The Real Cost of Internal Paraplanning

Outsourcing the non core functions in your business allows you to focus on your core competence – i.e: where YOU add the most value to YOUR business.

FPA Survey on SoA Generation

An FPA survey has shown that, on average, an adviser will generate approximately 120 Statements of Advice (SoA) annually. This survey also has shown that an average adviser spends approximately 12 hours when personally preparing a comprehensive SoA, and approximately 6 hours when personally preparing a basic SoA.

Opportunity Costs of Internal Paraplanning

Assuming that an adviser is able to charge $250 p/h when undertaking ‘fee for service’ work for a client, then the opportunity cost of an internally prepared comprehensive SoA is estimated at $3,000.  The opportunity cost of an internally prepared, basic SoA is therefore estimated at $1,500.

Taking this concept of opportunity cost one step further, what is the most revenue that can be generated from a single high net worth client?

Let’s assume that your ideal client invests funds of, say, $10,000,000. Based on this amount you may charge an advice fee of 1% per annum, which equates to $100,000 revenue from this client each year!

So, the actual opportunity cost of you completing your own SoA’s may be significantly higher than simply the time taken. What if, by outsourcing this function, you enabled yourself to see even 1 more “ideal” client per year?

P = R – E

This, at face value, seems a very simple and familiar relationship – Profit is equal to Revenue minus Expenses. However, let’s break it down a little and apply it to the concept of outsourcing:

Revenue

Your Revenue is a variable amount that can fall anywhere from zero dollars upwards and is largely dependant on your efforts as a marketer, in your client relationships and as a salesperson. These are a successful adviser’s areas of competence.

Expenses

Your Expenses fall under one of 2 categories: Variable or Fixed:

Variable costs are dependent on Revenue and, hence, are unlikely to ever result in a negative Profit figure. Variable costs are therefore inherently desirable and reduce business risk.

Fixed costs are independent of Revenue. They can result in a negative Profit figure. Fixed costs are thus inherently undesirable, and, wherever possible, should be converted to a Variable cost.

Internal Paraplanning

Hiring an internal paraplanner, while productive in terms of freeing up an adviser’s time, adds another fixed cost to your business.

As noted above, Fixed Costs are quite capable of creating a negative Profit figure. What happens to the cost of an internal paraplanner if you take a holiday and cease seeing new clients for a period? NOTHING! The cost simply continues to accrue. The longer you are not generating revenue the greater the risk that this fixed cost will result in a LOSS!

Even scarier is what happens when that same internal paraplanner takes a holiday! You end up paying them to soak up the rays in a tropical destination while you remain in the office and incur additional opportunity costs as you revert to preparing your own SoAs!

So, let’s talk some sense now. Lets talk about how you can turn that fixed cost of paraplanning into a risk free, available and effective VARIABLE COST! Let’s talk about the benefits of outsourcing…and always remember that the only fixed cost in this equation should be YOUR remuneration!

Contact an Outplan representative today on 1300 789 782 - or complete the form on the right - to discuss an outsourced paraplanning solution for your business.