Key performance indicators, or KPIs, measure how well your firm is doing in terms of meeting goals. At a glance, KPIs can tell you whether your firm is moving in the right direction or veering off-track. On a deeper level, these indicators are helpful when it comes to developing strategic plans for the sustainability and growth of your firm.
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Understanding KPIs for Financial Advisors
KPIs are not specific to the financial services industry; they’re a tracking tool that virtually any type of business can use to measure performance. That being said, KPIs can tell advisors a lot about the health of their businesses and how they’re doing financially, operationally and competitively.
Tracking performance indicators enables advisors to make informed decisions about their businesses, which is often the key to building a sustainable and profitable firm for the long term. With that said, here are a few helpful tips for using KPIs to gauge your firm’s health:
- Start by defining your primary business goals or objectives.
- Choose KPIs that are specific, easily quantifiable and relevant to your overall goals.
- Clearly define each indicator and the source of the data you’ll track.
- Establish a consistent frequency for tracking indicators.
- Determine a framework for analyzing and evaluating the data you collect.
KPI tracking software can simplify the process of collecting and organizing data. You might consider adding a KPI program to your tech stack if your customer relationship management (CRM) software doesn’t offer this level of functionality.
KPIs for Financial Advisors to Track
Performance indicators can be divided by category or by type. Some KPIs are operational, while others are strategic. Below, you’ll find some of the most helpful indicators that you can track for your business.
Financial KPIs
Every advisor wants to run a profitable business, ideally one with revenues that increase year-over-year. If you’re assessing the financial side of your business, you might find it helpful to track the following:
- Net profit
- Gross profit
- Debt-to-asset ratio
- Cash flow
- Total assets under management (AUM)
- AUM growth
- Revenue per advisor
- Net profit per advisor
Net profit tells you how much revenue remains in the business after all outflows are calculated for a set period of time. Gross profit, meanwhile, measures your overall profitability. At the other end of the spectrum, revenue per advisor and net profit per advisor can tell you which members of your team are your strongest performers.
Client-Focused KPIs
How well do you know your client base? Tracking these indicators can help you better answer that question, which can prove useful when creating marketing campaigns:
- Number of households served
- Average revenue per client
- Net profit per client
- AUM per client
- Time spent per client
Looking at these data points can give you a better idea of which segments of your client base generate the most or least revenue, and how that corresponds proportionally to the time spent working with each client.
You can also look at two other categories of indicators: client acquisition and client retention.
Client Acquisition KPIs
Gaining new clients is essential to your firm’s growth and ongoing financial health. These indicators can offer a snapshot of how quickly your firm is expanding, and the impact that growth has on your bottom line:
- Client acquisition cost
- Return on investment
- Conversion rate
- Churn rate
- Client growth rate
- New client revenue
- Referral rate
Referral rate may be of particular interest if you’re hoping to generate new leads organically through client referrals.
Client Retention KPIs
However, gaining new clients for your firm isn’t simply enough; you also have to retain them. Some of the KPIs you might track to see how well you’re doing here include:
- Client retention rate
- Monthly recurring revenue per client
- Customer satisfaction score
- Average client tenure
- Customer lifetime value (CLV)
Net promoter score (NPS) is another useful indicator to monitor; this can tell you how likely your clients are to recommend your firm and services to others. You might use a client satisfaction survey to measure this metric.
Marketing KPIs
Marketing KPIs can tell you how effective your marketing campaigns are, as well as which efforts are generating the best return on investment. Some of the indicators you might find useful include:
- New visitors to your website
- Returning visitors to your website
- Search engine rankings
- Email opt-in rates
- Email open rates
- Email click-through rate
- Unsubscribe rates
- Social media follower count
- Social media engagement
- ROI for digital ad campaigns
These indicators can help you track the performance of your digital marketing plan. If you’re tracking offline marketing campaigns, you might collect data on cost-per-lead or cost-per-conversion.
Frequently Asked Questions (FAQs)
Why Should Financial Advisors Measure Performance?
Measuring performance is the best way to see how well your firm aligns with your goals and expectations. Without any type of benchmark to measure yourself against, it’s difficult to determine whether your momentum is propelling you closer to your goals, or further away from them.
What Is Benchmarking for Financial Advisors?
Benchmarking means comparing your firm’s business practices against your competitors or the industry as a whole. You choose a baseline or standard to measure your firm against, and use your findings to determine which areas of your business need improvement the most.
How Can Financial Advisors Monitor KPI Results?
Utilizing KPI tracking software is a straightforward way to organize data and analyze results. These programs can allow you to create KPI tracking templates or dashboards that you can then use to track the various indicators you’re monitoring.
Bottom Line
Key performance indicators can shed light on how your firm is doing right now, and where you may need to improve to reach your future goals. Tracking these and other KPIs is an integral part of business development for advisors who hope to continually reach higher performance levels.
Tips for Growing Your Advisory Business
- Tracking marketing results is important for understanding the effectiveness of your various campaigns. If you’re looking for a way to simplify marketing, you might consider partnering with an advisor marketing platform. SmartAsset AMP helps you find leads and gives you the tools you need to nurture those relationships. Schedule a demo to learn how you can use it to grow your business.
- Collecting data on employee KPIs helps you evaluate how your team performs, outside the scope of new clients added or revenue generated for the firm. For instance, you might track things like turnover rate, absenteeism rate and overall productivity. You may also track employee satisfaction if you’re interested in reducing turnover and retaining top talent.
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