A Northern Trust survey of financial advisors shows that the trend of outsourcing investment management activities remains popular. One half of the outsourcing respondents reported contracting out all investment management activities. These respondents say outsourcing helps them achieve productivity and profitability, with 64 percent saying it gave them more time to spend with clients and 60 percent saying it gave them the ability to develop a more consistent investment management process. Investment outsourcing is the use of external providers for investment management as opposed to conducting all investment management-related activities in-house. The survey, "Investment Management Outsourcing: The State of the Art in 2012,” an update to Northern Trust’s initial 2010 survey on this topic, polled more than 500 financial advisors with assets under management from under $50 million to over $1 billion. The 2012 survey found that advisors who outsource said that it positively impacts the growth of their practices. Ninety-four percent said they were satisfied with their outsourcing solution. Outsourcing advisors also noted that the top drivers to outsourcing were:
- Access to asset allocation models
- Access to managers that advisors could not hire on their own
- The potential to generate alpha through investment ideas.
Key survey findings include:
- Six out of 10 respondents outsource more than half of their clients’ assets. That includes 37 percent of respondents who outsource 75 percent to 100 percent of client assets.
- For 43 percent of advisors, outsourcing is leading to some changes in fees charged. While more than half (57 percent) of those surveyed say outsourcing has had no effect on fees charged to clients. Almost one-third (28 percent) say they’ve increased fees and 15 percent say fees have decreased.
- Advisors from larger firms that don’t outsource are increasingly burdened with investment management-related tasks. More than six out of 10 advisors from larger firms report spending nearly two full workdays a week on three key investment management tasks.