Financial planning firms are sending their back-end processes to out-of-house workers as a way to increase efficiency, but despite many positives, caution may also be needed. Three industry members talked to ifa recently about how advisers can reap the benefits and minimise any risks
Linda Santacruz, features editor, ifa: What kind of work can be outsourced and what are some of the benefits from doing so?
Ashley Pattinson, principal, Pattinson Financial Services: The moment you employ your first staff member, you begin outsourcing. So really outsourcing is taking the work out of your own hands and putting it in somebody else's. If we broaden that concept, then it's about you taking it out of your office and you putting it in another office.
Any of the work that support staff in your own office can do can be outsourced, but being selective of what you outsource will allow your team members to focus on the highvalue transactions like client contact and the building of and maintaining of relationships.
Alisdair Barr, director, Grad Mentor: A business can outsource anything non-client-facing. Anything from filling in application forms to chasing up product providers to setting meeting appointments to prepping emails to filling in data to preparing documents for presentation – all of that can be outsourced. Anything that is clientfacing or revenue-generating, we recommend businesses maintain that in-house – you can't just send away a task and hope to god that it's going to work because it will eventually get lost in translation, [whether] you're sending something to downtown Sydney or the Philippines. When we outsource, we outsource a whole process and say 'This is the way we want things done'.
Benjamin Pike, financial adviser and director of financial planning, Shore Financial Planning & Insurance: The next generation financial adviser doesn't even need to have an office or an assistant or even a paraplanner. All of these can be outsourced, for example, serviced offices, virtual assistants, and offshore para-planning solutions. Although advisers can outsource all of these tasks, what are the actual benefits? Does it actually increase turnover or even profits? I feel confident that outsourcing the advice document preparation side of my business is definitely increasing the business' bottom line. By outsourcing paraplanning, I have more time to focus on existing clients and growing my referral network. These two activities ensure client retention and future referrals – both adding to the profitability of my firm.
LS: What about some of the potential hazards? How do you protect yourself from risks such as data security issues and disclosure concerns?
AP: If you begin outsourcing without some clear written parameters defining the activities involved in each task that you outsource and the results that you expect, then you're not going to get back what you expect. Security is really important and obviously under the National Privacy Principles there are additional obligations that we all need to be aware of.
To address these issues, you need to ensure that the method of transferring information between offices and access to files and client information has very strict parameters around it. We operate a zero-tolerance policy on password protection and password sharing. Staff cannot share their passwords and they must not record them anywhere that another person can access.
Additionally, when staff work in our business in the Philippines, they have to check their phones and bags at the door with the security guard. We use dumb terminals so that there can be no printing, or saving of files and we have intranet email facilities which prevent data from being emailed to anyone except those approved to receive it.
BP: To overcome the risks associated with identification fraud, it is important to understand the culture of the business that you have decided to outsource to. My preference is to use firms that have an Australian culture instilled within the firm, where the operators of the firm are Australian and to some extent even some of the services are provided by Australians.
I also review their systems and processes to ensure that clients' personal information is locked from being obtained or saved to a memory device. I am confident that the only way that an individual could obtain a client's personal information would be to write it down with pen and paper.
It is important that when you are outsourcing to a firm offshore that you advise your client and ensure that they confirm that they are happy for their information to be sent offshore to have their advice prepared.
AB: [You can guard yourself] by working with organisations that have all the protection for hazards in place. The company that I work with also works with an Australian organisation based in Vietnam that has data security plans, disaster recovery plans – everything detailed and itemised. So by going through an outsourcing process that has structure and is a reputable organisation, then you're covered.
If you're going through an online outsourcing model, you probably want to be a little bit more careful about what sort of information you share with them. The company we work with has all the privacy and IT locked up. Everything is secured.
LS: What are some other instances when outsourcing is not so appropriate?
AB: If a business wants its people to be revenue-generating financial planners, they need to grow them. That being said, when you grow people into your business, it's really important that they understand every process in financial planning. So they need to understand how to fill in an application form and communicate with a fund manager or an insurance company. They need to be able to follow paperwork through to completion, they need to be able to prepare a plan and be able to crunch out strategy and the calculations around it.
If you outsource everything in your business and you're growing people into financial planners, they won't have that 'long division'. You have to be able to rotate them through a series of processes in the way that you do business. If you outsource all of your processes, then you will struggle to have a place to grow them.
LS: What is the biggest piece of advice you can offer to others firms looking to start outsourcing?
BP: Do your research, listen to your peers and review their feedback, and don't go with whoever is the cheapest. Ask yourself: Am I comfortable that my clients' information is secured? Make sure that your licensee approves the service provider and be prepared to change if you are not confident in their work or you are spending excess time on reviewing the prepared documents.
AP: As I said before, if you've got your processes documented then all you need to do is train or supervise the people that you are outsourcing your activities to meet the requirements of your documented processes.
If they are not clearly defined, then you should expect that you're not going to get back what you want. Importantly, don't expect outsourcing to solve your problems, unless you have identified the weaknesses in your business, and you know that someone else can do those things better then you. Outsourcing won't improve your time management nor will it make you more productive, it provides the opportunity for better outcomes but only you can make them happen.
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