Optimizing your practice using data

Optimizing your practice using data

by Jean-Philippe Doré, Product Owner – Business Intelligence

The eternal question persists… How do you become more profitable? There are usually one of two ways to improve the bottom line – either ramp up revenues or squeeze expenses. Expenses are often out of our control, so to move the needle we need to concentrate on the revenue side of the equation. Practice managers can help you find the different techniques to tackle the revenue question. Let’s take a look at how practice managers can leverage data to help guide advisors and identify opportunities to build effective growth strategies.

Meet Jessica, a seasoned advisor with a well-known investment management firm. Although she has good results, she wants to take her practice to the next level. She understands the importance of data but does not know how to leverage it to achieve her goals. She’s decided to get help from the practice management office. This team of professionals uses analytics to visualize data, providing benefits for Jessica and her colleagues at the firm.

Leveraging analytics

The practice management office believes that it is essential to use the amount of information held by the firm to generate actionable insights for advisory teams. In fact, an investment management firm sits on a tremendous wealth of current and historical data. Whether it is information about the book of business, customers, revenues, or advisor performances, practice managers have the information to deliver data-driven optimizations.

Anthony, a practice manager, decides to help Jessica by employing an analytics platform to hone in on areas of improvement using a top-down approach. He goes through an advisor’s data starting with the overall health of the portfolio and then drills down to the book inventory.

Understanding the current state of the practice

Anthony walks Jessica through her dashboard and helps her evaluate her book on multiple axes of analysis. To start the evaluation process and get a sense of how Jessica is doing, they focus on asset-based key performance indicators (KPIs), such as the size of her book, average assets under management (AUM) per household, return on assets, and tracking growth over time. Looking at these metrics can provide a basis to help understand her growth potential.

Increasing insights leads to improved business

Reviewing the actual state of the book is crucial to removing friction and providing guidance on how to boost Jessica’s performance. Factors such as gains in AUM are key in evaluating her effectiveness to bring new assets to the firm to then build retention strategies. Jessica’s growth target can be achieved; however, it’s important that this increase be driven organically through deeper client relationships and by increasing new assets per household, rather than through market volatility. Let’s take a closer look at the type of data that can be used to enhance her performance.

Revenue type

Breaking down revenue either as fee-based or transaction-based provides yet another indicator to help advisors like Jessica develop targeted business development strategies. This analysis can help practice management teams better understand the reality faced by individual advisors and help them build tailored migration programs based on firm objectives.

Client segments

Client segments are a good indicator of where to focus your time and energy. A measure of profitability would be to examine the effort required per segment versus the revenue generated. If Jessica’s results are skewed towards bottom-tier clients, she should consider transitioning these clients into a different kind of service offering and use the additional time to strengthen the relationship with clients who generate more revenues.

Relationship overview

Sometimes taking a step back and looking at the big picture is useful to identify opportunities. Anthony uses relationship analysis to understand the significance of relationships in Jessica’s practice, how many households have been added, the AUM growth in these accounts, and the average number of accounts per household. A more significant relationship implies better client retention, as well as the likelihood that assets will increase in years to come. This type of data enables both advisors and practice managers to build projections and define a realistic action plan to hit financial targets.

Book inventory

Drilling down to understand portfolio composition can be useful in providing techniques to be more efficient. If Jessica has too many positions or fragmented positions (securities with few holdings), there is an opportunity to optimize the asset inventory. This type of information can be a signal to the practice manager that the advisor should anchor the book of business to firm models or adjust the choice of securities held.

Enabling practice managers and advisory teams

Croesus Data Analytics can help wealth management professionals leverage analytics to focus on business objectives and build out successful revenue plans. Using analytics is a key tool for advisors and practice managers to understand how they can be engaging with data and how practice management programs can be built to attain advisory growth.


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