A report released yesterday by the Financial Planning Association found common traits among the most profitable advisory firms-namely, the most efficient practices operate with less support staff than comparably-sized practices by focusing on fee-based revenues with larger clients.
The Independent Advisor Industry Trends report found that the most efficient multi-advisory practices averaged 18% more fee-based income, had 51% larger clients, and had 31% higher net effective payout (NEP) per owner than comparably-sized firms.
In addition, the most efficient solo practices averaged 19% higher NEP than similar-sized solo firms, and 30% higher NEP in the critical revenue growth phase of between $250,000 and $500,000.
The report was released by the FPA and McLagen, a financial services consulting firm. It was sponsored by Fidelity Investments. It contained findings from the initial FPA Practice Management Scorecard provided by McLagan and sponsored by Fidelity Investments that came out last October. The Scorecard aims to help advisors improve their practices by comparing them against local competitor benchmarks.
"There is no doubt that in today's highly competitive market, that those firms that can enhance their operational efficiency will be better positioned to compete," said Jim Dario, executive vice president of Fidelity Institutional Wealth Services. "But streamlining efficiencies is easier said than done, especially given the increasing demand on advisors' time from high-net-worth clients. By identifying the characteristics of highly efficient firms, RIAs have access to a new layer of insight that can help them to more effectively manage their practices to maximize growth and profitability."
For more information on the FPA Practice Management Scorecard, to order the Industry Trends Report, or to register for the 2008 Scorecard, please visit https://FPAscorecard.mclagan.com or contact Todd Crowley at (312) 381-9706.