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Three Steps to Benchmarking for Optimal Advisor Performance

Three Steps to Benchmarking for Optimal Advisor Performance

Advisors with a clear vision for their business, who have the discipline to achieve their objectives, are most likely to benefit from an internal analysis to unlock their company’s potential. And one of the best ways to gauge performance is to use custom benchmarks.

An effective benchmarking process will help financial advisors identify and understand how their firm is performing against key metrics. It helps establish goals for improved performance and regularly measures performance against those goals and against the standards set by top-performing firms. In short, business benchmarking is a process that helps you make faster, more insightful business decisions with specific business intelligence.

The benchmarking process provides a critical view into the linkage between a firm’s behavior (decisions) and its outcomes (results). Given that most financial advisors lack a clear way to define what behaviors and decisions they can change to achieve different results, benchmarking can be an especially valuable business process.

Advisors can easily benchmark performance using an online financial dashboard. These platforms convert qualitative and quantitative data points into ratios, and compare the data against the ratios of the firm’s objectives and peer performance.

Advisors choose the appropriate time period for analysis and enter the firm’s financials to establish a framework to measure continued success. The higher the ratio, the closer the advisor is aligned to the firm’s objectives and peer metrics.

The most difficult aspect of the process is changing a firm’s business model in order to reach – and surpass – targeted benchmark ratios over time. Advisors will make difficult operational decisions, but disciplined changes in behavior will generate results.

As an initial step, a firm needs to identify the performance metrics that best suit its situation. A small, solo advisor may simply want to run a more profitable business; an emerging firm may be focused on how to drive and manage growth; an established firm may be looking to transform a successful business into an enterprise with offices in multiple locations.

To incorporate the benchmarking process into their businesses, financial advisors can follow these three steps:


Identify key performance indicators: Create benchmarks by converting financial data into ratios. Establish a set of key performance indicators such as revenue per advisor, revenue per client, revenue on assets, clients per employee and expenses per client to include in benchmarking reviews. Use these metrics first to establish baselines.

Measure and analyze performance metrics over time: Monitor key performance metrics on a quarterly basis against budgets, goals and peers to identify trends and areas of trouble or opportunities for improvements. Calculate the impact of performance gaps on business performance.

Adapt business practices to improve performance: Armed with sound business intelligence, you can confidently make changes to your business practices based on benchmarking reviews.


For example, an advisor focused on raising the ratio for revenue per client may need to reduce the number of smaller clients to adhere to new minimum–account-balance requirements, raise fees on underpriced client relationships, and target marketing strategies to reach prospects with higher net worth. With benchmark reviews each quarter, advisors should be able to make incremental improvements.

Benchmarking can also be applied to non-revenue performance measures to uncover opportunities. One example is a former client who, during the peak of the financial crisis, was an advisor at a silo firm with non-revenue performance measures (such as clients per advisor, clients per staff) that were 20 percent higher than the other two advisors in the firm. We found that his service and operations process made him more efficient. The other teams were able to quickly implement his process to improve their own client service and profitability.

At the same time, all three advisors recognized that their average revenue per client was below their target goal, which was now even lower due to market movements.

On the basis of the benchmarking information, the firm decided to hire a service advisor at a cost of $25,000 per partner to support smaller clients, so that the advisors could spend more time with larger clients to increase referrals and share of wallet. 

While firm revenue and assets were down, and revenue per advisor dropped further when they hired the service advisor, our quarterly benchmarking review showed that the affected performance metrics were improving at a rate that was faster than the markets. Once the market recovered, their AUM and revenue increased far faster than those of their peers, because the market gains were a bonus to the gains they had driven internally. The benchmarking process helped them transform the market downturn to their advantage.

Experience has proven that benchmarking is a comprehensive, efficient practice that can help disciplined advisors of any size assess business performance and realize how to improve operations. Identifying performance indicators, measuring and analyzing performance metrics over time, and adapting business practices to improve performance will optimize business and help advisors achieve their goals.



Matt Matrisian is Senior Vice President of Practice Management and Strategic Initiatives at AssetMark, Inc. (www.assetmark.com, a provider of investment and consulting solutions for independent advisors, and author of The Power of Practice Management: Best Practices for Building a Better Advisory Business.

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