Don’t Get Left Behind – More Advisors are Outsourcing Investment Research

by Joe Cortese, Partner, Senior Consultant

In the ever-evolving world of financial advisory services, firms are navigating a complex landscape marked by regulatory changes, market uncertainties and technological advancements. Amidst these challenges, a noteworthy trend is gaining momentum – the increasing adoption of outsourced investment research solutions. According to a recent FlexShares study, “50% of all respondents, and 59% of RIAs, report increasing utilization of outsourced investment management” . This strategic shift reflects a dynamic response to the demands of a competitive industry to stay ahead of innovation, efficiency and specialized knowledge.

As global financial markets become more intricate and interconnected, the need for timely and accurate information is paramount for making informed investment decisions. However, maintaining an in-house research team capable of comprehensively analyzing diverse asset classes, global markets and emerging trends can be a resource-intensive endeavor. Outsourcing some, or all, of the investment research function is a strategy many wealth advisory firms are embracing for the following reasons:

5 Ways Outsourcing Adds Value

1. Cost Efficiency and Resource Optimization: Financial advisory firms are turning to outsourced investment research to optimize costs and allocate resources more effectively. By leveraging external research providers, these firms can access high-quality insights without the need to maintain an extensive in-house research team. This not only reduces operational expenses but also allows firms to reallocate resources to areas of true competitive advantage.
2. Access to Specialized Expertise: Outsourced investment research solutions provide financial advisory firms with access to specialized expertise across various asset classes and markets. External research providers often have dedicated teams with deep industry knowledge, enabling advisory firms to tap into a broader range of insights and strategies. This access to specialized skills enhances the quality of investment recommendations and can lead to more informed decision-making.
3. Focus on Core Competencies: As financial advisory firms strive to excel in their core competencies, outsourcing investment research allows them to concentrate on client relationships. By delegating research activities to external experts, firms can streamline their operations and focus on adding value to their clients.
4. Risk Management and Compliance: External research providers often have robust risk management and compliance processes in place. By outsourcing investment research, financial advisory firms can benefit from the risk mitigation measures implemented by these specialized providers. This is particularly crucial in an environment where regulatory requirements continue to evolve, and compliance is paramount.
5. Accelerating Growth: Viewed from the client’s perspective, the most valuable aspect of the financial advisory partnership is the client-advisor relationship. To the client, the other aspects, including investment research and selection, are essentially commodities because they lack the specialized knowledge required to differentiate. Accordingly, it makes good business sense to outsource functions the client doesn’t deem as essential and where the advisor lacks a clear competitive advantage. A Fidelity study reported, “On average, advisors utilizing investment outsourcing save nine hours per week.” Therefore, advisors that outsource may have more time to deepen the client relationships they currently have as well as more time to find new clients, thus accelerating growth.

The trend of financial advisory firms embracing outsourced investment research solutions underscores a strategic approach to enhancing competitiveness, managing costs and accessing specialized knowledge. As the industry continues to evolve, the collaboration between financial advisory firms and external research providers is becoming even more integral to success. Those firms that outsource successfully have the opportunity to increase client retention rates, improve investment outcomes and grow faster than their peers.

Interested In Other Outsourcing & OCIO Related Content?

• Why Hire an OCIO
• An OCIO Can Support Your Move to Independence – Learn How!
• Unlocking Success with Financial Institutions Outsourcing

These third-party financial institutions are separately managed advisors, they vet their client risks prior to distribution. Fiducient Advisors, LLC financial institution clients are registered investment advisors, broker dealers, accounting firms, banks, multi-family office, and trust companies. Fiducient Advisors makes available research and other materials to financial institutions such that they can utilize the materials for the benefit of their respective firms or their underlying clients. Fiducient Advisors makes no representation of fitness, purposes for use, and fiduciary obligations regarding the materials used by financial institutions who do so at their discretion.

About the Author

This report is intended for the exclusive use of clients or prospective clients (the “recipient”) of Fiducient Advisors and the information contained herein is confidential and the dissemination or distribution to any other person without the prior approval of Fiducient Advisors is strictly prohibited. Information has been obtained from sources believed to be reliable, though not independently verified. Any forecasts are hypothetical and represent future expectations and not actual return volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. The opinions and analysis expressed herein are based on Fiducient Advisor research and professional experience and are expressed as of the date of this report. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is risk of loss.