Delegating/outsourcing: When does it make sense?

It can make good sense for an adviser to share plan responsibilities when it is likely to lead to improved outcomes or reduced costs.
By None

This applies to internal delegation and to outsourcing of tasks to external service providers.

It is a breach of fiduciary duty to allow a plan to incur costs that are unreasonable.  For this reason, and to foster strong client relationships, it is important to consistently deliver good value to plan clients.  If an adviser is able to manage down his costs through delegation and outsourcing, he can pass these savings along and enhance competitiveness. 

While few advisers explicitly bill clients for time expended, most of us heavily factor time expectations into our pricing models.  We touched on this in our last column, “TrackingTime.” In speaking with advisers, and reviewing benchmarking data, the range of hourly time valuations generally lie between $250 and $600.

An adviser who needs to get $500 or $600 per hour to make her business model work needs to be especially adept at delegation of more routine tasks to lower-cost team members in order to avoid pricing themself out of the “reasonable zone.”   For example, it might be quite reasonable for a high-end adviser to create custom presentation material at a $500 hourly rate, but it might be unreasonable to have the same person spend a day presenting this material at employee meetings at a cost of $4,000, if a capable, lower-cost associate was available. 

Many plan tasks can be outsourced to third-party service providers.  Most large plan providers offer a range of services beyond the day-to-day recordkeeping.  These ancillary services can cover such things as plan design and compliance consulting, participant advice services, asset allocation model management, fiduciary services, investment reporting and employee communication and education.

Naturally, if all plan tasks are outsourced, then the question arises as to the value being added by the adviser, and consequently the reasonableness of any compensation being paid to them.  However, judicious use of provider services can lead to better outcomes at lower cost.  For example, the provider may be able to offer up specialized teams, at little or no incremental cost, to: 

·         Walk individual participants through proprietary gap analysis exercises;

·         Run asset consolidation campaigns to encourage roll-ins; and

·         Send mailings to non-participating or under-contributing employees.


All of these actions can lead to better participant outcomes, and they can potentially lower plan costs if they lead to increases in plan asset levels and higher revenue sharing receipts.

In summation, it’s a balancing act.  The specialized knowledge and skill sets of a seasoned retirement plan adviser are invaluable to bringing a plan to its full potential.  There are many plan management tasks that cannot be delegated without some breakage.  However, where appropriate, the judicious use of delegation and outsourcing can help to manage plan costs and potentially improve participant outcomes.


Jim Phillips, President of Retirement Resources, has been in the investment industry for more than 35 years, the past 18 of which have been focused in the area of qualified retirement plans.  Jim worked for major national investment firms for 14 years before “going independent” in 1990.  Jim is an Accredited Investment Fiduciary, has contributed to two books on 401(k), and his articles have been published in Defined Contribution Insights, PLANSPONSOR’s (b)lines and ASPPA’s 403(b) Advisor, and Jim is a RetireMentor on His work has been acknowledged with multiple Signature Awards from the PSCA, he has been named to the 2012 and 2013 list of Top 100 Retirement Plan Advisers, by PLANADVISER Magazine, and he was a finalist in 2012 for the Morningstar/ASPPA 401(k) Leadership Award. Jim has been a frequent speaker at national conferences, including SPARK, ASPPA, AAO and the PLANSPONSOR and PLANADVISER National Conferences.


Patrick McGinn, CFA, Vice President of Retirement Resources, is a CFA charterholder and has been in the securities industry since 1993. In addition to the Chartered Financial Analyst designation, he is an Accredited Investment Fiduciary and a member of the Boston Security Analyst Society. Together with Jim, Patrick has co-authored a number of articles which have been published in industry publications on topics about managing successful 401(k) and 403(b) plans. His work has been acknowledged with multiple Signature Awards from the PSCA, and he has been named to the 2012 and 2013 list of Top 100 Retirement Plan Advisors, by PLANADVISER Magazine. He was a finalist in 2012 for the Morningstar/ASPPA 401(k) Leadership Award.


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.