Paraplanning function going in-house: Helm Recruitment Insights

Paraplanning function going in-house: Helm Recruitment Insights

In the past six months, Helm Recruitment has observed a discernible trend in the centralisation of the paraplanning function, with more firms choosing to retain the function in-house, or bring it back in-house, through hiring a dedicated paraplanner. This follows a period where businesses had seemed increasingly open to outsourcing their paraplanning function

Like most businesses structures, there is no "one size fits all" model. For wealth management and financial planning businesses, it comes down to deciding what structure delivers the best quality outcomes in the most efficient way for your firm. 

Let's consider the options:

• In-house paraplanning: This will likely incur a larger fixed cost but will allow you to mould, develop and train a person  to better control the quality of outputs, as well as tailor often complex Statements of Advice (SOA’s) to individual clients
• Outsourced paraplanning:  Outsourcing the function to an external party obviously frees up capital by shifting a fixed cost of the business to a variable cost, with savings available for technology, marketing or Advisor training. Outsourcing does, however, require significant on-boarding time and commitment, as well as significant review of the quality of SOA’s once they are completed.  There is also the commitment of time to brief outsourced providers on the management of more complex clients. 

Even where firms apply similar models, we see that paraplanners are used in different ways to alleviate their admin burdens.  The litmus test for many seems to be the type of and level of advice they are offering their clients. Do they necessarily need to have an in-house Paraplanner to assist in offering the level of advice or can they maintain quality and increase efficiencies through outsourcing? 

Some businesses have found they do not require what may be, for them, a costly relatively over-qualified permanent Paraplanner to perform lower-complexity largely commoditised tasks. However for businesses that provide their clients with more independent, tailored advice and less product-driven advice, the value of an in-house Paraplanner becomes critical.

Stronger technical skills and knowledge of the client will be required to produce higher quality advice strategies.  For instance, businesses that cater for wholesale versus retail clients will require the support of greater technical skills and an ability to tailor an individual plan for each client’s individual needs.

Each individual business and its Advisors will largely determine the role and responsibilities of their paraplanners and in line with this, the quality of outcomes they would like to deliver vis a vis the costs associated with bringing on new clients and the efficiency levels that can be achieved.

In an increasingly competitive environment, subject to ever more regulation and compliance, cost considerations are usually the main driver in choosing between an in-house or outsourced paraplanning model. Add to this Advisors now receiving reduced, if any, up front commission and you understand why smaller, boutique business may be reluctant to invest in an in-house planner who might be under underutilised for significant periods of time whilst having to absorb the fixed costs of their salaries. 

Paraplanners remuneration can range between $55K to $85K (Salary Survey)  so outsourcing can be an option to manage fixed costs, in providing greater flexibility and adding value to your business in busier periods while eliminating costs in leaner times.

Interestingly, Helm's experience is that the increased compliance and regulatory requirements have increased demand for skilled in-house Paraplanners, with strong knowledge in these areas, to support the Advisors and the business. Our clients tell us the in-house model provides greater ability to control the quality of both inputs and outputs over outsourcing to an external party.  Those who have tried outsourcing question the quality of what they receive compared to having a dedicated Paraplanner available to support them, also noting the duplication in activity involved in reviewing outsourced paraplanners' work.

On the flip side, outsourcing the paraplanning function is often seen as the least risky and most cost-effective way of dealing with the documentation and administrative needs of the business, freeing up Advisors’ time to service existing clients and procure new ones.

Some businesses have expressed reluctance to employ additional paraplanners, citing the "stepping stone" nature of the position, from paraplanner into an Advisor role.  Understandably, they are wary of the transitional nature of the role and can be cautious about investing the time, training and development into a person that has one eye on an Advisor role elsewhere. This thinking makes outsourcing a more attractive option. However, this ignores the benefits that can be achieved through moulding and immersing a paraplanner in an organisational culture, with a view to progressing them into an Advisor role within the business. There is a definite cost benefit in this approach too, avoiding the costs associated with finding, attracting and hiring a new advisor externally, which can be difficult to find.

Developing an Advisor from within the ranks means that person already understands the systems, processes and culture, values and beliefs of the business.  This approach is also a great way to retain strong staff as they see a clearly defined career path from Paraplanner to Advisor.

So while the trend may shift again, it seems wealth advice and financial planning firms currently see value in  employing competent  paraplanners who understand their client base and can produce consistent, quality output more efficiently, confident in their knowledge and application of the compliance and regulatory requirements.  For these businesses, paraplanners are an asset that frees the Advisors up to do more business rather than a cost to the business.

Brendon Jukes specialises in making appointments across the Private Wealth Management, Financial Planning and Funds Management Industries

Helm Recruitment is a financial services recruitment specialist. We focus on careers in investment management, including private wealth management, financial planning and funds management.