth. If you spend most of your time servicing existing clients and trying to acquire new ones, then you are looking for an acquisition to fuel your practice. Either way, with 50+ households your time is now limited, leaving you wondering how to manage it all.

To help you figure out what to do next, you need to answer this question, “What do you love the most about your job? Investment management or relationship management?”

If you answered investment management, it is likely you are not aggressively pursuing new clients and may have some difficulty doing so. This may be the time to consider hiring a junior advisor or merging practices. Both options allow you to continue to focus on investment management (which you love) while a new team member with a complimentary skill set can deliver new value to your practice and actively pursue new client acquisition.

On the other hand, if you answered relationship management, it’s time to pursue alternatives for investment management. You, your practice and clients will all benefit if you hand-off investment management to another. You’ll be happier, your clients will likely not notice the difference, and you’ll be able to spend more time face-to-face with clients while working to acquire new ones.

Here are some of the benefits of outsourcing investment management:

  • Minimal Commitment – If your clients are not satisfied with your investment management, you are at risk of losing them. However, if your clients are dissatisfied with your outsourced solution, you can replace your investment manager and keep your clients.
  • Greater Depth of Expertise – Outsourced investment management solutions are often expansive teams with greater collective experience and increased access to extensive investment research.
  • Additional Value Adds – In addition to portfolio management, rebalancing, trading, tax-law harvesting, and investment research, many also offer professional marketing materials which make communicating with clients easier.

Where you turn your practice next, depends on who you are and what you enjoy! If you are in fact at the turning point, what’s most important is that you recognize the need to do something and make a change. The quicker you realize you are in the mud, the faster you can get out!

Learn more about Financial Advocates’ outsourced investment management services and the Double Leaf Portfolio Strategies,  call Sieg Johnson at (360) 866-2345, extension 404.