How your firm will handle back office tasks might be one of the most impactful decisions you’ll make as a financial advisor.
In a recent survey, 91 percent of advisors indicated that the back office was “important” or “very important” to their firm’s success.
The back office covers a range of services to help manage client accounts and run the day-to-day operations of an advisory firm. It often includes technology – including hardware and software tools – for investment management, regulatory compliance, and client account reporting.
Choosing how your firm will tackle these functions is important because it impacts everyone engaged in your firm (clients and employees), daily.
But there’s an issue facing many advisors. When it comes to satisfaction with back office operations, advisors seem to be wanting more. The advisor survey uncovered that less than a quarter of advisors are “very satisfied” with their firm’s back office. Furthermore, 32% of advisors are “less than satisfied”.
Why are advisors underwhelmed by their back office solutions? We think it has something to do with a misalignment between the features and focus of their back office provider/technology and the needs/focus of their firm.
The same survey also identified the most important issues advisors feel the back office should solve.
Selecting and implementing a back office solution that provides a more satisfying experience for you, your team, and your clients begins with ensuring your provider/technology (whether you use outsourced or in-house back office solutions) is positioned to address the issues that are important to your firm.
Questions to consider when evaluating back office solutions:
Will this solution help you remain compliant?
One of the fundamental competencies of any good back office is it’s ability to help you navigate the financial advice world’s complex regulatory environment. While the fiduciary rule is dead and gone, the SEC is increasing the number of audits it conducts annually, calling for higher levels of preparedness from the average financial advisor. The biggest impact your back office provider can make on your ability to remain compliant is the accessible storage of client account data. In the event of an audit, your ability to procure the requested records is paramount. Beyond simply filing data, a good back office will readily assist you in finding the necessary information as needed.
Also consider the solution’s ability to help you monitor areas of risk, like money laundering and best execution trade reporting. These services are becoming more commonplace, and could prove essential to your ability to avoid costly discrepancies with the SEC.
Can it create efficiencies within your firm?
Robust tools and technologies are widely available to help automate, or at a minimum, streamline administrative tasks associated with managing client accounts. When considering a back office’s ability to create efficiencies within your organization, it’s important to look toward traditional bottlenecks in your workflows. Common ones are building and delivering proposals, onboarding new clients, and submitting work requests.
Evaluate the solution’s ability to make these tasks (or any others that tend to impede your team’s workflow) more manageable. The ultimate goal of the back office is to create more time for you and your team to spend building relationships with clients.
How easy is it to use (how intuitive is the technology)?
Closely tied to efficiency, your back office’s technology should be easy to use. Sophisticated technology should be demanded, but it isn’t helpful if you can’t use it, practically.
Beyond shear capability, evaluate how intuitive the user interface is – for you and your clients. Can you easily find what you are looking for within the advisor portal? Are tasks, like running reports, drilling into account data, or filing forms easy to complete? These are great questions to ask yourself as you evaluate your current or prospective back office solution.
One feature that is often overlooked is the service environment available through your back office provider. Every system will have a learning curve, and all technology experiences the occasional bug. An accessible service environment becomes invaluable (particularly in addressing timely, client-facing issues).
What’s the total cost?
While it’s clear that cost isn’t nearly as important as functionality, platform fees should be considered carefully. Whether you pass those fees onto clients or absorb them into your bottom line, the cost of your back office solution is going to tangibly impact your business.
There’s no “one-size fits all” in this industry. The best thing you can do is ensure the cost incurred by your business makes sense with the capabilities offered by the selected back office solution. Increased demands for fee transparency might not mean everything needs to be done on the cheap, but it might mean you will find yourself explaining how each fee translates to value for the client.
Are you interested in learning more about the how advisors are approaching the back and front office? Download our whitepaper, Running an Advisory Business: Costs, Challenges and Opportunities, for data-driven insight.
0130 – FTJFC – 3/22/2019