Red Zone Calculator
Measure your firm's and your clients' profitability
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Red Zone Calculator
Measure your firm's and your clients' profitability
By IN Research and American Century Investments — October 14, 2019
Do you have any clients below an optimal profitability level? Armed with InvestmentNews data, this tool determines your client’s profitability. Complete the information below about your overall client base, as well as individual client/AUM levels and the calculator will return a “score”, providing the benchmark and assessing if you’re above or below optimal profitability levels.
After filling out information in the top left table, the table on the right will show how your firm’s client profitability metrics compare with competitors of similar size.
A graph will also appear directly below the two tables that demonstrates how different client segments typically contribute to firm profitability for a business your size. The green bars show the typical client composition of similar-sized firms, based on client asset levels. The yellow line shows the contribution each client segment makes to the total percentage of firm profits; this line is also based on industry averages for similar firms.
Institutional view
Input your firm’s information
How does your firm compare?
| Your Firm | Typical Firm | |
|---|---|---|
| Revenue per Client | – | – |
| Total Clients | – | – |
| Profit per Client | – | – |
| AUM per Client | – | – |
| Revenue Yield on AUMFirm revenue divided by firm assets under management | – | – |
| Billings per Client Service HourFirm revenue divided by 1300 hours per year spent with clients divided by “# of professionals” | – | – |
| Average hours per client1300 hours per year spent with clients multiplied by “of professionals” divided by “Clients” | – | – |
Breakout of advisory firm clientele and profits by client asset levels
This section shows whether an individual client is profitable, and what a firm might need to change to make them profitable. After inputting client information in the table on the left, the table on the right will show how that client compares with the average client at a firm your size, based on several revenue and profitability metrics.
A chart below those tables will then provide a visual gauge of how profitable that client is relative to other clients at firms in the same revenue band. For example, a client in the 90th percentile would be more profitable than 90% of clients at an average firm your size. You can change the client data in the left-hand table to see how altering the client fee or assets will make the relationship more or less profitable.
Individual view
Input your firm and client information
Is your client profitable?
| Your Client | Average Client | |
|---|---|---|
| Client fee | – | – |
| Client revenue | – | – |
| Client profit | – | – |
| Profit margin | – | – |
| Annual client hours | – | – |
| Hourly client revenue | – | – |
Range of client profitability for a typical advisory firm of your size
*To learn more about advisers’ considerations around client profitability, download the full report here.
