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Portfolio > Asset Managers

7 ways to gauge the progress of your practice

By Dean Zayed

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I love this time of year. As I am still eating some delicious Thanksgiving leftovers, I take full advantage of the holiday season (and some of the much needed down time) to reflect on the past year and begin preparing for the coming year.

As the old saying goes, to know where you are going, you must know where you have been.

I’d like to share with you a few of the year-end ‘”accounting” measures that I have become accustomed to doing to help gauge the success of my year as well as the overall health of my firm. To be fair, I take the final measurement of these numbers in early January, a logical time since all of the year-end numbers are in. But December is a great time to begin collecting these numbers if they are readily available so you may begin to digest them.

Alternatively, if you do not have the systems in place to accurately collect these numbers, this may be a great month to institute a system whereby you can readily obtain these ever-important measurements.

There are several quantitative barometers that I use to measure the success (or progress) I have made in a given year. These include the following:

1. The amount of new assets that I acquired over the year. This includes the gross dollar amount of new assets that I gained to manage and placed in any variety of vehicles, from fixed indexed annuities to fee-based managed accounts.

2. The total value of all of the assets that I manage, including, of course, the growth or appreciation realized over the year.

3. I further break down the total value of all assets by asset type. For example, what percentage of my book of business resides in annuities vs. fee-based accounts?

4. The number of new clients that I acquired in the year.

5. The total number of clients that I now have, including the new ones and factoring in clients that have left or died.

6. The total revenues for the year. Importantly, I break this number down further by type of compensation- upfront commissions vs. ongoing fees that I collect for assets that I manage.

7. The profitability of the firm. This calculation allows me to look at the expenses I incurred over the year and compare them with the previous year.

I keep a summary of the various annual numbers in a separate manila folder and I keep all of the folders together. When I start the new year, I know exactly what I did in the previous year in terms of assets, clients, revenues, profits, etc. I know exactly what my fee-based revenue will be for the coming year before I even open my doors in January and take on a new client. I also know how these numbers compare with the previous year.
Knowing these financial metrics is very important to wrapping your arms around your practice and gauging its progress. Did you try some new initiatives last year that explain a major change in your revenues? Did you implement a referral program that explains a jump in the number of new client acquisitions?

The numbers can reveal what’s working and what is not. They become a key factor in the strategic decisions that you should be making about the direction of your practice.

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