4 min

KPIs You Need to Track to Transform Your Business

Keeping track of the right key performance indicators (KPIs) can help you strategically address your most significant pain points while preparing your business for the future.

While financial planning firms can track various metrics, they don’t need to track them all. The goal is to identify, track, and act on the metrics that matter most.

Having said that, what KPIs would be most appropriate for your planning business?

Financial Planning KPIs: What Makes One Good?

The first step is to understand what makes a good KPI. Simply tracking something doesn’t mean it’s good. To guide your operations toward essential organization targets, KPIs should balance both leading and lagging indicators. An example of a good KPI can be characterized as:

  • Easy to understand
  • Measurable
  • Aligned with organizational goals
  • Actionable
  • Demonstrates progress objectively

In essence, you want KPIs that provide a clear rationale for your next steps as an organization, provide insight into progress toward meaningful goals, and show how much progress has been made.

Essential KPIs for Financial Planning Firms

The most commonly used and impactful KPIs can be categorized into a few categories based on your business structure, maturity, and goals.

1. High-Level KPIs
In their most condensed form, high-level KPIs measure the health of your business. A financial planning firm’s core KPI is likely to be net profit margin, which is calculated by subtracting operational and direct expenses from total revenue.

In addition to net profit margin, other high-level KPIs to consider are:

  • Total households served
  • Total assets under management
  • Total revenue

It is crucial to track key performance indicators such as these to stay focused on your organization’s ultimate goals. The objective of many firms is to provide high-quality financial advice to as many households as possible, as profitably as possible. These KPIs can measure your firm’s success in achieving these KPIs.

2. Retention KPIs
The KPIs surrounding retention can be either client retention or revenue retention, but it’s important to keep an eye on both to ensure your growth is not offset by the loss of clients. The following are some common retention KPIs:

  • Number of clients retained
  • Client retention rate
  • Average client tenure
  • Amount of recurring revenue
  • Next-generation client relationship rate

Retaining metrics is critical to determine how stable and mature your firm is long-term. Optimizing retention KPIs over time can improve your client experience and ensure you’re attempting to retain assets as they pass from generation to generation.

3. Firm Growth KPIs
Identifying growth-related KPIs for your firm helps identify sources of client or revenue growth, as well as progress toward expanding new strategic avenues of growth. Some growth-related KPIs are:

  • Client growth or addition rate
  • New revenue from new clients
  • New revenue from existing clients
  • Revenue from market performance
  • Referral rate

As strong market returns can mask slow growth in other areas, separating revenue from market performance and revenue from other sources will be an important indicator of firm health for many firms. Each of these KPIs can comprehensively understand current and anticipated growth.

4. Client Base KPIs
Knowing your Client Base KPIs can help guide your business development and marketing efforts. Here are some examples of good client KPIs:

  • Average client age
  • AUM per household
  • Average revenue per client
  • Revenue by client age
  • Time spent on each client
  • Net profit per client

Many firms find that most revenue comes from a small number of clients. KPIs related to clients can help you determine how revenue is distributed among your client base, allowing you to focus your efforts on those clients that are likely to be profitable.

5. Financial Planner KPIs
Ideally, Financial Planner KPIs should be tracked by larger firms with multiple financial planners in order to identify pain points and optimize performance accordingly.

Possible financial planner KPIs include:

  • Households per advisor
  • AUM per advisor
  • Revenue per advisor
  • Net profit per advisor

For determining individual performance, many of the KPIs related to growth, retention, and client base can also be applied at the level of financial planners. If you are a larger firm, financial planner KPIs are just one more way to ensure your revenue and client base are stable, diverse, and well-positioned for the future.

Creating a Successful Future For Your Business

In terms of what you could track, these metrics are just the tip of the iceberg, but they may offer a great starting point for those looking for a way to gauge their firm’s stability, maturity, and future prospects.

The KPIs you choose to track and optimize for will dictate your company’s operations, so choosing the ones most relevant to your business is imperative to its success.

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