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Financial Planning KPIs Your Firm Should Be Tracking

Brandon Heid February 22, 2022

Wealth management metrics review of KPIs

A strong understanding of key performance indicators (KPIs) helps keep your business moving in the right direction. Tracking the right metrics allows you to strategically address your biggest pain points while preparing your business for the future.

Financial planning firms have a wealth of metrics they could be tracking, but that doesn’t mean they should be tracking every single one. The goal is to identify, track, and act on only the most important metrics.

So, which KPIs make sense for your planning business?

What Makes a Good KPI for Financial Planning?

First, it’s important to understand what makes a good KPI. Just because something can be tracked doesn’t mean it makes a good KPI.

Generally speaking, KPIs will balance both leading and lagging indicators—measurements of past performance and indications of future performance—to guide your operations towards essential organizational targets.

Good KPIs are typically:

  • Simple to understand
  • Easy to measure
  • Aligned with organizational goals
  • Actionable
  • Comparable to other organizations
  • Able to provide objective evidence of progress

Basically, you want KPIs that provide a clear rationale for your next steps as an organization, offer insight into progress towards important goals, and reveal what has contributed to that progress.

Important KPIs for Financial Planning Firms

The KPIs you use will depend on your unique business structure, maturity, and goals. The most common and impactful KPIs can be broken down into a few categories.

High-Level KPIs

High-level KPIs are core to your operations and represent the health of your business in its most condensed form. Net profit margin is likely to be the core KPI for just about any financial planning firm, calculated simply by subtracting operational and direct expenses from total revenue.

A few other high-level KPIs to look at in addition to net profit margin could be:

  • Total households served
  • Total assets under management
  • Total revenue

Tracking core KPIs like these helps you remain laser-focused on your organization’s ultimate goals. Many firms strive to serve as many households as possible, as profitably as possible, with high-quality financial advice. These KPIs are a broad measurement of a firm’s success in doing so.

Firm Growth KPIs

KPIs for the growth of your firm help identify the sources of client or revenue growth, as well as progress made in expanding strategic avenues of growth. Some growth-focused KPIs to consider include:

  • Net new clients
  • Client growth or addition rate
  • New revenue from new clients
  • New revenue from existing clients
  • Revenue from market performance
  • Referral rate

For a lot of firms, separating revenue from market performance and revenue from other sources will be an important indicator of firm health, as strong market returns could mask slow growth in other areas. Each of these KPIs, though, can provide meaningful and actionable insight into current and anticipated growth.

Retention KPIs

KPIs surrounding retention can refer to either client or revenue retention. A look into how well your firm is retaining clients and revenue can ensure any growth you’re experiencing isn’t then offset by losses in the existing client base.

Some common retention KPIs include:

  • Number of clients retained
  • Client retention rate
  • Average client tenure
  • Amount of recurring revenue
  • Next generation client relationship rate

Retention metrics are important in judging the long-term stability and maturity of your firm. Optimizing for retention KPIs over time can enhance the experience you deliver to clients, as well as ensure you’re attempting to retain assets as they pass from one generation to the next.

Client Base KPIs

It’s important to have a detailed look into who comprises your existing client base. Client base KPIs can help guide your business development and marketing efforts.

Some client KPIs could include:

  • Average client age
  • AUM per household
  • Average revenue per client
  • Revenue by client age
  • Time spent on each client
  • Net profit per client

It’s not uncommon for firms to find the majority of their revenue is coming from a small segment of clients. Client-related KPIs can reveal the distribution of revenue among your client base, allowing you to focus future efforts on clients that are likely to be profitable for you.

Financial Planner KPIs

These KPIs may be most relevant to larger firms who employ several financial planners. At larger firms, it’s important to track financial planners’ performance to identify pain points and optimize where necessary.

A few potential financial planner KPIs include:

  • Households per advisor
  • AUM per advisor
  • Revenue per advisor
  • Net profit per advisor

Many of the growth, retention, and client base KPIs could also be applied at the financial planner level, as well, to determine individual performance. If you’re a larger firm, financial planner KPIs are just one more way to ensure your revenue and client base are stable, diverse, and well-positioned for the future.

Guiding Your Firm for Future Success

The metrics here are merely the tip of the iceberg in terms of what you could track, but may offer a great starting point for anyone searching for ways to gauge their firm’s stability, maturity, and future outlook.

The KPIs you ultimately choose to track and optimize for will dictate the operations of your firm, so it’s important to choose the most actionable and applicable ones for your business.

If you’re strategically evaluating the success of your firm, you may also find our recent practice management eBook Shifting Your Compensation Model valuable. We walk through each consideration when thinking about charging a fee for planning as a separate service.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

About the Author

Brandon is a Practice Management Consultant in eMoney's Financial Planning Group. In his role, he provides detailed assessments and recommendations for firms looking to enhance their use of the eMoney platform and incorporate interactive financial planning into their practice. He works closely with Sales, Training, and Relationship Management departments to assist prospects and active users, as well as develop internal talent. He helps coordinate eMoney’s University Program, working with instructors, program directors, and students in over 70 CFP Board registered programs across the country. Prior to eMoney, he spent time on both the institutional and retail side of TD Ameritrade, in multiple business development roles.

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Welcome to
Heart of Advice

a new source of expert insights for
financial professionals.

Get Started

Tips specific to the eMoney platform can be found in
the eMoney
application, under Help, eMoney Advisor Blog.