In the previous post of our seven-part series on practice management, which we’re calling the ActiFi Practice Management Primer, we discussed the importance of key performance indicators and measuring results as it relates to your overall practice management plan. With that information in mind, along with the other points we’ve discussed, in this blog we’re covering the next step in the process: benchmarking.
The most important benchmarking you can do is against your own goals and objectives to determine what is working and what is not. Once you are clear on your performance against your goals it is useful to take a broader perspective and determine where you stand in relation to your peers and competitors. By comparing your results and stats to those of other practices, you’ll be able to see where you’re coming out ahead and where you’re falling behind.
To get started, you’ll need to identify the appropriate benchmarking studies related to your firm’s goals. Several broker/dealers and custodians have very good benchmarking data. In addition, studies by FA Insight and InvestmentNews/Moss Adams are a good place to get independent benchmarking data. We are beginning to see portfolio management software providers share powerful business statistics as well. For example, Orion Advisor Services has a very cool Business Metrics report that they offer to their advisors.
Having the data and knowing how to use it, however, are two different things. Rather than getting lost in a thicket of statistics and numbers, review data with specifics in mind. When you’re looking at benchmarking data in aggregate, it will ultimately be less useful to you than if you look at a specific metric as it relates to one of your specific goals. Specific data will be more meaningful to you and also easier to understand.