Today’s successful financial advisors are overwhelmingly shifting to a client-centric model versus the traditional investment-centric approach commonly seen in recent decades. A related trend among advisors is the outsourcing of investment management. Outsourcing provides a scalable growth strategy and enables advisors to focus on true business drivers such as new client acquisition and existing client service, while delegating research and investment management to dedicated portfolio managers.
A benchmark study conducted by Cerulli Associates highlighted that advisors at RIA firms with less than $100m in AUM spend 20.3% of their time on investment management activities, and only 48.4% of their time on client facing activities. This was a stark contrast to larger RIAs with over $1.0bn in AUM who spend 92.5% of their time on client facing activities and a mere 3.8% of time focused on investment management.
CEG Worldwide, a global research and consulting firm for advisors, identified a dramatic shift between 2001 and 2012 in advisors’ emphasis on client relationships versus investment management. The study concluded that when “advisors foster deeper client relationships, they gain a deeper understanding of their clients’ financial concerns and are thus able to effectively address these concerns. This makes it easier for advisors to ask for, and get, additional assets and introductions to prospects.”