Numbers Game

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Latest research and trends from around the financial advisory business, updated regularly highlighting stats, charts, infographics and all things data.

Quantifying the best practices of advisory firms

InvestmentNews Moss Adams data show that top performers increase revenue by adding new clients

Apr 9, 2014 @ 12:01 am

By Matt Sirinides

In last year's InvestmentNews/Moss Adams Compensation and Staffing Study, the yearly benchmarking report in our Excellence in Practice Management Research series, we launched our "Best Practices" awards series — an initiative to acknowledge the top firms in the financial advice business. Our aim is to home in on not only the quantitative data that singles out the top-performing firms, but also the qualitative factors that highlight the decisions firms make to achieve such lofty results.

This year's benchmarking study, the 2014 InvestmentNews Financial Performance Study of Advisory Firms, hopes to continue that tradition [Participate now]. How will this year's top performers bear out the best practices?

Market conditions need not apply

In 2012, the typical participating firm saw 46% of its growth in client assets from market performance. Among top performers, that figure was 39%. What top performers do is increase sources of revenue primarily through new clients: the highest-ranked firms registered 45% of asset growth through new clients, versus 36% for all others. With the market experiencing record growth in 2013, we expect that advisory firms will register a higher percentage of year-over-year asset growth attributable to market performance across the board. In this year's study, we will delve into how firms with the best practices not only sustain growth by adding the right types of clients, but by also understanding the trajectory of their business, with the intersection of long- and short-term strategy, business development initiatives and a fine-tuned service model.

With client a median size of about two times that of the average participant, top performers generate five times more profit per client. The best firms not only attract the biggest clients, they also strive for efficiency in operations, staff and service models to maximize profit. This practice plays out at firms that define their ideal client, support those clients efficiently by hiring and assigning the right staff and have development and strategy goals that reinforce these practices.

Looking ahead

Between market factors and the recent trajectory of the financial advice industry, we expect 2013 revenue growth to be on par, if not greater, than what we saw in 2012 — the industry is poised to double before the close of the decade. The firms most likely to gain are the ones that have managed for the future and have a deep understanding of both their own growth potential and the value of their business. We encourage all firms to join us as we look to benchmark the advisory firm of the future — what we like to call Adviser 2.0 — by participating in the 2014 Financial Performance Study of Advisory Firms.


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