Numbers Game

Women-owned advisory firms outperform their peers

Firms majority owned by women in InvestmentNews study were more likely to be top performers – and to staff more women

Nov 21, 2016 @ 3:45 pm

By IN Research and Ellie Zhu

InvestmentNews Research conducts an annual benchmarking study, shifting its focus each year between financial performance and compensation and staffing. Last year, we collected staffing and salary benchmarking data for firms from 2014, including the gender of all staff members, and that data yielded interesting findings about the careers of women who own and work at independent advisory firms.

This year, in our 2016 InvestmentNews Financial Performance Study, sponsored by Pershing Advisor Solutions, we collected 2015 data that included not only firms' income statements and their client, asset, revenue and profit information, but also data on their fees and services, growth strategies, business development and marketing strategies, and equity management practices.

For a snapshot of how women differ in those areas from their male counterparts, we used information on the gender of firm owners to identify women-owned advisory firms, defined as those where women make up at least 50% of the partners. The cohort was tracked over the course of two separate studies, and in the table, we compare 21 women-owned firms with 101 others that weren't majority-owned by women who participated in both our 2015 and 2016 benchmarking studies.

Women-owned firms posted excellent marks in 2015 in profitability (29% operating margin versus 22.7% for all other firms) and revenue growth (8.6% versus 6.7% for all others) in a year when firms of all types struggled to expand. Sky-high profits and, as we'll see later, strong productivity, meant that although these firms accounted for only 10% of our sample, they made up 38% of our “Top Performer” cohort. To select the rarefied top quartile of firms that we analyze every year in our study, we look at five metrics around profits, income, growth and productivity to benchmark the industry's best-run firms.

Top-line performance metrics, 2015 data
Women-owned All others
Average revenue $2.7M $4.8M
% change from 2014 8.6% 6.7%
Operating margin 29.0% 22.7%
Average AUM growth 3.9% 5.4%
Average client size $781,000 $1,356,000
Portion of revenue paid to professionals 34% 34%
Portion of revenue paid to administrative and support staff 21% 19%
Income per owner $588,000 $643,000
Median revenue per staff $259,000 $253,000
Average firm headcount 11 16.5


It could be that 2016 proves more challenging for this group: Assets under management only grew by 3.9% in 2015, below the 5.4% of other firms. AUM growth is a leading indicator of the following year's revenue prospects, as the initial billings typically reflect the year-end AUM, not the total preceding year's revenues. So only 3.9% more AUM to start the year may mean revenues in 2016 started off sluggish in terms of growth.

While women-owned firms paid out an identical 34% of firm revenue in compensation to professionals, when it came to their administrative and support staff, they paid out slightly more: 21%, versus 19% of revenue paid by all other firms. That divide is what you'd expect given that women-owned firms in our sample are smaller, and smaller firms tend to pay more of their overall revenue for operations and administrative staff because of a lack of scale.

Percentage of employees who are women, by category

One thing stands out in the data that defies typical trends: Larger firms usually see greater staff productivity (as expressed by median revenue per staff), but women-owned firms outperform their cohort — and larger counterparts — in this regard. At $259,000 in revenue per staffer versus $253,000 for all others, women-owned firms appear more adept at leveraging talent. These firms outperformed their productivity benchmark by 5%, while their counterparts underperformed by 13.1%.

(Related read: Meet the 2016 Women to Watch)

Women-owned firms are much more likely to have female staffers, with the number of female professionals (lead advisers, service advisers and business development specialists) over 50% at women-owned firms.


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