5 Reasons Why Outsourced Providers Are Black Listed by Custodians

Everyone probably knows what a black list is… However, not everyone knows what an outsourced provider is. Before we explain the reasons why outsourced providers are black listed, here is the definition:

And outsourced provider is a business that provides a service to your firm without coming onsite.

For example, the virtual receptionist firm answering your phones with a friendly hello is an outsourced provider. A financial planning firm that provides you drafted financial plans for you to finalize and present to your client is an outsourced planner.

Compliance is not the main reason outsourced providers are black listed or not offered by custodians and BDs.

Here are a few of the main reasons:

Reason 1: They don’t have the bandwidth nor expertise to fully vet outsourced providers.

They also don’t want to be blamed by you for a lackluster experience using an outsourced provider from their “approved” list. They also don’t know the best method of working with outsourcers to make sure you are compliant and satisfied.

Reason 2: They fear you will become so independent that you won’t value their back office technology or consulting services.

Once you work with a “doer” (aka. outsourced provider), you won’t need the consulting services offered by the custodian or BD. Understandably, they want you sticky to their company, ideas, and solutions.

Reason 3: The majority of advisory firm executives believe free or cheap is good and “sufficient”.

So the custodians and BD provide free operations advice as that might be the only way you will listen, learn and improve. Unfortunately, these same institutions can’t implement the advice to confirm it truly works for your firm so you are still left with the “doing” and possibly a lot of wasted time and effort.

Reason 4: Custodian and BD relationship managers are juggling too many clients while also traveling onsite to firms.

If you were asked to service 150 families and remember all their “issues” and fly to see them annually, would you be able to recommend specific outsourced solutions to each and every family? I don’t think so. You could only offer solutions that YOU know and could implement. Any solution you couldn’t provide would require you to research, vet, explain the benefits, and then introduce to the family. A relationship manager of 100+ firms doesn’t have the time to truly understanding your operational hurdles to growth and profitability to then vet and recommend solutions.

Reason 5: You are not sharing your successes with outsourced providers to your relationship manager at your custodian or BD.

Your RM needs your help in knowing what works and doesn’t work so share!

So while some BDs and RIA roll up’s have a true written Black List, others have a mental black list. As an advisory firm owner, it is your job to find providers that will truly understand how you operate, eliminate the hurdles to growth and profitability, and then share this “win” with your custodians and BDs.

We hope this helps! Seeking operational excellence? Drop us a line by connecting HERE