FlexShares Finds Advisors More Likely to Consider Outsourcing Due to COVID-19 - Seite 2

Alternate ways to gain efficiencies

Though most advisors continue to manage investments in-house, there are several other ways non-investment outsourcers are gaining efficiencies. The survey found 100% of advisors that kept investments in-house outsourced at least one non-investment function, and on average they outsourced 2.6 other activities.

They are increasingly relying on external help for services such as investment product analysis, up to 66% in 2020 from 57% in 2018, reflecting advisors’ desire for support in investment selection. There is also significant growth in outsourcing their marketing function, up to 39% in 2020 from 20% in 2018. Finally, new to the survey this year, 60% of advisors indicated they rely on external help for information technology services.

“Over the past 10 years, we’ve seen a clear shift in the perceived benefits of third-party outsourcing – whether that’s utilizing external investment managers or other non-investment related service providers – as advisors’ expected role continues to evolve from investment manager to holistic financial planner,” said Laura Hanichak Gregg, Director of Practice Management and Advisor Research at FlexShares. “As the investment landscape has become increasingly complex and clients demand more from their advisors, external resources of all types are helping advisors better focus their time on activities for which they add the greatest value.”

The rise of specialized strategists

To execute on outsourced investment strategies, 61% of outsourcing respondents say they turn to providers of turnkey asset management programs (TAMPs), down from the 67% in 2018, but up from 52% in 2016. Advisors are also increasingly employing ETF strategists, now used by 34% of respondents, up from 23% in 2018 and 29% in 2016. This likely reflects advisors’ demand for services that can provide direction amid the substantial rise in passive investment vehicles over the past decade.

The role of digital technology

As it assumes a greater role in advisory practices and clients’ lives, technology is shaping advisor decisions about external management. An increasing number of advisors are employing automated digital advice platforms, used by 16% in 2020 compared to 6% in 2018. Issues surrounding ease of use and integration with existing platforms are growing in importance. Of respondents who do not outsource, 17% say that the availability of a user-friendly technology platform would be an incentive for them to reconsider their decision, reflecting the fact that whether they outsource or not, advisors are increasingly becoming comfortable with incorporating digital solutions into their practices.