Going it alone

With the volume and complexity of compliance requirements ever increasing on the back of the Financial Services Reform Act (FSRA), the back-office is demanding even more of planners’ time and attention.

And if you agree with Integra Financial Services principal Deborah Kent, the load is only going to get worse.

“Back-office has certainly become more complicated because of compliance issues. Paperwork has grown and I believe it’s going to grow even more with FSR coming through,” Kent says.

So why are so many small financial planning practices deciding to tackle their back-office alone?

Nick Bruining, from NC Bruining & Associates, says while doing your own back-office is a hands-on task, the advantages make the work worthwhile.

“You know exactly what is going on and you can detect systemic problems as they start to develop,” he says.

Kent believes the ability to troubleshoot is the biggest difference between master trust type back-office control and in-house control.

“If anything slips through the cracks, or if any issues occur, we pick them up immediately. With master trusts, the expectation is you’re not going to have any problems, but you always do.”

Kent outsources about 50 per cent of her clients’ back-office requirements through master trusts, with the other half run in-house using their own software program, as well as VisiPlan.

“Many people think what we do is back-office intensive, but it isn’t. We’re never running behind with things and we’re not labouring over it,” Kent says.

She says as long as a practice has the right systems in place with the right people looking after them, doing your own back-office does not pose a time cost issue.

For five planners, Kent says around 50 per cent of time from two staff members is dedicated to keeping the back-office system up-to-date and running.

“As the senior financial planner and licence holder for this business, I’m responsible for what everybody does, so when something changes, such as FSR coming up or any compliance issues, we put in place systems that make it easier for people to operate and not fall out of that compliance area.”

Looking towards the future, Bruining says the pressure on planners to reduce their costs will only increase, and providing back-office in-house will be one way to ensure a competitive advantage.

Bruining argues that when the back-office is outsourced through master trusts and wrap accounts, the client pays for it through higher management expense ratios.

He believes that if planners can find a way to provide those services more cost-effectively than the platform providers, more small practice planners may lean towards keeping the back-office in-house.

But his argument is not without its critics, one of whom isMoney Management’sFinancial Planner of the Year, Robert Kiddell.

“In the future, for a sole practitioner to provide a genuine professional service rather than a sales service, they’re going to need to outsource those back-office activities,” he says.

“I honestly don’t believe that a one man band, with a couple of unqualified assistants, even with excellent systems, can really provide a full professional planning service.”