Heady times for back office providers

Few providers of back office services to financial planners would disagree that they occupy the less glamorous side of the investment advice industry, toiling away in the back room, or back office as it were, leaving the glory and headlines to others.

But behind the placid fa ade, the burgeoning business of selling back office solutions to advisers and dealer groups is going through a spirited expansionary phase, as a growing host of providers strive for a foothold in what is becoming an increasingly crowded market.

Over the last 12 to 18 months, the ranks of those organisations looking to get a piece of the back office service trade has swelled, substantially boosting the options for advisers seeking to outsource some or all of their back office functions.

At the larger end of the back office service provider market, MLC’s long established back office service, 360, has been joined by the likes of Zurich, which launched its Dealer Back Office Service (DBOS) last June, and more recently ING, which formally released ING Adviser Solutions in April.

AMP Financial Services has also announced its intention to become a key player in the provision of back office outsourcing solutions to planners, and has set up a team under dealer group services manager Victor Sumsky in an attempt to have the new business operational by March next year.

The exact nature of the services offered across these different organisations varies, and in fact the service can vary depending on the nature of the client. Yet the aim of each of these large groups is to effectively make available what they see as a holistic outsourcing solution, covering just about any aspect of an adviser’s business that fits into the definition of back office.

That includes anything from compliance management, to education and training, paraplanning, business development consulting, research, conference and event planning, commission processing, technology provision and even recruitment services.

Operating alongside these groups with their total outsourcing options are an array of other providers, either filling one or a number of specialist niches in the provision of back office services to advisers, and also looking for a greater share of planner’s back office budgets.

Take financial planning training group IntegraTec for example. In a move signalling a greater push into back office services by the group, its parent company, Tribeca, recently purchased the Queensland-based Paraplanning Professionals in a deal worth more than $2 million. The acquisition followed Tribeca’s purchase in February of the compliance business THP Services, now operating as IntegraTec Compliance.

On the surface, the rush of such groups to compete for a part of the back office outsourcing market is being driven by what is perceived to be a growing tendency for advisers to outsource some or all of their back office functions.

Advisers are currently in an environment where they find themselves increasingly time-poor, and where running a financial planning practice involves a mounting regulatory checklist. This includes areas such as the IPS 146 requirements and the soon to be implemented Financial Services Reform Act. This means many financial planners will look to unburden themselves from as many non-core areas of their business as possible.

ING’s assistant general manager of business solutions Graham Peaty is just one of many who believe that taking increasingly onerous back office function off adviser’s hands will prove progressively more lucrative.

“There is a need today in the marketplace for stringent regulatory and quality controls and a lot of advisers just don’t have enough time to deal with that. The types of shared services that we are offering are certainly going to have an impact in the market,” he says.

But the push into the provision of back office services, particularly by large broad-based financial services groups, is as much about a wider competition for the hearts and minds of advisers and their clients as it is for their hip pocket nerves.

While there is no doubt that groups moving into the sector are doing so with a firm eye on their bottom line, it is not unfair to say that in many cases the primary motivation for launching into the market lies with the potential of the back office division to draw advisers into an organisation’s wider product distribution network.

In fact, the need to create an environment where the back office service division acts as a sort of conduit, pointing advisers in towards the rest of the organisation, is seen very much as one of the overriding principles behind a group like AMP as it prepares to bring its back office business to market.

“It is getting tough out there for advisers and if we can offer them these sorts of services, they may want to align themselves with us at other levels,” AMP financial services director Steve Helmich says.

With the provision of back office services to advisers becoming an inexorable link in the distribution of broader financial services products to advisers, no doubt many more groups will at least consider the possibility of moving into the sector.

If advisers, in turn, respond positively to the burgeoning range of services being made available to them, then the providers of back office services may just find themselves earning the odd sexy headline.