The Most Important Metrics for a Data Driven Advisor

The Most Important Metrics for a Data Driven Advisor

Think of what a difference yeast makes to bread. Without yeast, bread is flat, crunchy, and it tastes like a cracker. Yeast is the growth stimulant that makes bread rise.

Just as yeast causes bread to rise, implementing business intelligence can help your firm to grow. If your firm isn’t driven by intelligent decisions backed by solid data, its growth is more susceptible to remaining flat.

But this discussion isn’t just abstract “data.” As an advisor, you can use business intelligence tools to get useful data and make smart decisions. Below are some of the most important metrics we think you should be collecting:

Data From Your Clients

Some of the most important data you could collect comes from your clients. You should track data from clients in two ways:

1)     Track Your Client-to-Advisor Ratio. When you consider how well you’re providing service to your existing clients, you first want to track your client-to-advisor ratio. If the ratio is too high — too many clients per advisor — your firm likely won’t be able to meet your clients’ needs adequately. There is no magic proportion to recommend; the number could be different for every firm. But as you review your services and how you work with your clients, try to make an objective analysis of what that ratio looks like for your firm.

By using data to keep track of the client-to-advisor ratio, your firm will know when it’s time to hire someone new. You’ll also have an idea how much salary and education time to allocate to future additions to your team.

2)     Track Your Client Demographics. You also want to track your demographic data. This might sound obvious; of course you want to assess what your clients have in common and use that to market to people like them. Demographic data is also useful for clients who aren’t using all the services you offer, so you can better understand how to help them more fully utilize all that you can offer in their specific life situation.

Additionally, if your portfolio accounting platform offers business intelligence tools, you can dive deep into financial analysis. Look at performance dispersion, asset ranges for new business, and track the types of assets invested in across your entire client base.  But don’t forget to track login activity, statement downloads, and reports being run to see how well your clients are utilizing the technology you’ve made available for them, such as client portals and mobile apps.

By combining the data you store in your CRM and portfolio accounting system in an integrated manner, you should know who has important life and career milestones coming up.

Are they getting ready to retire? Do they have adult children who need to become involved in their financial plans?

By using this information, you can determine which clients need more attention. Maybe some of your clients haven’t completed their financial plans. By collecting the right data, you can provide better, more complete advice.

Data From Your Staff

You also need to make sure you track data for the day-in-day-out processes. This is data about your staff.

1)     Track How Long It Takes Your Staff to Complete Tasks. Using data points from the workflows you track (likely in your CRM), you can track how efficient your staff performs tasks. Time spent can show you areas where staff might need more training, or where you need to re-evaluate your assumptions about how much time a given tasks should take. It can also help you determine if anyone on staff is overloaded with tasks.

2)     Track How Often Your Staff Repeats the Same Workflows. Knowing how often certain actions occur can give you an idea of which areas in your business can be streamlined.

The best firms make technology work for them. When you use technology to track data in a healthy CRM, you can operate more efficiently. And efficient operation means you can be more transparent with your clients. That’s a win-win for both you and your clients.

To become a data-driven RIA, you need to establish a plan to collect data on your clients and your advisors. For your clients, collect data on their demographics. Consider their involvement with your firm and the milestones that are part of their plan.

For your advisors and staff, look for ways to streamline responsibilities and create better processes. To make the most of all that data you’re collecting, it’s best to implement business intelligence tools so you have the technology in place to collate and analyze it quickly. No one wants to be running reports out to a spreadsheet and creating pivot tables.

Data From Your Peers

It is imperative to be able to benchmark how your firm is doing against other advisory firms.  Reach out to your custodian and technology providers to see what tools they make available for you.  You should be able to get your hands on comparisons by absolute and relative measurements for Assets Under Management, Performance, and Net New Accounts.  These are all objective measurements, and its important to know how you are doing.

As you utilize business intelligence to grow your insights, you’ll be able to create a more robust action plan for your future.

Eric Clarke
Eric Clarke
Eric Clarke is the chief executive officer and founder of Orion Advisor Services, which develops solutions that improve advisors’ business operations and interactions with clients. The company’s current vision is to integrate its portfolio accounting system with CRM platforms to increase efficiencies for advisors. Mr. Clarke and his colleagues founded Orion’s predecessor company after they developed an off-the-shelf portfolio accounting system for advisors. Prior to starting Orion, Mr. Clarke served as chief operations officer for CLS Investments, an SEC–registered investment advisor. As an industry-recognized expert in portfolio accounting, Mr. Clarke has written articles that have appeared in Investment News, The Journal of Financial Planning, and others. He earned a bachelor’s degree in accounting from Brigham Young University and a master of business administration degree from the University of Utah.

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