Third-Party Support Not Just for Newly Launched Firms

A quarter of independent financial advisers are currently honing and redeveloping their practices—including many established firms crafting approaches to new markets.

An atmosphere of development and competition has encouraged practitioners across the investment advice spectrum to seek and provide new forms of third-party practice management support, finds a recent LIMRA survey. The research shows one in four advisers is “still establishing their practice,” yet 67% of all advisers surveyed said third-party business support remains a critical factor to their ongoing success.

LIMRA says there are several reasons why practice management support is more in demand now than in the past—both among established and new practices.

“Advisers today must be able to understand and explain complicated financial products to an increasingly complex client base,” LIMRA researchers explain. “Advisers are also expected to understand and deliver the right solutions for clients of different generations and culturally diverse backgrounds, each of which has unique needs.”

Demand is so significant, LIMRA notes, that advisers may want to consider their own ability to shop out third-party services to other firms, either on a consulting basis or as a recurring service.

LIMRA says advisers commonly expressed concern over how the regulatory and compliance environment will affect them. Turning to recent regulatory headlines, more than a third of independent and career advisers anticipate a negative impact on their business if a uniform fiduciary standard is implemented (also see “Some Advisers Aren’t Fretting the Fiduciary Fight”). Most advisers with negative comments suggested a uniform standard would increase paperwork and create additional compliance costs while providing little to no benefit to clients, LIMRA explains.

“Finally, for all the opportunities technology can provide to a financial professional, it also adds a layer of complexity to running the business,” the research adds. “When companies implement new technology, they can confront some formidable and conflicting obstacles.”

Among the top challenges, LIMRA says, is resistance by staff financial professionals to technical changes, cited by 62% of companies. Even more companies surveyed (63%) said they lack sufficient internal IT resources to adequately control systems. Selecting for younger advisers, the results change significantly: 78% said technology tools for client services “was the most important sales support they could receive.” Three-quarters of young advisers also said availability of technology tools designed to simplify practice management was the most valuable support on the market.

Current industry merger and acquisition (M&A)  trends, along with the need to attract Millennial talent into the advisory space, highlight the dangers of ignoring the technical writing on the wall. In a recent interview with PLANADVISER, Corporate Insight analysts noted the recent deal between LearnVest and Northwestern Mutual could be the start of a financial industry “technology feeding frenzy” that alters the way financial services firms interact with their customers and the competition.  

LIMRA notes that advisers do not always have to find new provider partners to get new support services: Existing partners can often bring new support services to the table when demanded or requested. 

“These basic business challenges are not unique to financial services,” LIMRA concludes. “In 2013, email marketer Constant Contact surveyed small businesses and found that 59% of respondents said it’s harder to run a business now than it was five years ago. The top reasons they cited were the economy, keeping pace with technology and an increase in direct competition.”