The Financial Planning Association and McLagan Partners, a compensation consulting firm, recently released findings from the first ever FPA Practice Management Scorecard study, which found that independent advisory practices’ profit margin before owners’ draws varies greatly–ranging from less than 20% to more than 80% depending on which part of the country an advisor’s firm is in.

The Practice Management Scorecard, sponsored by Fidelity Investments, is intended to help advisors benchmark their practices against other firms in their local areas. The FPA notes in a release that “national benchmarks can be a misleading statistic,” and relying solely on national benchmarks can lead an advisor “to miss improvement opportunities or set inappropriate goals.” For instance, the FPA says “if a practice is located in a rapidly growing market, measuring performance against national benchmarks may result in setting growth goals which under-represent the true potential of that practice. Or if a practice is located in a market with relatively high compensation standards, national statistics can lead a practice owner to set pay levels which are too low, resulting in employee turnover and related client service failures.”

The Scorecard tracks practice revenues, assets, number of clients, average client size, new assets, profitability, compensation, staffing, and expenses. The Scorecard also provides participants with their rank in their market on each performance measure, FPA says, so they can benchmark themselves against their local peers.

The study’s findings reveal that median practice revenue ranges from almost $800,000 in and around New York City to just under $300,000 in smaller and rural markets throughout the Northeast. Also, markets such as southern California, Washington D.C., and San Francisco have lower net effective payout rates primarily because of the high overhead costs relative to the productivity of practices in those markets, the Scorecard found. But Washington D.C. and San Francisco offer opportunities for growth that may make up for the higher cost of those markets, the study says. Washington D.C. has the second highest new assets per advisor of the markets surveyed with more than $9 million of new assets per advisor.

An FPA spokesperson says the Scorecard will become an annual study. More information about the Scorecard is available at www.fpanet.org/member/Practice-Management-Scorecard.cfm.