What do you Measure in your Financial Advice Business?

At the end of the day for most advisers, there’s one measure that stands head and shoulders above the rest in terms of importance – profitability.

Until recently, many firms actually didn’t view profitability as their key metric; their main focus was on income. This was usually backwards looking, i.e. examining income in the last 12 months, or sometimes also looking out at the next 12 months. Many firms have now switched this focus to looking further forwards – based on their increasing trail commission and fee incomes, what is income forecasted to be next year / in 5 years time / in 10 years time? This now gives a real sense of the future health of the business.

While income is a very important metric, profitability tells a truer story of the health of the firm as it takes account of the expenses of the firm, and helps to better determine the future value of the business. Now this is what you (or other shareholders) are really interested in!

However there are so many factors that can impact your profitability, most firms will look to dig a little deeper to examine some of those factors that are impacting their profitability. Set out below are just some of the metrics used currently by different advice firms, that help them to determine the performance of key inputs to their profitability. Which ones might it make sense for you to start tracking?

 

Client metrics

There is a range of metrics that can be used to measure the success of your client activities. These include;

  • Number of clients: this can be measured at an overall level and also within segments of your target client groups.
  • Average revenue per client: this will give you a sense of whether you are building greater value into your propositions and whether you are reaching your ideal clients. Again this may be carried out at a segment level.
  • Average recurring revenue per client: this will give you a good sense of the future health of your business.
  • Number of new clients: always a good measure of whether you are growing as a business or not!
  • Client satisfaction: this will give you a sense of your likelihood to hang onto your clients into the future. Again this can be carried out at a segment level. The Net Promoter Score is a very simple but useful measure of client satisfaction.
  • Risk register: Are there problem cases that need to be monitored? If so, a firm oversight needs to be maintained, both in relation to the number of cases and progress of these cases towards a solution.

 

Staff measures

Again, there is a range of measures that you can use to ensure your staff are performing to their maximum potential;

  • Sales Performance: This may be based on volume, margin or other relevant measures.
  • Activity: This may be the number of new clients secured, first meetings secured, financial plans completed etc. It is always useful to get a good sense of the activity levels of each of your sales team.
  • Staff satisfaction: Similar to client satisfaction, this is important too! Are your staff happy and committed to the long term health of your business or are they just waiting for an opportunity to jump ship? Staff satisfaction measures can help you uncover these insights.

 

Marketing Metrics

Yes, most marketing activities can actually be measured! Here are a few that will help inform your marketing activities;

  • Contact data quality: This might be as simple initially as tracking the number of client email addresses you have secured. Email offers you a no cost method of getting marketing messages out to your clients.
  • Numbers and source of leads: Tracking the numbers and source of new lead is one of the best inputs into decision making around future marketing activities. If it worked before, it might be worth repeating!
  • Website analytics: Google analytics will give you a wealth of data in relation to your online marketing activities. For more detailed information in relation to how Google Analytics can help financial advisers, check out our previous article here. Google analytics can tell you;
    • The number of people finding your website
    • Where website visitors came from – Search terms, social media, directly accessing your website.
    • The content that attracts people to your site…. and also drives them away.
  • Social media interactions: Likes, +1’s, comments, Retweets! These terms are “Double Dutch” to some people, highly valued endorsements of your content to others!

There are of course many other measures available to be used within your business, these are just a few that are available to you. However the list is also potentially endless! For most advisers, the starting point is to identify a few metrics that you feel will make a real difference to your business, and then track them diligently.

There are many metrics that people use that are not listed above. Which ones do you find particularly useful? All your comments are welcome below.

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