Wealth managers are racing toward scalability, efficiency, and continuity solutions. A recent survey by FlexShares, entitled The Race to Scalability 2018, confirms the trend of previous surveys, revealing that wealth managers are choosing third-party managers for all or part of their investment management. The proportion of outsourcing advisors has gradually increased to 43%, up from 41% in the 2016 survey and 40% in 2014. On average, advisors who turn to external investment managers, now delegate 57% of their assets under management, compared with 53% of those assets in 2016.
Interestingly, wealth managers’ satisfaction with external solutions has increased steadily from 90% in 2014 to a surprising 97% in 2018. The peer group ranked their reasons for outsourcing along with their perceived value: the most important reason they outsource investment management is to find more time to spend with clients. On average, DIY wealth managers spend 28 hours per week on in-house money management. 63% found they had more time with clients after outsourcing, with 51% achieving their goal of adding institutional-level due diligence & monitoring to their practice, and 62% adding consistent investment management processes to their offering.
Advisory firms between $76 and $150 million were the most likely to utilize third-party money managers—62%.
The majority of wealth managers, 88%, adopt a turnkey asset management program or RIA, like Dynamic Wealth Advisors for their asset management needs. Only 29% utilized an ETF strategies program. Also, in the majority, 61%, were advisors who are utilizing a combination of active and passive approaches to fulfill their portfolio construction strategies. “These trends are very consistent with the movement we have experienced from our wealth manager clients”, says Jim Cannon, CEO of Dynamic Wealth Advisors. “We definitely see a higher level of productivity and sustainability among our clients using portfolios models and sub-advisory relationships.”
THE NEED FOR FREE TIME DRIVES USE OF EXTERNAL MANAGERS
As managing a successful advisory business becomes more challenging, driven by several factors — regulatory complexity, technological change, more demanding clients and greater competition — wealth managers must focus on their key differentiators to remain competitive. It’s not surprising, therefore, that advisors cite “freeing up time in my practice” as the leading reason (61%) they choose to use an external investment manager. Among advisors looking to free up time, 71% say they want to spend more time with clients, 56% say they want the time for business development, and 51%, want to provide personalized financial planning services.
About Dynamic Wealth Advisors
Dynamic is recognized as a premier provider of essential resources to professional wealth management practices. Its turnkey practice platform includes asset management, and enables wealth advisors to save money and focus on clients while positioning themselves for success and growth. With myVirtualPractice, a suite of wealth management practice solutions, Dynamic hands the professional wealth advisor the keys to a comprehensive custom-built virtual office and practice complete with staff, back/middle office, accounting/billing, compliance and even a Virtual Assistant. The wealth advisor need only add clients and they are up and running instantly. For many breakaways and independent wealth advisors, being part of a nationwide community of like-minded professionals is one of the most valuable components of their affiliation with Dynamic.