Fee businesses have more assets, higher expenses and bigger valuations.
A major study of independent financial advisory firms shows that profitability varies widely. The survey found, surprisingly, that adding producers doesn't always result in higher profits. But fee-based practices, as expected, command higher valuations (see charts).
Released in August, the 2000 FPA Financial Performance and Compensation Study of Financial Planning Practitioners was done for Atlanta-based Financial Planning Association. Moss Adams LLP in Seattle conducted the survey. (To purchase the entire study go to www.fpanet.org.)
The study queried 703 financial planning firms, 40% of which were sole practitioners. The rest were "ensemble" firms with more than one principal or partner.
Respondents identified as high-profit practices are the top 25% of participants in terms of profitability.