Outsourcing paraplanning can boost productivity

Cost efficiency and having the flexibility of an ‘on-tap’ service are the top two reasons for utilising a contract paraplanner, both for independent advisers and dealer groups.

Nina Hope, former director of contract paraplanning provider Paraplanning Professionals, which was sold toTribeca Corporationin 2001 and subsequently absorbed into Integratec, identifies the most common scenarios for employing third-party paraplanners.

“With small practices, they either couldn’t justify employing someone at that stage, or they wanted to test the waters first to see how it would work. With larger dealer groups, where we would be doing all their paraplanning — between 80 and 150 plans a month — it would be to save them the hassle of managing a paraplanning division,” Hope says.

Succession planning for a paraplanner within a small practice is often difficult, and so another reason for outsourcing, although many dealer groups encourage larger practices to have their own internal paraplanners for this reason.

WhileNow Securitiesis one of these groups, it employs two full-time paraplanners to allow advisers to spend more time with clients and to provide a technical ‘touchstone’.

“There are productivity gains for practices using the service, and we also make sure we are mitigating risk — until you’re comfortable that practices are really producing the quality of plans you’re looking for, if you can have them educated by paraplanners, it’s a good way of achieving quality control,” Now chief executive Geoff Rimmer says.

Far removed from anonymous temps, third-party paraplanners place a great deal of emphasis on building relationships with their clients, with sometimes a bit of trial and error required to find the right match between adviser and paraplanner.

“You’re always going to have teething problems because the paraplanner has to understand the adviser’s style,” Hope says.

“It does take time for the paraplanner to get to know the adviser, to appreciate the way the adviser likes to deal with the client, and the level of detail and the strategies they operate with,” Rimmer says.

Establishing systems and procedures and implementing templates is another crucial part of initiating an external paraplanner/adviser relationship.

Paraplanning companyIFP Solutionsdirector Roger Rosentreter says: “It does create a bit more work to get procedures and templates and systems worked out, but once that is in place, we find that if the adviser actually fills out the data collection form properly, then we have the right information — it’s a matter of training the adviser.”

And a lack of information is the greatest complaint external paraplanners have when preparing plans for advisers.

“The number one problem is the fact finder — 90 per cent of the time advisers don’t complete the fact finder with enough detail for the paraplanner to do the plan quickly and easily,” Hope says.

However, a good relationship between adviser and paraplanner can help to fill in the gaps — and to achieve the fast turnaround times sometimes required.

Richard Wakefield, who is a financial planner for Lambert Investments, a Now Securities practice, says: “[Our paraplanner] knows all my profiles and portfolios, and he knows which strategies I like to use. Plus it saves me a lot of time not having to actually use the software and generate the plans myself.”

CFBS Financial Planning outsources its more complex financial plans to Sharon Walsh of SRW Professional, and their strong working relationship is key to achieving efficiencies.

“Sharon is very experienced. She has seen probably every scenario you could possibly imagine, so she’s pretty quick to jump on what we’re looking for and tailor the plan to what our needs are and our particular style of doing a plan,” CFBS principal Dominic Kelly says.

And even though many advisers never meet their paraplanner face to face — instead communicating by phone, fax and e-mail — they often use them as a ‘sounding board’ for new ideas and strategies, drawing on the paraplanner’s awareness of trends and regulatory changes in the industry.

“You get a feel for what other planners are doing, what people are investing in, and types of strategies to consider,” Kelly says.

And it seems once the relationship is established, only a few issues — such as a drop in plan quality or having to chop and change paraplanners — will threaten it. In most cases, advisers and paraplanning professionals alike say the most likely reason to terminate the arrangement would be the advising business growing sufficiently to support an internal paraplanner.

“In terms of time and cost, it’s far more efficient having an external paraplanning service — we can get on with giving advice, as opposed to compliance, which can be extremely time-consuming,” Kelly says.