Should I Outsource My Paraplanning? 5 Questions to Ask Yourself

With so many changes in Financial Services regulations these days leading to more administration work to remain compliant, it’s common for Financial Planners to ask themselves whether they should look into outsourcing their paraplanning.

The client meetings, phone calls, endless emails, and day-to-day operations are generally enough for the average Financial Planner’s day, causing the paraplanning tasks to fall short on the priority list.

Paraplanning happens behind the scenes of the advice process and broadly includes data entry, research and modeling and writing the Statement of Advice (SoA) itself.

So, if you’re in doubt on whether to outsource your Paraplanning, consider the following questions first.

1.    How much time do I have to devote to Paraplanning?

Lack of time is one of the biggest reasons Financial Planners look to outsource their Paraplanning.

Paraplanning involves more than just writing, printing and binding the SoA document.

You have to invest time in:

  • Completing the Fact Find questionnaire in full.
  • Obtaining an Authority to Access Information from the clients regarding their current investments, loans, insurance, and superannuation, and then actually contacting the third parties to get hold of the necessary data as part of the research and development of the recommendations for the SoA.
  • Collecting and organising detailed file notes and documents in order to build a strong and reasonable basis for the strategy recommendations.
  • Developing templates and customising the standard text to avoid wasting time on editing and formatting.
  • Researching the technical features, regulations and legislation, and compliance requirements.
  • Learning to use financial software to complete projections efficiently and accurately to model different scenarios as part of the analysis of the cost and benefits of each strategy.

2.    Do I Know How To Write a Statement of Advice?

Putting together an SoA can be a simple exercise if you know what you’re doing. But simple doesn’t mean it’s easy. You still need to know what types of advice requires an SoA and the mandatory contents of an SoA to meet the requirements of the Corporations Act.

Preparing an SoA is both an art and a science. This means finding the right balance between using legal and technical language and using language the client is likely to understand. Not everyone has the knack for this.

The more complex the strategy, the more scenarios need to be tested, resulting in more preparation work required.

If you have spare time and are willing to learn, go for it! However, if you don’t have the interest nor the energy to learn how to do this, then don’t.

So, if the idea of learning how to write an SoA is making you cringe, then it’s best to outsource it to professionals who do this on a daily basis.

3.    Have I established templates? If so, how up-to-date is it?

Templates is everything. You know the benefits of having them in place but if they’re out of date, then precious time will be wasted formatting and editing.

Establishing templates as part of your process quickly eliminates the need to start from scratch, it builds consistency in your communications and speeds up the time it takes to produce your SoA.

Having said that, you can only rely on templates up to a certain extent because more often than not, you will need to stray from the standard text to customise each SoA to suit each client’s unique situation. Nevertheless, the existence of templates will save you the struggle of figuring out all the necessary information you need to complete the document.

4.    Can I Afford to Outsource?

Dealer Group Paraplanning, Paraplanning companies, and Independent Contractors charge out at different rates. Some charge on a per plan basis and others charge by the hour.

Outsourcing your Paraplanning could cost anywhere from $100 to thousands of dollars per month, all depending on the following:

  • What areas of paraplanning are you outsourcing: data entry, strategy design, projections, SoA preparation or the lot?
  • How many SoAs you want to be prepared: More SoAs means more expenses
  • Long term or short term: generally, the longer the contract, the lower the rate
  • Do you have access to Financial Planning software: Some paraplanning service providers require you to provide access to the software

As a comparison, these are the overhead costs if you choose the in-house paraplanner route:

  • Wages
  • Superannuation
  • Holiday pay
  • Sick leave pay
  • Computer hardware
  • Office space
  • Training time

If you choose the outsourced contractor route, you will save on costs but you will still need to invest time in:

  • Management of remote staff
  • Email and phone communication
  • Relationship building

5.    What Should I Do?

Which option is right for you? Well, it depends on your business goals and whether outsourcing is a short-term measure or a long-term solution.

Generally, if you’ve got a to-do list up to your neck and the idea of setting aside additional time to research, draft, edit and review an SoA is making your head spin, then outsource. It will take less time to implement.

If you have time to train and the budget to hire an in-house Paraplanner, then do so.

Final Thought

At the end of the day, there is no right or wrong decision when it comes to outsourcing or doing it yourself, but there are many factors that impact your decision. Identifying your strengths, weaknesses and opportunity costs could all help to reach that decision.

An SoA is a document that is intended to help clients understand advice and decide whether to rely on it. So, it doesn’t matter who prepares the SoA, what’s important is your client’s understanding of your recommendations which, is the critical part of the advice process.

Spend the extra time being the genius behind your business and allow yourself to be a business owner instead of the technician.

Do you have other burning questions about whether you should outsource or not? Let us know in the comments.

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“If you want to go fast, go alone. If you want to go far, go together.” – African Proverb

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