We are not post-RDR panacea, warns specialist paraplanner

Advisers that are increasingly looking to paraplanners in order to improve efficiencies and meet stringent post-Retail Distribution Review requirements should not simply outsource wholsesale to an outsourced paraplanning firm, according to a firm offering outsourced paraplanning services.

Damian Davies, director of paraplanning firm The Timebank, said using a specialist firm can be a valuable addition to an advisory business but that it works most effectively when the company has an in-house paraplanner as well, as an outsourced paraplanner “will never be able... to do the things an in-house paraplanner can do”.

In an interview with FTAdviser, to be published later today (15 November), Mr Davies dismissed notions that firms should outsource this function entirely because “it’s cheaper and better”.

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Previously, the founder of another specialist firm, Argonaut Paraplanning, told FTAdviser that more advisers are looking to remove the in-house function and outsource all paraplanning requirements due to the need to find RDR efficiencies and because of a desire to reduce their fixed costs ahead of a now postponed capital adequacy hike.

Earlier this autumn, an IFA firm had also highlighted the expense of employing an in-house paraplanner and said most advisers may not be able to afford this out of their existing income without increasing client costs.

Martin Dodd, independent financial adviser at Wolverhampton-based Midlands Investment Agency, said: “They are obviously providing a very valuable service to IFAs but if a paraplanner costs almost as much, if not as much, as an adviser, the IFA would then need to charge higher fees or find more clients that can pay the current level of fees.”

However, Mr Davies said the value-add of an internal paraplanner makes the cost worth it.

He said: “An in-house paraplanner is always going to understand the firm better, will always understand the clients better as they often sit in meetings, will always know the [centralised investment proposition] that the firm uses much more tightly than an outsourced firm will.

“In-house paraplanners give you so much more in that regard in terms of depth of capability than an outsourced paraplanner. The difference is that people engage us because our capabilities match or complement those the in-house people have.”

Mr Davies said the majority of firm clients at The Timebank have an in-house paraplanner as well, although he admitted there are also a number that do not.

Mr Davies said: “They have made that decision for a number of reasons: either they want the flexibility to just use us or they like the fact that using us means they’ve got 23 people that they can have at a drop of a hat, plus you’ve got other people that have tried employing paraplanners and it just doesn’t work. Or sometimes the relationship just doesn’t happen.”

Mr Davies said that firms may have an insular view of certain things and a benefit of outsourcing is that it can introduce a different way of thinking, which can complement an in-house option.