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Moneyball tactics for recruiting Financial Advisors – yup, it exists.

By ClientWise | December 5, 2013

[Guest Post]
Created by  Amrita Mathur, PriceMetrix

Talented financial advisers don't come cheap. The largest Wall Street wealth management firms, which have been bidding up the signing bonuses for high-end advisers for years, can attest to that. 

But are these star advisers worth the upfront bonuses they now command in the marketplace? 

I work for a practice management software and data services company called PriceMetrix, and many of our clients wanted to know if statistical analyses could be deployed, much as they are in baseball, to help them ensure – rather than simply assume – that they are recruiting the right candidates and allocating resources to those advisors with the greatest potential. 


Just as Billy Beane, general manager of the Oakland Athletics baseball club and subject of the best-selling book 'Moneyball,' relied on statistics when making his decisions about players; broker/dealers can also use data to make informed decisions about recruitment.

We wanted to help our retail brokerage clients ensure that their advisors and managers are focusing on the metrics that drive production outperformance. Frankly, we completely threw out the old playbook and worked on establishing a new methodology that would help advisors and managers better identify, recruit, and pay for future outperformers; and also enable firms to identify, and act on, the most important factors for future growth in production.

As such, we developed a groundbreaking new methodology that was far more powerful in forecasting future outperformance than traditional metrics.  Our analysis revealed the following:

  • All revenue is not created equal. Transactional, trailer and fee revenue are different predictors of future revenue
  • Size matters. The number of large and small households in a book dramatically impact future performance.
  • The depth of client relationships is also a predictor of future production.
  • You might be surprised at the relationship between advisor experience and future performance.


It is important to note that the focus of our analysis was on production (and growth in production over time) as a hallmark of a successful hire.  This research was conducted based upon the metrics of advisors with 5 to 20 years experience and by utilizing our aggregated retail brokerage database consisting of 35,000 books of business, 7 million investors and over $3.5 trillion in investment assets.

The first finding is that fee revenue is much more predictive of outperformance than transactional revenue. What this tells us is that advisors, managers and firms must differentiate more aggressively between the different sources of revenue in their books of business. Books with greater production coming from fee accounts, as opposed to transactional or trailer revenue, are expected to outperform to a greater degree.

Not surprisingly, we found that advisors with a greater number of high-asset households will outperform. For every household with more than $250,000 in investable assets in an advisor’s portfolio, future revenue is expected to increase by $1,650.

What should make advisors pause for thought is that the reverse is also true. The data shows that advisors with a greater number of small households will underperform other advisors. In fact, predicted future production decreases $270 for every small household in an advisor’s book!

Marketing research experts have long asserted that the depth of client relationships and client share of wallet are strongly linked to increased client retention and profitability. PriceMetrix data supports this assertion. One measure of the depth of client relationships is the number of retirement accounts, such as IRAs, in an advisor’s book.


Another measure of the depth of an advisor’s client relationships is the average number of accounts per household. More accounts per household is indicative of deeper client relationships and a higher share of investable assets, which as it turns out is highly predictive of future production.

The data indicates that less experienced advisors have greater potential for increased production than advisors with more experience. An advisor who becomes a top producer after five years has significantly better growth prospects than an advisor who reaches the same level of production after 20 years.

Simply put, given two baseball players batting .300 and driving in 100 RBIS that are 25 and 35 years old respectively, which one would you choose? Likewise for financial advisors, the shorter length of time it takes for an individual to achieve a certain level of performance is indicative that they will have a greater future growth trajectory.

Brokerage firms, managers and advisors can all use these predictive analytics to improve their ROI on recruiting spend, to coach advisors, and to predict and manage future production.


The full report on Moneyball for Advisors can be viewed on the PriceMetrix website:http://www.pricemetrix.com/moneyball-for-advisors/


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PriceMetrix is the first choice in practice management software for retail brokerages in North America. PriceMetrix helps wealth management firms enhance revenue growth, by enabling financial advisors to recapture lost revenue opportunities. By combining industry know-how with powerful aggregated market data, we help our clients increase overall firm profitability. 

PriceMetrix directly measures aggregate industry data represented 7 million investors and 40,000 advisor books of business. Founded in 2000 and headquartered in Toronto, Canada, we service a notable range of retail wealth management firms within the United States and Canada. Please visit www.pricemetrix.com for more information.

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