Cost of set up and lack of income security are the major elements cited by paraplanners preventing from setting up their own outsourced company, our latest Parameters survey has revealed, while others say if you are going to do it, do it now.
The majority (61%) of paraplanners have not considered setting up an outsourced business of their own deeming these issues as too risky.
For many paraplanners, there is a worry that they may struggle to achieve the same level of work and income by themselves.
One paraplanner said: “I am not sure that I could generate the same level of income working on my own whilst also trying to market my services, invoice and do a good job for clients.”
16% said they had considered setting up an outsourced business but had decided against it.
For one paraplanner, who previously worked on a self-employed basis for a short period, the benefits offered by employment including regular income, employee benefit schemes and interaction with colleagues outweighed the benefits of working alone.
Others agreed that a lack of resources and social interaction with their peers, as well as the pressure that stems from being self-employed, would act as barriers to running their own outsourcing business.
As one paraplanner told Professional Paraplanner: “I prefer to work as a team and collaborate ideas and solutions and feel I might lose these being an outsourced paraplanner. There is also the cost of technology and licenses.”
Another noted: “I would love to but would also miss having resources available for help and might struggle going alone.”
However, 11% of paraplanners said it was something they were still considering.
One respondent said: “I will have to see what the rest of the year looks like at my current employer. Benefits are not great but so far it has offered stable employment. If this changes I will be more inclined to do something myself.”
Another said: “It’s something I am actively pursuing as I feel it will meet my personal circumstances better and also provide more variety in advice.”
Meanwhile 12% said they had taken the leap and set up an outsourced business, with several paraplanners running their own business for well over a decade.
2024 – a good year to establish your own company?
As part of the survey, Professional Paraplanner also asked the paraplanning community whether 2024 will be a good year for paraplanners to set up on their own.
Three quarters (75%) said they were unsure. Their uncertainty comes amid a difficult political and economic environment, with the UK economy entering recession in the final quarter of 2023 and the political landscape looking unpredictable. However, 17% of paraplanners took a more bullish stance, believing it to be a good year to set up an outsourcing business, more than double the 8% who disagreed.
Paraplanners agreed that success is likely to depend on the individual, with some having the ability to thrive while others will inevitably fail.
However, the issue of the market being “saturated” with outsourced firms emerged as a key theme, with many respondents believing new firms might struggle.
“I think there was massive growth in these in 2023 so not sure how much capacity the market has,” one paraplanner said.
Another commented: “There are significant headwinds and too many small one-person firms setting up with very little idea of the work and costs involved in running a business. In many cases a good paraplanner will earn significantly more by remaining in an employed role.”
It was also evident from the results of the survey that paraplanners believe advisers often fail to see the value of outsourced paraplanning, deeming it an extra cost.
As one paraplanner explained: “There is certainly demand for paraplanning and there always seems to be a lot of vacancies, however I feel some firms / advisers don’t yet appreciate the benefit of outsourcing, they just see it as a higher cost, particularly where an hourly rate is stated.”
The rise of technology, particularly artificial intelligence, was also cited as a possible barrier to the growth of outsourcing, with the software potentially compromising part of the need for simple report writing.
The time to do it is now
However, others said the rise of outsourcing could demonstrate the paraplanning community’s ability and worth to the advice process.
One paraplanner commented: “The economy is uncertain and the developments around AI are a challenge, but if someone is keen to set up an outsourced business, I wouldn’t let that put them off. They will simply need to have a clear vision and business plan to make sure it works.”
For a number of respondents, growing recognition of the value of paraplanning and demand for experienced paraplanners will help those looking to set up alone.
According to one paraplanner: “Experienced paraplanners are now at a premium so if you were confident in your abilities, it’s a good time to set up.”
The sentiment was echoed by a fellow respondent, who said: “There seems to be a shortage of qualified paraplanners in the industry with experience so without enough paraplanners to go around, becoming outsourced increases the potential for demand.”
According to another paraplanner, the paraplanning industry has a bright future.
“I think the past few years and into the future, have been and will be, great for anyone in any area of paraplanning. Especially with directives like Consumer Duty, whereby there’s more pressure to have solid processes in place, thus, more pressure on firms = less time for internal paraplanning,” they said. “Firms having the ability to outsource a huge chunk of work will always be seen as advantageous.”
