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• Please provide us with key operational metrics for affluent financial advisory business in banks globally, such as: banker to advisor ratio, average share of wallet, AuM per advisor, number of clients per advisor, profit and efficiency metrics and other relevant metrics/KPIs) - for each one, please provide figures that can be seen in specific banks
Hello! Thanks for you question about key operation metrics (KPIs) for affluent financial advisory business in banks. The most helpful sources that I used were KPI Metrics for Financial Advisors and Five KPIs Successful Financial Planning Businesses Monitor. The short version is that the most important KPIs are reviews and outcomes, product sales, retention rates, client feedback and complaints, and the distribution of client revenue. I could not always find specifics for every KPI for named banks, but I did include that information as well as general estimates where I could. Below you will find a deep dive of my findings.
KPIS FOR FINANCIAL ADVISORY BUSINESS IN BANKS
Key operational metrics for affluent financial advisory business in banks, globally, are reviews and outcomes, product sales, retention rates, client feedback and complaints, revenue, and growth. Revenue can be split into gross revenue, gross and net profit margins, direct expenses, and overhead expenses. Growth can be split into percentage of revenue from new or existing clients, percentage of revenue that is recurring, revenue/asset retention rate, and client retention rate. KPIs directed towards clients can be split into average revenue per client, the distribution of revenue per client, the distribution and average of client age, distribution of revenue per client age, client revenue per hour, and profit per client.
Reviews and outcomes are important because they help to examine the performance of client review via the number of meetings scheduled versus the actual number that take place as well as the percentage of clients that actually follow the advice given. Huntington Bancshares Incorporated had a 2016 full-year net income of $685 million, which was a decrease of 1% from the prior year, whoever total revenue increased 39% over the year-ago quarter. Examining the movement in client numbers can help businesses predict what to do next as well as where training needs to be given to staff.
Product sales can help uncover training needs and open up new opportunities. When businesses discover low scales, they can implement education and development to fix the issue. Client feedback and complaints help to establish the performance of the business and show that the business values its customers.
The distribution of client revenue is used to measure profitability, to see the average revenue per client and the number of clients that have high net worth. Retention rates help measure growth. Growth can be measured against revenue and client retention with revenue from retained business being different than revenue from new clients. Knowing the retention rates can help direct expansion. The median retention rate of clients’ year-over-year is 97%.
KPIS USEFUL FOR BUSINESS GROWTH
KPIs that are useful for the growth of business include the percentage of revenue that is recurring, the percentage of clients retained each year, the percentage of clients retained versus lost, the percentage of assets retained verses lost, and the percentage of assets that flowed out even though the clients were retained. The percentage of revenue that is recurring included ongoing trails, AUM, and retainer fees.
KPIS USEFUL FOR BUSINESS' FINANCIAL HEALTH
KPIs that are useful for financial health of business include direct expenses and overhead expenses. Direct expenses represent the cost to acquire and directly service clients, or in other words, the cost of the financial advisors that work directly with clients. Overhead expenses account for everything else from operations and administrative and management staff to office space to technology and software. Measuring profit margins is also important.
The gross profit margin equals the profitability of the firm after accounting for the direct expenses, while the net profit margin of the firm is what remains after accounting for overhead expenses as well. The 2016 full-year net income for Huntington Bancshares Incorporated was $685 million. A typical rule of thumb for advisory firms is the 40/40/20 rule where 40% revenue goes towards direct expenses and 40% to overhead expenses resulting in 20% net profit margin although larger firms tend to be closer to 40/35/25 in actuality. Brookfield for 2016's Q3 had revenues of 6,285 million for three months ended and 17,476 million for nine months ended with net income being only 2,021 million and 2,223 million respectively.
KPIS USEFUL FOR CLIENTS
KPIs that are useful for the clients in your advisory practice include the average payment from client to firm (AKA share of wallet), the distribution of revenue paid from each client, client revenue by age, and the time spent on behalf of each client by advisor and staff. Among existing clients, firms are increasing share of wallet with top-performing firms increasing share of wallet by 4% in 2014. The number of new clients has surged by over 24% for half of the RIAs in a 2015 study of RIAs with top-performing firms adding 10% or more new clients in 2014 and the median firm adding 5% more clients.
AUM
Assets under management (AUM) are important even though they do not give the whole picture. It is the single best and easiest statistic to instantly convey information about the firm’s approximate revenues. If you also know how many clients the firm has and how many staff the firm has (even approximately), then you can immediately understand most of the firm’s key metrics from average revenue per client to average clients per advisor to average revenue per staff to an estimate of gross and net profit margins. AUM doesn’t directly answer about the quality of a financial planner and their advice, but it does about the nature of the planning practice. Brookfield's AUM was $283,015 million as of September 30, 2016.
CONCLUSION
To wrap it up, retention rates, client feedback and complaints, product sales, reviews and outcomes, and distribution of client revenue are the best KPIs to use. I could not find specifics for every KPI for named banks, but I did include that information as well as general estimates where I could. Thanks for using Wonder! Please let us know if we can help with anything else!