Five KPIs the most successful financial advice firms are monitoring

1 June 2021
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Five KPIs the most successful financial advice firms are monitoring

1 June 2021


For any business, team or function looking to determine whether it is meeting its strategic goals, progress measurement is vital. When that business operates within a highly-regulated environment, such as financial planning, it is imperative.

What is a KPI?

An essential part of smart measurement is establishing key performance indicators (KPIs) - metrics against which the business's progress can be tracked. These must correlate with goals, targets and regulations if the resulting information is to be of value.

From our 10 years of working closely with financial advice firms of all sizes, we’ve identified the top five essential KPIs that the most successful ones are measuring. If most of them seem obvious, it’s because they are fundamental; but it’s easy for advisers (particularly when working within a small unit) to focus on the next thing without taking time to analyse what’s been happening - and spot trends that inform where changes for the better could be made.

Top five key performance indicators:

Reviews and outcomes

For fee based firms, it’s useful to examine the performance of client reviews, from the number of meetings that are scheduled versus the number that actually take place, to the percentage of clients who followed the advice given. Naturally, you would hope that the majority of clients took up the recommendations given; if they didn't, then this KPI presents you with the opportunity to find out why not. Another metric to examine is a movement in the numbers of clients, i.e. sudden drops, as this can indicate inconsistencies in performance which require urgent attention.

Product sales

Although some people hate the thought of having to count up and report on every individual product sale, considering it time-consuming and irrelevant, this compliance-adhering KPI does serve a purpose. It can uncover training needs and open up new opportunities. Discovering low sales of something like health protection, for example, may suggest a lack of confidence or knowledge in this area. This deficiency should be easy to overcome with education and development, ultimately leading to greater sales in the coming year.

Client feedback and complaints

While this might appear a wishy-washy indicator, it's also one of the easiest and most valuable ways to establish performance. Simply asking clients for their opinions after each review can supply you with vital information. Questions might pertain to their experience of the financial planning process, the approach taken and their thoughts regarding the charging structure. This can also tie into any wider 'Treating Customers Fairly' initiatives which you practise.

This might also extend into the number of complaints received. A figure that should be set as low as possible, naturally, this KPI would log how many complaints are upheld against a financial adviser. Anything over a specified amount - it might be as few as just one case - would trigger some sort of action within the business.

It's important to track complaints as it also shows that the business is mindful of providing an exemplary customer service and operating in accordance with high standards.

Distribution of client revenue

In order to monitor trends in growth rates and in the firm overall, profitability must be measured. There are many different ways to capture this information - gross revenue, overheads and profit margin to name but a few - but a popular one is to set a KPI on the distribution of client fees.

Measured in monetary brackets, this will allow you to see clearly the average revenue per client and how many are high net worth. This might also spur a firm into taking steps to raise the average and attract more clients in the £3,000 - £5,000 revenue bracket, for example; or to position itself as a mid-range practice. In which case, the KPI might be to have 50 per cent or above of existing business in the £3,000 - £5,000 client revenue bracket by year end.

Retention rates

Absolutely crucial for both the growth of a business and its financial health is your retention rate. If nothing else, this is the area that really ought to be closely monitored. Growth can be measured against revenue (from existing and new clients) and client retention. Understanding what proportion of your revenue is derived from retained business (recurring fees such as retainers, etc.) as opposed to new clients can help direct your expansion, allowing you to focus on the more successful area while perhaps finding ways to grow the other.

It's equally important to find ways to retain your clients - the aforementioned feedback could relate to this point - to guarantee that flow of recurring revenue.

The right way to set KPI targets

According to the experts, the key for success is to set only a handful of KPIs - three to five should be perfectly adequate and more convenient for you to work with. Each one should incorporate a time period, for example ‘no more than X complaints within the quarter’ or ‘X per cent of new business per month’.

As the Association for Financial Professionals says: "what gets measured will get managed" and it's a vital point. KPIs allow you to understand what's going on in the business, what's working and what isn't. Ultimately, they should be clear, easy to monitor and appropriate, equipping you with information that you can use to gain more clients, manage your risk, enhance your reputation and become a better business.