Haven't heard of the FPA's new "Financial Advisor Practice Management Scorecard" yet? According to the association's Web site (https://fpascorecard.mclagan.com/), "McLagan Partners and the Financial Planning Association (FPA) have teamed up to create a tool to help financial advisor practices improve their performance through relevant, local benchmarking.". "Local" being the key word.

Robert J. Powell III, president of Unison Associates LLC, a Salem, Mass., consulting firm, has worked with Moss Adams LLP in Seattle and McLagan Partners Inc. of Stamford, Conn., to help produce FPA-sponsored statistical data for advisors to use in benchmarking their profitability and compensation structures. Says Powell, "About two years ago, concerned that the Moss Adams studies weren't addressing all FPA members' concerns, the FPA put out a request for proposal for the creation of an instrument that members would find more useful and actionable. After hearing from folks such as Ernst & Young and similar firms, we went with McLagan because they've been doing these studies for 40 years and were willing to work with the FPA to create a study [with more local relevance]."

The new scorecard was first launched with 2006 accounting data, and the FPA received approximately 500 study responses, about the same as for earlier Moss Adams studies. What makes this remarkable, says Powell, is that the former studies were free; FPA members paid to participate in the McLagan study, since the end result is a "scorecard" showing each respondent's numbers in comparison to other firms in its region-a result apparently valuable enough to members to motivate them to pay $195 plus $30 for each individual financial advisor scorecard desired beyond the first one, which is free. (Results can be compared on both firm-level and individual-level bases.).

"The scorecard," explains Peter Keuls, head of the private client business at McLagan Partners, "is a three-page affair: one page for revenues, one for practice profitability and costs and then individual advisor performance pages."

The firm has prepared a sample scorecard that starts with a page labeled "Practice Scorecard: Revenues, Assets & Clients," indicates the relevant market (a city and state); the number of other firms represented (which, in the case of the sample, is 11); and the practice type (for example, a sole proprietorship). For variables such as revenues, assets under management, numbers of households, etc., the scorecard shows the advisor's other firms' data based on "low quartile," "median" and "high quartile" breakdowns, followed by a graphic indicating the advisor's personal relative performance in the study.

Our sample respondent's 2006 revenues from asset management alone were $231,300, between the median and upper quartile measures of $157,000 and $328,800. The sample firm's "practice rank" among the 12 firms (11 comparison firms plus itself)  is five out of 12 for asset management revenues. Other measures on the same page include revenues per advisor, in which the sample firm scores two out of 12, and one-year percentage growth rate, in which the sample firm scores five out of 12.

Page 2, "Staffing, Expenses & Profitability," is similarly arranged to show the respondent his firm's employee roster by job type (e.g., "specialists," "licensed support staff" and "administrative staff") and how the firm compares with others using the same low and high quartile and median information. In the same format is an abbreviated version of the firm's income statement, showing how total revenues, expenses (with breakdowns) and profit compare with those numbers for the other 11 firms in the same market. Expenses-unlike revenues and profits-are not shown in a dollar amount, only as a percentage of revenues.

Page 3 is a sample "Financial Advisor Scorecard" for a "senior financial advisor." What this portion of the scorecard attempts to do is compare employees from like job classifications based on total revenues generated, total assets per employee and how compensation data (salary, bonuses, commissions, etc.) compare with those for the local market. For example, the sole proprietor on our sample scorecard earned a total salary of $153,000, which puts him right around the median of $150,000. The comparison, in this case, is against a total of 24 financial advisors in the same market.

The initial reactions to the scorecard by its participants have been positive, as exemplified by Leon Rousso of Leon Rousso & Associates in Ventura, Calif. Thirty years ago, Rousso was looking for the secret to rock 'n' roll stardom; now he's looking for secrets that might further propel his success as a financial advisor.

"At 29, with a pregnant wife, I quit trying to be a rock star," says Rousso. He went on to try his fortune in the health insurance field working for Equitable and, later, got his CFP and his Series 7 to move into what he perceived as more lucrative investment services. Eventually realizing Equitable wouldn't support his brand of financial planning, Rousso finally started his present firm four years ago. "My business now runs on 60% revenues from health insurance and employee benefits and 40% revenues from financial planning and investment management," he explains.

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