Will Outsourcing Improve Profit Margins?
Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Do you think that outsourcing is a good solution for most advisory firms? We have been tracking our expenses and can’t seem to improve our profit margins, even though our fee revenue has gone up quite a bit this year. When I look at our expenses, a lot of it goes to salaries and benefits. I know this isn’t unusual for small businesses. But are other firms avoiding these increasing costs by outsourcing? If so, what do they outsource? What are the best functions for an advisory firm to outsource?
I’m not interested in letting most of my staff go. But I am also not up for adding to staff and therefore expenses.
As a consultant who offers my time and talent to many different organizations, I am predisposed toward outsourcing! And, as a small business owner who needs to cover a lot of bases and wants to do it with as little an investment in salaries and benefits as possible, I do also look for ways to outsource functions in my own business.
So, the answer is “yes,” there are many opportunities for financial advisory firms to improve margins by outsourcing. That said, you have to be careful. You can’t outsource the oversight or the responsibility for managing the function. For example, I have seen advisory firms outsource marketing (this is a great area to consider if you are paying a part-time or full-time marketing person), but you still need to have someone inside the firm who approves things, works with the outsourced firm on strategy, and makes sure the messaging and materials are on point for your firm.