Outsourced ETF strategies supports stronger advisor-client relationships for continued business growth

Posted on: 10/06/2014

Business man and meeting table backgroundBy Vern Sumnicht

In a study by CEG Worldwide, a consulting firm for advisors, a shift (2001 through 2012) was identified regarding advisor emphasis on client relationships as opposed to the historical advisor emphasis on investment management.  The CEG study found that advisors who develop stronger relationships with clients have a deeper understanding of their clients’ financial needs and concerns. This deeper understanding and relationship with clients will, in turn and naturally, lead to additional assets for the advisor to manage as well as many more referrals from clients.

IMG_3689Another study conducted by Cerulli Associates, found that advisors (less than $100 million in AUM) spend only 48.4% of their time with clients. While larger RIA firms (over $1.0 billion in AUM) spend 92.5% of their time with clients. Interestingly enough, smaller RIA firms spend over 20% of their time on investment management while larger RIAs spend less than 4%.

Focusing on client relationships rather than investment management is a trend that has led to the growth in ETF-managed portfolios. CEG Worldwide’s survey of financial advisors indicated that outsourcing to ETF investment strategists also provided advisors with additional time to spend with current clients–allowing them to maintain and build relationships as well as time for prospecting and relationship development of potential new clients.IMG_3690

CEG found that investors’ ability to access experts in investment analysis, portfolio construction, asset allocation, tax implications, and so forth was very important to them.  All-in-all outsourcing to ETF investment strategists allows advisors to increase  the scalability of their investment advisory practice allowing greater long-term growth.

As time goes on, more and more advisors are going to realize that when it comes to achieving reasonable risk-adjusted returns for their clients, they will need to outsource investment management in order to be competitive with other advisors who are outsourcing. Going at it alone is simply too costly and time-consuming for most advisors in this day and age.



Leave a Reply

You must be logged in to post a comment.

%d bloggers like this: