If You Cannot Measure It, You Cannot Manage It

You must actively monitor and measure your firm’s performance to tell if you are meeting your goals, or else you can only hope you are reaching them. You can only manage potential problems and set strategic goals once there is a mechanism to measure and monitor your firm’s financial health, its growth and your clients. When making business decisions, having the correct data is critical. A business intelligence dashboard can highlight areas that will allow you to better manage and track the data in your practice. It will enable you to see patterns, review trends, set goals and measure return on investment (ROI).

Quantitative Data: The Numbers Game

Quantitative data involves using measurable metrics and numerical values to assess performance objectively. One clear advantage of quantitative data is its precision and clarity. It provides a concrete, numerical snapshot of a financial advisor’s success, making tracking progress and setting benchmarks easier. For financial advisors, these metrics can range from assets under management (AUM), client lifetime value or acquisition costs to ROI for different marketing, tech or operations spending types.

Metrics vs. KPIs

Metrics measure the success of everyday business activities that contribute to your key performance indicators (KPIs), which are quantifiable performance measures that are targets you should track that have the most impact on your strategic business outcomes. While metrics impact your outcomes, they are not the most critical measures. Some metrics examples include “monthly client touches” or “white paper downloads.” Although metrics can be great tools in your business, they are not likely to tell the story you need to hear.

KPIs support your overall strategy and provide the data you need to analyze and help you focus on what matters. They go beyond simple metrics by providing targets for teams to aim for, milestones to assess progress and valuable insights that assist decision-making across the organization. For example, a KPI could be “targeted new customers per month.”

Building a Business Intelligence Dashboard

Building a performance dashboard does not have to be a complex undertaking. It can be as straightforward as creating a spreadsheet, gathering data from your CRM system and other software and monitoring the data on a pre-determined timeline. A consideration in selecting metrics and KPIs is to ensure you are measuring and tracking the data most relevant to your practice. For example, a financial advisor can measure their success by examining KPIs like percentage increase in AUM over a specific period. However, a percentage increase in AUM alone does not necessarily indicate progress toward firm growth. It’s more important to consider asset growth minus market returns or new AUM-added gross revenue minus total client acquisition costs. Some suggestions for KPIs and metrics to include in your dashboard are presented below:

Firm Metrics & KPIs

Revenue tracked every quarter can give you a clear picture of your firm’s growth and sustainability. Remember that net new revenue gives you a look into the revenue gained from new clients or additional business from existing clients minus any revenue lost from client attrition. A positive net new revenue indicates healthy client acquisition and retention efforts. KPIs that can be included in your dashboard include new amount (%) of revenue from new clients, new amount (%) of revenue from existing clients and percentage of revenue that is recurring.

Tracking profitability is equally important. Significant metrics include gross profit margin and net/operating profit margin. Expenses should be tracked as well to determine profit margin figures and trends. KPIs like profit per client (revenue per client – cost per client) can be included in a benchmark dashboard to take profitability analysis a step further.

Client Metrics & KPIs

Growth in your client base goes hand in hand with growth in AUM. By tracking the number of new accounts acquired by your firm, you can evaluate the effectiveness of your marketing and client acquisition strategies. The number of new accounts provides excellent insights into your firm’s market appeal and growth potential.

Calculating average revenue per client/household provides deeper insight into the profitability of each client relationship. Average revenue per household can help identify opportunities to enhance income from existing clients and optimize your book of business. Drill down even further and include information on KPIs such as client revenue/hour. Client retention rate is also an important metric to track as it can be used to track the percentage of revenue that is recurring.

Client demographics provide another opportunity for developing metrics and KPIs. For example, looking at the distribution of clients by age and then the distribution of revenue by age can help identify potential client niches to focus on.

Employee Metrics & KPIs

A KPI that calculates average revenue per employee can show how each employee contributes to your top line. Tracking this key metric helps you to understand the efficiency of your team. In turn, this enables you to make well-informed decisions regarding your workforce.

You can also develop KPIs targeted at specific job functions within your practice. For example, the average number of completed service requests per Client Relationship Associate (CRA) helps to assess the productivity and workload of your CRAs. It enables you to identify potential imbalances and opportunities for improvement. For advisors, tracking the average number of meetings per advisor allows you to assess whether your advisors are being as efficient as possible when meeting with clients. Tracking these KPIs enables you to optimize your resource allocation to ensure manageable workloads across your team.

Client Activity Metrics & KPIs

There are quite a number of client development-related activity metrics that can be added to your dashboard. These include the number of prospect and client meetings, proactive client calls and the total number of client touchpoints. Collecting this data will help you determine extremely useful KPIs such as revenue per client or prospect meeting. These KPIs measure how effectively your client meetings generate revenue for your firm and enables you to identify opportunities to improve meeting outcomes and maximize the value of client interactions.

From a client servicing perspective, two important KPIs to include in your dashboard are the number of new and completed service requests. Monitoring the number of new service requests received within a specific timeframe allows you to gauge the demand for your services. More new service requests could indicate a growing client base and increased market penetration. Additionally, this could inform hiring decisions to accommodate growing demand. The number of completed service requests helps you measure the efficiency and effectiveness of your service delivery. By tracking this KPI, you can ensure that your team is meeting client needs in a timely fashion.

Final Thoughts

A business intelligence dashboard that includes relevant KPIs serves as a vital tool for understanding the health and performance of your firm. It provides valuable insights and the power to drive your business in the direction you want. Your intelligence dashboard should be updated (at least annually, but ideally even more frequently) to provide perspective on how these key performance indicators for the business are changing over time.

The data can also be compared to industry benchmarking surveys, such as the 2023 RIA Benchmarking Study by Charles Schwab, to identify potential problems, to determine whether your firm is still growing at a healthy pace or to review services and fees. From a planning perspective, you may focus on improving a particular metric or hold employees accountable for improving a specific metric as a part of their responsibilities to the firm.

Whether you are seeking guidance in establishing the most relevant KPIs to monitor your business performance or want to begin to build an intelligence dashboard, we’re here to help. At WAA, we’ve created a community of like-minded advisors who support each other through all stages of business growth. Contact us, and we’ll be happy to discuss our culture and how we might align with your needs.

We help advisors establish and grow successful wealth management practices. To learn more about how we can help you amplify your life’s work, contact us at team@waalliance.com. You can follow us on Twitter@theWAAlliance and on LinkedIn.

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