Working with an outsourced paraplanner
Cathi Harrison, managing director of Para-Sols, was recently appointed to the board of the Personal Finance Society. Here she talks to Rob Kingsbury about the increasing demand for paraplanning services and the practicalities of working with adviser firms
Cathi Harrison is managing director of outsourced paraplanning company Para-Sols. She was recently appointed to the board of the Personal Finance Society (PFS) to provide representation from the paraplanning community and to help the PFS develop its support for paraplanners.
Cathi set up Para-Sols in June 2009 and has built the company into a firm of 10 people, consisting of seven paraplanners, including herself, and three admin staff, with offices in Darlington and Farringdon, London. We spoke to her at the London office.
ABR: What’s caused the notable increase in demand for paraplanners in recent years?
CH: There are several reasons but in the main it’s a cumulative change that’s come about because the structure of the typical financial adviser firm has been changing. RDR has shifted the focus of firms away from products and more to being service providers. This means advisers have to spend more time on the business and creating the right service proposition and they need more support both to free up their time from writing reports and to allow them to deliver that service. It’s been a cumulative change, in part driven by regulation of the industry and in part by a developing business culture.
ABR: What are the benefits for an adviser firm of incorporating paraplanning into their business model?
CH: Perhaps the main advantage for a financial adviser firm in using paraplanner support is that gives them a separate assessment of a client situation. Where an administrator will be very good on gathering the information, the paraplanner’s skill is in analysing the data. There are so many different areas to cover in financial planning – particularly when dealing with a new client where they may have numerous existing policies that need reviewing – which can be quite time intensive. That’s not necessarily the area of expertise of an administrator and it’s not always something that the adviser has the time to do.
The firms we work with appreciate having someone else who can look over huge amounts of data to make sure they aren’t missing anything out, that they’ve picked up on all the main points. It can save them a huge amount of time as well as give them the confidence of that second pair of eyes.
ABR: Do advisers tend to use outsourced paraplanners differently to the way they might use in-house paraplanners?
CH: Whether an adviser firm will employ an in-house paraplanner or use outsourced paraplanning services will very much depend on the set up of the business. This will include practical elements such as the technology available and the location of the firm in terms of recruitment, for example, but it will also depend on the kind of relationship the firm has with its clients. In-house paraplanners will have a much closer relationship with clients, they’ll tend to speak to them a lot more on the phone, and they’ll often be able to sit in on meetings. In this respect, sometimes in-house paraplanners can be a mix of paraplanner and client relationship manager.
Outsourced paraplanners, on the other hand, may be the better option for a firm if it has limited office space, if it doesn’t want the commitment of a permanent employee, or if it already has in-house paraplanners and wants the flexibility of the additional resource as and when needed. The trade off is that there won’t be a paraplanner sat in the house and able to speak to clients.
ABR: Is there a typical size of adviser firm that uses your services?
CH: We have a very broad mix of firms using Para-Sols. We work for one-man-band firms who use us for everything from paraplanning to admin support and where we will speak to the clients and arrange annual review meetings and so on, and then we have large firms who have their own in-house teams of paraplanners but will use us for ad hoc support as an overflow and during busy periods.
ABR: How much do you work in the adviser’s office and how much work is done virtually either from your offices or from a home base?
CH: We’re fully office based and very team focused. I want everyone to be working in an office environment where they can talk to each other, share ideas and help and support each other rather than scattered all over the place. We’ve got the two bases north and south but we don’t go into adviser offices, the work comes to us.
ABR: Taking an average adviser firm, what kind of service will you be providing for them?
CH: In the main it would be reviewing the position of new clients joining the firm, which will include helping gather data on the assets the client already holds. If the firm uses cashflow forecasting we’ll input that data into the system. We’ll look for any shortfalls in the client’s objectives and we will do any research and analysis needed and pull together a report that summarises everything for the adviser. Those are the main tasks we’ll undertake for the majority of firms.
ABR: Do you fit with the adviser firm’s way of working?
CH: Absolutely. Although we work within our own offices, if the advisers have their own processes and procedures already we will fit in with them, so hopefully they can view us as an employee that just happens to be elsewhere in the country.
Around 60% of advisers will use our in-house templates because they haven’t got one they already like and the other 40% will have their own in-house templates.
We’ve found that all the firms we’ve worked with are open to suggestions if we think something could be done in a better way, or tweaked to improve it. As we’re working across a range of different companies we’ll see different ways of doing things that could benefit them.
ABR: Working across that range of firms presumably means your team has to use various software packages. How do you ensure your team keeps up-to-date in all those packages?
CH: Because we fit in with whatever the adviser firms’ use, we use pretty much everything that’s out there at the moment. What I say to people in training is once you’ve got to grips with the theory behind one software system or one cashflow planning tool, you can pretty much use any of them. They are designed to do the same thing; they just have slightly different interfaces. They all have pretty good support teams if there is anything we need to know; and having everyone working in the office, if there is something someone doesn’t know how to do there will usually be someone there who has experience and can talk them through it.
ABR: When you start with a new client, what’s the initial process?
CH: We have an information pack that we will send to the adviser which explains a bit about us, the service, the fees, how we work and so on. If the adviser wants to come on board we have a simple questionnaire for them to fill in. This tells us about them; their systems, software, the work that they do, their preferred platforms, investment proposition, etc.
Then it takes five minutes to set them up as a client. We will add them to our system and agree a way to securely share files and documents.
What I say to firms is that the best way to find out about what we do is to try out the service, as it’s easier for someone to use the system than it is to try for us to explain how it works in practice. If they put a case in they can see see how the service works, what the output is and whether they are happy. Then we’ll talk again before they come on board fully.
ABR: What’s the one thing that advisers can do to make better use of outsourced paraplanning services?
CH: Advisers have to realise that outsourcing paraplanning is not a solution to any in-house problems. If they’ve identified an issue in their process, for example, they need to sort that issue before the start to use an outsourcing service or the outsourcing simply won’t work for them.
For example, if they have an issue in selecting preferred investments for clients, it’s not possible to outsource the investment strategy to the paraplanner. Advisers need to make sure they have everything working at least in theory or on paper in-house, so they know how things work and how they want to interact with clients and then use the outsourced paraplanner to provide the resource to check it and test it and back it up.
ABR: While paraplanning is your core business, Para-Sols offers a range of business support services to adviser firms. What was the reason for expanding your offering beyond paraplanning?
CH: We provide administrative support for clients, separate to any admin done as part of the paraplanning services. That could be gathering data for annual reviews, setting up the review meetings with clients, etc. We also do compliance checking on files if the adviser firm wants an extra pair of eyes on cases. And then we have a service that is all about helping firms transfer their legacy assets, approaching their existing client bank and looking at how we can review clients in bulk and move their assets where necessary and suitable.
These services have all been developed from adviser demand, where advisers have been asking if we can help in certain areas.
Outsourcing in general is gaining so much more traction, and what we’re finding with paraplanning is once advisers have taken the step to outsource, and they’ve tried it seen it works and dealt with people remotely, which can seem quite daunting at first, then often they will look at what else they can outsource.
We want advisers to see Para-Sols as a rounded support company, which allows them to look at their business, see where the gaps are and then pick and choose from our range of services to fill those gaps.
Visit the Para-Sols website