Is agile working key to successful outsourcing?

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The pandemic has further opened the door for outsourced paraplanners who are no longer so confined by geography. Cherry Reynard speaks to a number of advisers and paraplanners about the growing trend and explores the debate between flexibility and cost

For many, the greatest long-term change from the pandemic will be agile working. Company bosses have been forced to loosen their grip on employees, allowing them to work from home at their own pace and in their own way. This new-found flexibility may also change the way advice firms operate and, specifically, the extent to which they make use of outsourced administration and paraplanning services.  

Outsourcing paraplanning and other back office functions has been an option for advisers for some time. There is also increasing choice as more and more outsourced paraplanners have entered the market. The pandemic has accelerated the trend, as people have realised they do not want to go back to a corporate environment, having enjoyed the flexibility of working from home and operating to their own schedule, rather than a train timetable and office hours. 

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More importantly, the pandemic has also removed one of the key arguments against outsourcing that the external professional could not be in the office and part of the team. 

The decision to outsource or not may be more to do with business need. Outsourcing paraplanning may not necessarily be cheaper, but it can be more flexible and better matched to business needs

Jo Campbell, director at Para-Sols, says: “One of the original barriers to outsourcing and a question we used to get asked a lot was about how someone can be part of your team while not in your office. That move from having a full-time employee, always around and on hand, to someone working remotely is a big leap of faith. 

“That barrier has now been removed, through external circumstances, and the majority of people can now see that it wasn’t a barrier at all, it was just something new we needed to get used to. Which we did.”

The use of video conferencing software, messaging services and robust project management systems have also helped to bridge that gap and move the industry forward. The outsourced paraplanner is now at no significant disadvantage to the in-house paraplanner in terms of access to the advisers.

The only real barrier that may remain is the sense that the in-house paraplanner understands the company better; they know the systems better, understand the advisers foibles and preferences and there is no complex onboarding. 

For many advisers, the decision to outsource or not may be more to do with business need. Outsourcing paraplanning may not necessarily be cheaper, but it can be more flexible and better matched to business needs. Philip Martin, managing director of Unique Financial Planning, says: “Advisers are moving a fixed cost to a variable cost, paying on a per case basis. That can be helpful in managing your business, getting rid of a potential mismatch between costs and income. If your business falls off a cliff, or accelerates very quickly, you can tap in and out of those variable costs.”

Campbell says this is likely to be the key consideration for adviser businesses: “Does it make sense for my growth plans to try and find more paraplanners – bearing in mind, they’ve always been difficult to find and train – or to outsource? We now know remote working is effective and all the other benefits of outsourcing such as capacity cover, lower costs, not having to cover sickness or provide employee benefits, will now become much more of an attractive offer.”

For some advisers, the complexity and expense of regulation and compliance will force their hand. Those using in-house paraplanners and administrators have to ensure they are up to date with the latest regulations, which can be challenging and may be impossible for smaller businesses without deep pockets.  

If they outsource, they are buying in that expertise. Caroline Stuart, owner of Sparrow Paraplanning, says: “There is a lot less risk in taking on an outsourced paraplanner, particularly at the moment when times are still uncertain.” The proliferation of paraplanners means it is possible to find paraplanners with expertise in different areas and for different needs, she reasons. It doesn’t need to be all or nothing: “People can outsource the very technical work, or the areas they can’t cover in-house. They can decide the service they want and look for it in the market. Today, financial planners are spoilt for choice.”

There are still things that outsourced paraplanners cannot do. It does not work if advisers want to train up successors, for example. Most advisers will not want outsourced paraplanners coming along to meetings with them, so there is always going to be the hurdle of getting the information from the client to the adviser and then to the paraplanner.

This works if the adviser is organised, but the ‘rubbish in, rubbish out’ principle may also apply. Martin says: “If you don’t have procedures written down, with four or five advisers all doing different things, it can be very difficult to outsource. You might as well do it yourself.”

As such, good organisation and processes are key to making an outsourced relationship work in practice. Campbell says: “Having good robust processes in place and essentially to be able to communicate between planner, paraplanner and client. We designed our own project management system, which is consistently evolving but the use of any such as Basecamp or Asana will really make the transition from in-house to outsourced much smoother.”

Stuart agrees that organisation is key: “You need to understand what the financial planner is trying to achieve. Many of them view me as part of the team. Certainly, it’s more difficult when planners don’t have everything organised, but that is true for in-house paraplanners as well.” 

Are there organisations that suit an outsourced proposition better than others? Martin says that larger companies are in a better position to offer paraplanning and administration infrastructure within the business. His business has taken on four apprentices within the past five years and can offer them a good career path. “Smaller businesses may not have the same bandwidth,” he notes.

In her experience, Stuart crosses a broad range of businesses: “It’s a really mixed bag. I’ve worked with some great, big firms and those advisers working on their own. For smaller groups, outsourcing is a really good option to bring in the expertise they need quickly. Perhaps they only need a few hours a week and don’t want to employ someone. That said, I’ve worked with larger companies too, but these tend to be infill projects – covering maternity or holiday, or around tax year end.”

For paraplanners themselves, it offers a route to an alternative career. Most have decided to pursue paraplanning as a career, rather than as a route to becoming an adviser. Many, like Stuart, say they have done as much as they can within a business and branching out alone can provide a career refresh and greater diversity of work. 

There is a danger that the market becomes saturated as more paraplanners strike out alone. This would be good for advisers who want to outsource, driving up competition and driving down costs, but may push paraplanners back in-house if it goes too far. 

Last year was tumultuous and many advisers will appreciate the flexibility over costs that outsourcing gives them. That said, there is no substitute for a good in-house paraplanner who is embedded in company culture and minutely understands the needs of its advisers. Advisers will need to decide which is more important as they contemplate the year ahead and further.

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