The market crash of 2008-2009 has fundamentally changed the competitive environment of the financial services industry in many ways as demonstrated by the relentless pressure on advisory fees and operating margins. This downward trend has been felt across the entire industry as the average advisory fee for new accounts opened in 2013 (1.02 percent) was 16 percent lower than just two years prior according to the PriceMetrix Insights “The State of Retail Wealth Management, 4th Annual Report.”  Over 62 percent of broker/dealers surveyed expect fee compression to be their greatest challenge in the coming three-to-five year period. 

In the face of this challenge to increase revenue and expand operating margins, an advisory firm must:

  • Grow the number of client relationships

  • Reduce the operating cost of each account/relationship

  • Increase top-line revenue per client

Traditionally, firms have needed to expand staff in order to handle more business and/or offer additional services to grow revenue. However, in today’s environment, firms can scale their businesses’ profitably and expand revenue by taking advantage of outsourcing options and technology solutions. The new market environment requires firms to both increase scalability and expand revenue in order to thrive. We believe that firms that can accomplish these two goals will be well-positioned to cushion the impact of fee compression.


In today’s world, scalability is achieved by successfully managing two related key drivers: (a) the tradeoffs of insourcing versus outsourcing and (b) process automation. 

The availability of outsourcing alternatives provides advisory firms with unprecedented flexibility. Most firms will internalize functions that are “client critical” and closest to the core value proposition of the firm itself. This allows the firm to use its own personnel to control the quality of the client experience. Non-critical functions can be outsourced to trusted partners. A typical advisory firm might approach this question by filling in a chart similar to the one below.

Today’s advisory firms want access to a variety of outsourcing solutions as well as integrated access to other providers as part of a comprehensive service and technology ecosystem. Key outsourcing solutions include financial planning and customer relationship management (CRM) while fully-integrated solutions would include custody and account aggregation.