Legacy Bridge Advisors Increases Advisor Capacity by 40% with Outsourcing
Executive Summary
Legacy Bridge Advisors faced a common industry challenge: advisors spending excessive time on administrative tasks, hindering their ability to focus on client acquisition and financial planning. By strategically outsourcing tasks like performance reporting, compliance monitoring, and investment research to a specialized third-party provider, Legacy Bridge Advisors successfully freed up advisor time. This resulted in a 40% increase in advisor capacity, allowing each advisor to onboard an average of 15 new clients within the first year and significantly boosting revenue.
The Challenge
Legacy Bridge Advisors, a growing RIA with $750 million in AUM, found itself at a critical juncture. While the firm enjoyed steady growth, partner concerns were mounting about advisor productivity. A recent internal audit revealed that advisors were spending approximately 60% of their time on non-client-facing activities. These included:
- Performance Reporting (15%): Generating monthly performance reports for clients using Black Diamond was a time-consuming process, often involving manual data entry and reconciliation. Advisors were spending, on average, 6 hours per client per year on this task, translating to approximately 1,800 hours across the entire client base.
- Compliance Monitoring (20%): Keeping abreast of evolving regulations and ensuring compliance with SEC rules required significant time dedicated to research, documentation, and reporting. The firm estimated that each advisor was allocating approximately 8 hours per week, or 416 hours annually, to compliance-related tasks. A single compliance error could cost the firm upwards of $10,000 in fines, not to mention reputational damage.
- Investment Research (25%): Conducting thorough due diligence on investment opportunities, analyzing market trends, and constructing portfolio models consumed a substantial amount of advisor time. An estimated 10 hours per week, or 520 hours annually, were spent by each advisor on research-related activities. This was impacting their ability to proactively identify new investment opportunities and tailor portfolios to individual client needs, costing potentially $25,000 per client in lost gains due to slower adaptation.
The cumulative effect of these administrative burdens was significant. Advisors were struggling to effectively manage their existing client base, limiting their capacity for new client acquisition. The firm estimated that this lost productivity resulted in a potential revenue shortfall of $500,000 annually. More critically, advisors felt overwhelmed and frustrated, impacting morale and potentially leading to attrition. The challenge was clear: Legacy Bridge Advisors needed to streamline operations and free up advisor time to focus on revenue-generating activities and enhance client relationships.
The Approach
Legacy Bridge Advisors adopted a strategic outsourcing approach to address its productivity challenges. The decision-making framework involved a multi-stage process:
- Needs Assessment: A thorough analysis of advisor time allocation and pain points was conducted to identify the specific tasks that could be effectively outsourced. This involved surveying advisors, analyzing time tracking data, and holding workshops to understand their workflows and challenges.
- Vendor Selection: After determining what to outsource, a detailed request for proposal (RFP) was sent to multiple outsourcing providers specializing in RIA support. The selection criteria included expertise in financial services, technological capabilities, data security protocols (SOC 2 compliance was mandatory), pricing, and client references. The firm rigorously vetted each vendor, conducting due diligence on their operational processes and compliance record. After careful consideration, they selected "AdvisorAssist," a provider known for its comprehensive suite of services and strong technology platform.
- Task Delegation: A phased approach was implemented to gradually delegate tasks to AdvisorAssist. The initial focus was on performance reporting and compliance monitoring, as these were identified as the most time-consuming activities. A detailed standard operating procedure (SOP) was created for each outsourced task to ensure consistency and accuracy. Regular communication and training sessions were conducted to ensure a smooth transition.
- Integration & Automation: Integration between Legacy Bridge Advisors' existing systems (Black Diamond) and AdvisorAssist's platform was crucial. AdvisorAssist's API was leveraged to automate the transfer of data between systems, minimizing manual data entry and reducing the risk of errors. A dedicated project manager from AdvisorAssist was assigned to oversee the integration process and ensure that all systems were properly connected.
- Performance Monitoring: Key performance indicators (KPIs) were established to track the effectiveness of the outsourcing initiative. These included advisor time savings, client satisfaction scores, compliance error rates, and new client acquisition rates. Regular reviews were conducted to assess progress and identify areas for improvement.
Technical Implementation
The successful implementation of the outsourcing strategy relied heavily on robust technology and seamless integration between systems. Key technical aspects included:
- Black Diamond Integration: Legacy Bridge Advisors utilized Black Diamond for portfolio management and performance reporting. AdvisorAssist's platform integrated directly with Black Diamond through its open API, allowing for automated data retrieval and report generation. The integration utilized a secure FTP protocol to transfer data between systems. The average data transfer time for a single client portfolio was reduced from 30 minutes to under 5 minutes.
- AdvisorAssist API: AdvisorAssist's API enabled Legacy Bridge Advisors to securely transmit client data, including account information, transaction history, and investment holdings. The API employed encryption protocols to protect sensitive data during transmission. A custom script was developed to automate the extraction of data from Black Diamond and format it for transmission to AdvisorAssist's platform.
- Compliance Monitoring System: AdvisorAssist's compliance monitoring system incorporated automated alerts and workflows to ensure adherence to regulatory requirements. The system monitored client accounts for potential violations, such as excessive trading or suspicious activity. Alerts were automatically generated and routed to the appropriate compliance officer for review. The system also generated compliance reports on a monthly basis, providing a comprehensive audit trail.
- Data Security Protocols: Data security was a top priority. Both Legacy Bridge Advisors and AdvisorAssist adhered to strict data security protocols, including SOC 2 compliance. Regular security audits were conducted to identify and address potential vulnerabilities. Employee training on data security best practices was also implemented.
- Performance Reporting Calculation: The outsourcing allowed for standardized performance report calculations following the CFA Institute's Global Investment Performance Standards (GIPS). This included time-weighted returns (TWR) calculated daily to account for external cash flows. The formula for TWR is:
[(1 + HPR1) * (1 + HPR2) * ... * (1 + HPRn)] - 1, where HPR is the holding period return for each subperiod. This enhanced the accuracy and credibility of the performance reports.
Results & ROI
The implementation of the outsourcing strategy yielded significant improvements in advisor productivity and overall firm performance.
- Increased Advisor Capacity: Advisors experienced a 40% increase in capacity, freeing up an average of 16 hours per week (64 hours per month). This was a direct result of outsourcing tasks like performance reporting, compliance monitoring, and investment research.
- New Client Acquisition: Each advisor was able to onboard an average of 15 new clients within the first year, generating an estimated $150,000 in additional revenue per advisor (assuming an average client fee of 1% on $1 million in AUM). The firm as a whole onboarded over 60 new clients in the first year of implementing the new systems.
- Reduced Compliance Costs: The automated compliance monitoring system significantly reduced the risk of compliance errors, saving the firm an estimated $20,000 in potential fines. The time spent on compliance-related tasks was reduced by 30%, freeing up compliance staff to focus on more strategic initiatives.
- Improved Client Satisfaction: Client satisfaction scores increased by 15% as a result of advisors having more time to dedicate to client communication and relationship building. Advisors were able to proactively reach out to clients, provide personalized financial advice, and respond to their needs in a timely manner.
- Increased Revenue: The increased advisor capacity and new client acquisition resulted in an overall revenue increase of $600,000 for the firm in the first year. The firm also saw a 10% increase in assets under management (AUM) as a result of the new client acquisition efforts.
- Return on Investment: The total cost of outsourcing was approximately $100,000 per year. However, the resulting revenue increase of $600,000 represents a 6x return on investment.
Key Takeaways
- Strategic Outsourcing is a Powerful Tool: Outsourcing non-core administrative tasks can significantly improve advisor productivity and free up time for revenue-generating activities. It's not about cutting costs; it's about maximizing advisor impact.
- Technology Integration is Essential: Seamless integration between existing systems and the outsourcing provider's platform is crucial for success. Invest in technologies and APIs that allow for automated data transfer and streamlined workflows.
- Clear Communication & Training are Key: Ensure that advisors and staff are properly trained on the new processes and systems. Establish clear communication channels to address any questions or concerns.
- Define Clear KPIs and Monitor Performance: Track the effectiveness of the outsourcing initiative by establishing key performance indicators (KPIs) and monitoring progress regularly. This will allow you to identify areas for improvement and ensure that the initiative is delivering the desired results.
- Focus on the Client Experience: Ultimately, the goal of outsourcing is to improve the client experience. By freeing up advisor time, you can enable them to provide more personalized financial advice and build stronger relationships with their clients.
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