Janet has grown her practice to a level admired and envied by many. So why was she sitting across from me looking so stressed?
The cause was a benchmarking study her sponsoring firm commissioned us to do that compared individual participants to their peer group, the entire company and the industry at large on a wide range of business metrics and best practices. As expected, Janet’s production, average sale size and AUM ranked her near the top of her firm. But those weren’t the statistics that were causing Janet such consternation.
Janet is one of the most successful advisors in her firm, but production alone doesn’t equate to overall success.
She scored extremely well on the revenue scale but ranked in the bottom quartile for profitability. She was being effective, but not as efficient as she should be. Her total expenditure per dollar of revenue is much higher than her peers. The biggest cost item is her time, which we have calculated at about $300 an hour.
Let’s look at her client base and compare expenditure per client to the revenue she earns from them. For example, her top 20 clients receive a great deal of attention. She meets with them quarterly for a review; takes them to lunch on their birthday; invites them to her “Top 20 Dinner,” a golf tournament, a client appreciation event and a portfolio manager meeting. They receive her newsletter, a gift at Christmas and personalized cards from her at all other holidays. She estimates that she spends approximately 12 hours per year with each of her top 20 clients.