How financial advisers can stay ahead of the competition

Eight practice management ideas from the Fidelity Inside Track Conference

Nov 1, 2013 @ 8:54 am

By Megan Durisin

practice management
+ Zoom

Advisers who compare themselves to the competition have a better chance of staying ahead.

That's the advice Mathias Hitchcock, vice president of Fidelity Institutional Wealth Services, gave to advisers at the Fidelity Inside Track conference in New York.

His lecture dove into data from Fidelity's 2012 RIA Benchmarking Study. (The 2013 version is set to roll out later this year.) Mr. Hitchcock focused on how high-performing firms — those in the top 25% in the industry in terms of profitability, assets under management over a three-year period and productivity as a measure of earnings before owner's compensation — are outperforming the competition.

There isn't one thing that separates high-performing firms from the rest of the pack. Overall, it's a matter of gaining assets through better sales effectiveness, investment performance and client retention, Mr. Hitchcock said. Looking at the data as a whole shows some ways they are a “little bit better” across numerous industry benchmarks, he said.

“We see this very clearly as being a story of strength across the board,” Mr. Hitchcock said. “It's a very significant difference in business performance.”

Here are eight takeaways from his panel discussion:

1. Seventy-two percent of top firms close business in two or fewer meetings. That compares to 53% of other firms.

2. Only 3% of high-performing firms stray from their “target client” profile. That compares to 11% of all other firms. “They get better at telling the same consistent story to the same consistent client and that does have an impact,” Mr. Hitchcock said.

3. Top firms focus more intently on larger client relationships.

4. They are more likely to bundle services in their overall management fees.

5. High-performing firms have seen assets grow an average of 20% over the past three years. Other firms have grown assets an average of 12%.

6. Top firms manage an average of 3% more assets per client.

7. On average, top firms have a more diversified staffing model. The largest allocation of their head count, 45%, is designated “other staff.” Forty percent of their staff is advisers and 15% is management. For other firms, advisers make up the majority of staff positions.

8. High-performing firms have an average of 80 clients per adviser, versus 64 clients per adviser at other firms. The firms also manage an average of $113 million in assets per adviser, versus $75 million per adviser for other firms.

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