Are you considering outsourcing your finance and accounting but unsure where to start? Your wealth management company is comprised of individuals knowledgeable on different finance and accounting topics; however, that doesn’t mean your company can’t benefit from the pros of outsourcing.
In fact, outsourcing accounting and finance roles in your wealth management business might be the accelerant you need to grow your company. As the wealth management market is poised to double in size by 2030 (Bain & Company), outsourcing allows you to focus on client acquisition and service, positioning your firm for significant growth.
In this wealth management outsourcing guide, we’ll cover everything you need to know about passing the accounting and finance reigns to an outsourced professional, including the pros and different tasks your professional will handle.
Outsourcing Options: The Best Finance and Accounting Professionals for Your Wealth Management Firm
Outsourced finance and accounting professionals can take on many different roles and responsibilities in your wealth management company. Let’s explore a few of these roles to help you pinpoint which professional your organization needs.
Bookkeepers
Bookkeepers handle your company’s day-to-day transactions by managing your general ledger. This primarily includes recording customer payments and entering invoices. Some bookkeepers will also process payroll and generate internal reports; however, most bookkeepers specialize in basic transaction management.
An outsourced bookkeeper is essential for wealth management companies that constantly fall behind on their accounting records. Bookkeepers ensure your general ledger is accurate to help you make informed business decisions and meet the needs of your clients.
Payroll Processors
Another type of outsourced accounting professional that your wealth management company might need is a payroll processor. An outsourced payroll processor handles all things payroll-related, such as setting up new employees, processing payroll, monitoring pay, and handling onboarding for benefits.
Having an independent outsourced payroll processor can reduce your risk of fraud, ensure employees are paid on time, and maximize compliance with federal and state agencies.
Financial Analysts
An outsourced financial analyst digs into the financial health of your wealth management company. They compile data to identify trends, areas of opportunity, and inefficiencies. For example, maybe your financial analyst uncovers a new investment avenue that your clients could benefit from or determines that 80% of your clients prefer electronic correspondence.
These insights allow your business to quickly adapt to changing market conditions, find viable growth avenues, and reach its strategic goals.
Accountants
Outsourced accountants are not the same as bookkeepers. While bookkeepers manage the day-to-day transactions, accountants take on a broader role, preparing formal financial statements, making adjusting entries, and planning for tax time and future growth. An outsourced accountant can also handle all of the roles of your outsourced bookkeeper, giving you the ability to maximize value.
Accounting wealth management outsourcing is beneficial for companies that might not need for a full-time in-house accountant. Your outsourced accountant can jump in on an as-needed basis to help you make important decisions, close the books, or adjust your financials.
Financial Controllers
A financial controller oversees the day-to-day financial operations of your wealth management company. In many cases, your wealth management team will be comprised of lower-level staff, which your outsourced financial controller oversees. Some financial controllers will also serve as your accountant, payroll processor, and finance hiring manager.
Having a strong tone at the top ensures your finance department is maximizing compliance, leveraging new opportunities, and generating accurate internal reports. Outsourced financial controllers in wealth management companies are common, as it can be difficult to find in-house professionals with the necessary expertise.
Chief Finance Officer (CFO)
An outsourced chief finance officer takes the responsibilities of a financial controller one step further, overseeing more operations than just your finance department. A wealth management outsourced CFO communicates directly with other C-suite executives and owners about current and future operations.
Outsourced CFOs are great if your organization needs to develop internal financial policies, has a team of in-house staff, or is looking for complex financial reporting.
Tax Accountants
Not all accountants offer tax services. Outsourced tax accounting is one of the most common accounting and finance tasks that wealth management groups outsource. After all, tax legislation can quickly become complex, especially if you have no formal background or experience preparing returns and corresponding with the IRS.
An outsourced tax accountant for wealth management businesses will understand the legislation your company is subject to, how to maximize tax savings, and when returns are due. Passing the tax burden off to a professional is highly recommended for wealth management businesses.
Learn more: Improving Your Accounting Processes Through Outsourcing
Wealth Management Outsourcing Pros
For many wealth management companies, the advantages of outsourcing aren’t always clear. Let’s cover some of the advantages your wealth management company can unlock with an outsourced finance or accounting professional.
Lower Costs
Outsourcing your finance and accounting tasks can actually result in lower costs, even if you are paying an outsourced CFO $100 an hour. For one, outsourced professionals are classified as independent contractors, meaning you aren’t required to pay employer payroll taxes on funds paid.
In addition, outsourced wealth management professionals have flexible schedules. If you only need help mid-month or for certain consulting projects, you don’t have to pay for a full-time in-house employee. Instead, you can contract your outsourced professional on an as-needed basis, saving you money.
Expanded Insights: The Power of Wealth Management Outsourcing
Bringing in an outsourced accountant or finance professional opens the door to new insights. For example, an outsourced financial analyst might uncover a new investment opportunity to expand your client base or find ways to cut down on variable costs. These insights are crucial when expanding your business or trying to improve profitability.
Similarly, outsourced professionals have the leadership capabilities to grow your internal team. Having a strong leader at the helm makes scalability attainable, whether that be taking on more customers, adding new revenue lines, or hiring additional staff members.
Stronger Risk Management
One of the weaknesses of many wealth management companies is risk management. Due to the intricacies of wealth management, companies are exposed to a variety of risks, from market risks to inflation risks. Finance and accounting professionals can identify prevalent risks and find ways to reduce them.
In addition, wealth management businesses face compliance risks. Federal and state agencies closely monitor wealth management companies for compliance. Without an experienced professional managing your risks, you could be met with stiff fines and penalties. Mitigating just one risk could save your wealth management company thousands of dollars.
Choosing the Right Wealth Management Outsourcing Partner
Before you bring on an outsourced wealth management accounting or finance professional, you want to be sure they are the right fit for your organization. Here are some factors to consider when evaluating prospective outsourced wealth management professionals:
Industry Expertise
The wealth management industry has very specific accounting, tax, and finance regulations that businesses need to follow. As a result, you want to bring on an outsourced professional who has experience with these specificities.
The roles and tasks you need completed will dictate the level of experience needed. For example, a general bookkeeper might not need to understand GAAP reporting for wealth management companies, but your CFO should.
More: Choosing an Outsourcing Provider: Top Five Things to Look for in a Partner
Credentials
Outsourced accounting and finance professionals with credentials demonstrate the candidate has completed the necessary education and certifications. Credentials will look different for accountants and finance professionals. Accountants will hold software certifications or a Certified Public Accountant (CPA) designation, while finance professionals may hold a Chartered Financial Analyst (CFA) license.
Although credentials aren’t required, they are beneficial. For example, only CPAs can complete reviews and audits. If your wealth management company is looking for a specialized outsourced accountant or finance professional, inquire about their credentials.
Cost
Even though the value outsourced professionals provide far exceeds the cost, you still want to be aware of the fees charged. The experience and expertise level will be the most influential factor in price. For example, a CFO or financial controller will charge more than a bookkeeper or payroll processor.
To find the equilibrium between cost and value, think about what services your wealth management company needs. Then, find the outsourced professional that offers those services. If you only need general ledger management, it wouldn’t make sense to pay for an outsourced CFO.
Availability
Wealth management companies can have seasonal demand. Finding an outsourced finance and accounting professional that can meet your availability needs is crucial. For example, let’s say your wealth management company onboards clients in April of each year. Finding an outsourced professional who is available during April would be beneficial.
Personality
When making your outsourced hiring decisions, you need to look at the big picture of your company’s culture. How will the individual fit in with the rest of your team? If you have an outgoing and energetic team, an introverted outsourced professional wouldn’t be the best fit. Generally, you can get a feel for the personality of your outsourced professional when you go through the interview process. Although you don’t want to discriminate against candidates based on their personality, you do want to find a professional that meshes well with your company culture.
Getting Started
This wealth management outsourcing pros guide is designed to get you started on your search for a qualified professional. However, it doesn’t cover every service or factor to consider when evaluating the needs of your business. For personalized advice on customizing your service package or understanding which roles to outsource in your wealth management company, contact us today for your free consultation.
