Having surveyed 680 advisors, the firm found that while fewer advisors are outsourcing all investment activities, more are using external managers for over 75 per cent of their client AuM. Meanwhile, satisfaction reached a high of 96 per cent in 2016, as a majority of respondents claimed that outsourcing investment activities frees up more time to spend with clients.  

“Using a third-party manager can be a win-win scenario for advisors and clients, as is demonstrated by the percentage of client assets being outsourced,” said Marie Dzanis, head of intermediary distribution at Northern Trust. 

“Increased usage of investment management by turnkey asset managers, registered investment advisors , ETF strategists and the increasing use of robo advisory or ‘fin tech’ capabilities highlight the need for scalability,” Dzanis said. “Advisors need to serve diverse global clients with more assets in real time and these tools can help.”

As the 40 per cent above-mentioned figure suggests, using an external manager is not, however, embraced by all advisors. But while most respondents do not currently outsource, they have not ruled it out in the future, Northern Trust noted.

“The key reason for keeping the function in-house is because investment management is core to a firm’s value proposition,” the firm said, adding that usage by advisor channels also varies considerably. 

The upcoming Department of Labor fiduciary rule on retirement assets, changes in the market environment and client investment and service needs all factor into advisors’ decisions on whether or not to use an external investment provider, for example.