Local talent shortages prompting advisers to outsource

On a webinar hosted by Netwealth, VBP chief executive Nathan Jacobsen explained that, while many advice practices are driven to outsourcing due to lower costs, others are essentially forced to do so due to a shortage in local talent.

Since the COVID-19 pandemic hit in 2020, Australia has seen significant swings in its unemployment rate, hitting a high of 7.5 per cent in July 2020 and a low of 3.5 per cent from August 2022 to December 2022, according to the Australian Bureau of Statistics (ABS).

Since then, there has been incremental improvement, with the unemployment rate sitting at 4.1 per cent as of September 2024. As such, Jacobsen explained that ongoing low numbers of available new staff have made it difficult for practices wanting to expand their teams.

“In a low unemployment environment, simply finding resources and talent in your local area may actually be a threshold to your own ability to grow. So, it’s not really a cost question, it’s the talent available, but also quality. Over time for a lot of people, their offshore partners become a better-quality answer for them than doing it onshore,” he said.

“I think it’s worth just noting that when you think about these options and the reasons, many people start with cost but it quickly becomes about more than that.”

When it comes to practices considering what they should outsource, Jacobsen said they need to consider the value that each task provides, and the ease at which others could be equipped to complete it.

“Once you are clear on what you’re really good at and what you want to spend your time on, then everything else should be outsourced. Everything else is a waste of your time,” he said.

“The way to think about this is, if it’s something that is low value to your organisation but high volume, repetitive, and is trainable, then it’s a great candidate for outsourcing. But of course, you start simple and you grow over time to more complex tasks.”

He added: “So, getting the team together and discussing what are the low-value, high-volume tasks that nobody really wants to do, that is time consuming, and the client wouldn’t necessarily pay for. Those are your natural candidates.”

Jacobsen explained that there are four primary ways businesses can go about outsourcing depending on their needs and the level of involvement and responsibility they desire.

These include full process outsourcing, active management, seat leasing, and gig economy, however, Jacobsen said that VBP recommends the active management model, where an offshore team member is introduced into a company to act much like a traditional, onshore employee.

When it comes to pursuing offshore outsourcing, Jacobsen explained that there are a number of concerns that practices will need to address to ensure a smoother experience. He said that practices may need to reassure existing staff of their job security as some may be concerned about being replaced by less costly, offshore staff.

“In reality, the offshore team member is not replacing an Australian. What’s usually happening is the local team member is moving into high-value tasks and they’re also potentially moving into different roles as well. So, it’s an augmentation benefit that comes through,” he said.

In the modern age, Jacobsen said it is “paramount” that practises be mindful of cyber security risks and protecting clients’ private data. As such, he said there are a number of question practices need to ask themselves if they choose to pursue outsourcing.

“Is your partner ISO 27001 compliant and is that externally audited? Is your data actually leaving Australia? How are local labour laws being handled? Are you at the risk of sham contracting if you employ them directly? … How is cyber risk being managed? How do we have a secure IT infrastructure?” he said.