When advisors assess their practices, looking for ways to accelerate growth, expand margins, or generally increase business success, there are several important questions to consider. These include:

• Am I spending enough time with clients and prospects?

• Do I have enough time for business development?

• Am I optimizing the time I am spending on investment management activities?

Based on the results of a recent industry survey conducted by Cerulli Associates, in partnership with the Investments & Wealth Institute and the Financial Planning Association, most advisors are not spending enough time on the areas that matter most to the overall health of their practices.

According to the study, advisors spend 21.2 percent—or more than one-fifth—of their time on administrative activities. Administrative tasks don’t give advisors a competitive advantage, and too much administration takes away from investment management and other areas that do give advisors their competitive advantage.

Investors engage advisors to help identify and manage their financial goals, create portfolios and set asset allocations, determine comfortable levels of risk, ensure portfolios don’t stray from them, and finally, select the right investment vehicles to make that happen. If day-to-day administrative duties take advisors away from what makes them indispensable to investors, then both parties are likely to wind up disappointed and frustrated. Investor outcomes can suffer if they don’t receive the level of service and customization needed to help them achieve their goals. Yet this study suggests that, on average, advisors allocate less than 20 percent of their time to spend with clients.

At the same time, advisors’ growth and profits can suffer if they are unable to spend adequate time building client relationships and growing their practices. This study also shows that advisors spend an average of just around 10 percent of their time on prospecting new clients. This is not a lot of time for cultivating new relationships, spending time developing centers of influence for referrals, generating proposals and meeting with prospects—and therefore, the longer-term investment in the growth of the business tends to suffer.   

As for professional development, the survey found it receives the least amount of attention, with all advisors spending, on average, only 6.1 percent of their time on improving their skillset and expertise. This can have lots of longer-term implications ranging from job satisfaction to falling behind on industry, regulatory, tax, and other important updates.

However, advisors have the power to optimize their practice efficiency. Just as they work with clients to shift portfolio allocations when necessary, they can work with their teams to implement solutions to shift practice time allocations.

There are several ways advisors can maximize efficiency and lay the groundwork for ongoing, scalable growth. 

First, advisors should consider whether there is a better or different way to optimize their portfolio management approach. Advisors have a range of options to scalably create client-centric portfolio solutions to achieve desired outcomes, while possibly also freeing up time to spend on other activities such as meeting with those clients or cultivating prospects. These ideas include:

1. Leverage Home Office or Third-Party Asset Allocation Models: Traditionally, advisor-driven portfolios have been thought of as more personalized and better-managed, with a perception that they are better able to meet every client’s individual needs. Building a client’s portfolio from third-party asset managers was historically considered a less-customizable solution. However, advances in technology have challenged these assumptions and created a happy medium between the two options, enabling advisors to efficiently create customized solutions for clients by personalizing models, or blending models from home-office and third-party managers with their own investment ideas, in a highly scalable way.

Best-in-class external managers are available via manager marketplaces integrated with technology providers. Leveraging the institutional investment research available from these managers can serve as reliable way to outsource some individual security/fund due diligence, asset selection, and portfolio construction. The adoption of powerful portfolio management and trading technology solutions can enable advisors to scalably customize, and efficiently and effectively monitor and manage, these combinations in client portfolios.

2. Give Clients Greater Access to SMA Managers via Unified Managed Accounts: Separately managed accounts (SMAs) enable advisors to offer clients access to multiple investment products and strategies for clients in a tax-efficient portfolio. However, the process of setting up SMAs has historically been complex and time-consuming—advisors were required to open separate custodial accounts for each strategy, and clients were required to sign individual agreements with each manager, making any rebalancing or other changes to the SMA very cumbersome.

Industry innovations have provided a more integrated, scalable approach for advisors—unified managed accounts (UMAs) which allow clients to access multiple investment products and strategies, along with exchange-traded funds (ETFs) and advisor-managed sleeves, in a single portfolio without having to open multiple accounts. This saves the advisor and client from having to sign and process multiple sets of account paperwork, and it also typically enables advisors to access institutional-caliber managers at much lower minimum account sizes. The UMA structure is much more efficient to manage, trade, and rebalance, and allows for scalable customization and tax management for clients on an ongoing basis. UMAs also streamline and simplify reporting.

For advisors not affiliated with a broker-dealer or bank, access to institutional-quality strategies from third-party managers is available through independent online marketplaces. Such a partner should be objective—without affiliations to custodians or fund managers—while providing an expansive and cost-effective suite of investment products and strategies for advisors to mix and match in client portfolios.

3. Outsource Trading And Overlay Portfolio Management: Consider outsourcing trading and overlay portfolio management to a third party, whether implementing simple advisor-driven or home office models, a blend of these and third-party models, or utilizing a UMA structure to access multiple SMA managers. A turnkey outsourced model implementation service can handle the trading, rebalancing, tax harvesting, and account administration on an entire book of business, all done in a tax-aware manner for taxable accounts. This can be a big time-saver for advisors who want to refocus resources on other activities.

4. Utilize Innovative Portfolio Accounting And Trading Technology: Implementing the right portfolio accounting and trading technology platform is critical to the success and efficiency in any investment management process. Like with any solution, advisors need to conduct thorough due diligence to find the right technology platform to fit their business. Each advisor will have his or her own specific list, but some of the key considerations and differentiators in an ideal platform can include:

• Ability to scalably create and manage custom portfolios

• Efficient tax-aware trading

• Efficient tax harvesting

• Flexible modeling from simple to complex

• True tax-lot accounting

• True sleeve-level accounting

• Support for flexible program-agnostic, single-solution “unified wealth management” concept

• Support to blend models from multiple parties in single account

• Ability to share trading discretion from multiple sources in a single account

• Fully integrated accounting and trading

• Single source of data, and fully integrated suite of tools

• Real-time data integration across entire suite of tools (proposal: modeling: trading: client reports: client portal)

5. Outsource Some Administrative And Operational Tasks: Finally, consider outsourcing some of the administrative and operational tasks to a transparent partner. Ultimately, anything that is not vital to an advisor’s value to clients can be outsourced to a third party in order to redeploy those resources within the practice. Outsourcing doesn’t need to be an all-or-nothing affair—with the flexibility to outsource only those tasks that are non-essential to the essence of their practice and value proposition, such as billing, on an a la carte basis, an advisor can optimize efficiency, time management, and client relations over the long term.

A reliable third-party service provider should offer advisors all the following, which should create trust and confidence in the decision to outsource:

• Transparency for advisors to seamlessly monitor everything in as much or as little detail as they wish.

• Best-in-class, responsive service so that when problems do arise, they are identified and resolved quickly and in the most client-centric way possible.   

• Demonstrated scale to handle not only the current book of business, but anticipated growth and worst-case-scenario volumes on days of extreme market volatility, etc.

In order to survive and thrive in an evolving marketplace and regulatory environment, advisors need to evaluate how they spend their time, and adjust accordingly. Fortunately, advisors have several cost-effective options for running their practices more efficiently and facilitating scalable growth—without giving up the personalized service and advice their clients have come to expect.  

Rob Klapprodt is corporate strategy officer for Vestmark.