Can Outsourcing Really Save You Money?
Outsourcing paraplanning or any aspect of the financial advice process is an accepted means to increase capacity or free up your advisers' time, but rarely is it thought of as a move that can save money too. After all, contracting in external resources for any job is always expensive, isn't it?
If you've looked at firms like, for instance, The Paraplanning Partnership, then you'd have certainly drawn that conclusion. After all, their indicative costs are in the order of £200 per report more than we would charge at PowerPlanner! Most other freelance paraplanners charge similarly high amounts too, on the premise that you're paying for chartered experts with lots of experience.
With this in mind, can it really be better value to outsource than to hire a paraplanner and do reports in-house? We believe it can be.
According to recruitment website reed.co.uk, the average UK paraplanner earns £35,500 a year, although totaljobs.com reckons it's more like £37,500, and some sites actually have it closer to £30,000. For the purposes of this exercise, the £35,500 figure seems like a reasonable median salary, so let's work with that.
Once you've added on the costs of employment, such as pension contributions and NI, your in-house paraplanner is probably going to cost you around £38,000 a year.
£38,000 is about £731 for each week of the year.
Let's assume our paraplanner learns the ropes quickly and is highly productive, able to churn out 4-5 suitability reports per week.
So, if our salaried paraplanner costs £731 a week, and is doing 5 reports in that time, then that's about £146 per report to the company. If he/she does 4 reports then it's around £183 for each.
To compare against an outsourcing model, let's look at PowerPlanner's record over the first 2 months of 2021 for one of our long-standing customers. Throughout the 8 working weeks in January and February, we've delivered 84 suitability reports at an average cost of £158 each.
At first glance, then, it looks like PowerPlanner's costs are roughly the same as our productive in-house paraplanner on a case-by-case basis. However...
There are a few points specific to the employment option that need to be considered:
- Our in-house paraplanner costs £731 per week even when he/she is on holiday.
- Our employed paraplanner needs paying for sick/compassionate leave.
- The lost productivity from these paid absences has a knock-on effect of depleting other resources, as the capacity needs to be made up from elsewhere.
The first point alone is significant. If we assume the typical 20 days' annual leave, our £38,000 essentially buys 48 weeks' worth of work rather than 52. That means it's more like £792 for each working week, so £158 per report if 5 cases are done in a week or £198 for a 4-case week. This doesn't factor in leave for other reasons either, or the fact that, in quiet periods, there may only be 1 or 2 cases to do but the cost is still £792 for that working week.
When all that's considered, it becomes apparent that PowerPlanner's £158 per report is a good deal, matched only by our employed paraplanner in his/her most productive weeks.
Other Factors to Consider
There are factors other than time/cost comparisons that are worth considering when contemplating whether to employ a paraplanner or to outsource.
One of these is capacity. We all know that the first 3 months of a new calendar year are the busiest. Your advisers may have more business to write than the in-house paraplanning capacity can comfortably deal with. With the pressure of extra work and the hard deadline of the financial year end looming, the temptation to cut a few corners or shortcut the advice process can become too great. At best, this just leads to sloppy mistakes, but if compliance procedures aren't followed then there could be major issues later down the line.
Contrast that with, say, September, when the workload is light and advisers are on holiday. At this point you've got more capacity than you need, but you still have to pay for it regardless.
Outsourcing avoids these capacity problems completely, as you can simply pay for what you need, when you need it.
Another point worth thinking about is your ability to scale. In the dark ages of corporate management, productivity was thought to be directly proportional to bums on seats, but we now know that to be a falsehood. In fact, there's a significant "warming up" period where new starters, irrespective of their experience, need time to adapt to new practices and procedures.
As such, when your business grows and demand increases sufficiently for you to employ another paraplanner, investment will be needed to bring him/her up to speed. This investment usually comes in the form of your existing employees taking time out to show the proverbial ropes. In turn, this temporarily detracts from the paraplanning capacity that you have for as long as it takes the new starters to get established. It's not uncommon for this to be a few months, a whole probation period, perhaps, and even then there's no guarantee that this investment will give you the productivity improvements that you seek.
Again, if you use a service like PowerPlanner's, you needn't worry about this, as our technology-driven approach is intrinsically scalable and delivers consistent quality regardless of the throughput of cases.
As demonstrated, outsourcing paraplanning should be an investment that delivers real returns rather than a cost to the business. The key is to pick a service that offers you control, quality and efficiency where your business needs it.
At PowerPlanner, our whole service is designed with our customers' operational efficiency in mind. We're not like other firms that charge exorbitant fees on the pretence that you're paying for chartered experts with ample experience (who, by the way, probably don't do your day-to-day work anyway). We just get work done and get it done consistently well.