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How to Avoid Benchmarking Your Way to Mediocrity

By Ray Sclafani | May 11, 2016

iStock_000089487755_Large.jpgOurs is an industry seemingly obsessed with benchmarking – whether it’s the performance of our investment portfolios or the performance of our businesses; we want to know what everyone else is doing. Those things that the majority of firms are doing, we quickly christen as “best practices” and hold them up as models for others to emulate. 

Look at any financial advisor benchmarking survey or report, and you’ll almost inevitably see variations on the same set of basic metrics time and again:

  • AUM growth
  • Revenue growth
  • Average number of clients per advisor
  • Average revenue per advisor
  • Product/service offering
  • Portfolio returns

The question that nobody ever thinks to ask, however, is why on earth anyone would consciously strive to be on par with everyone else? To genuinely produce extraordinary returns, you’ve got to be different. That requires developing your own measures. Instead of benchmarking yourself against the median of the advisory practice pack, why not create your own benchmarks for success and strive for higher heights?

Keep it manageable

Research tells us that while our conscious mind can only focus on ONE thing at a time, our preconscious mind is capable of keeping about seven things at the ready. It’s the reason why you can usually retain a grocery shopping list of a half-dozen things in your head, but end up wandering around the aisles knowing that you’ve forgotten something if the list is too long.

If you plan on benchmarking twenty different things, you’ll never be able to do it successfully. Always keep in mind that great organizations don’t necessarily deliver more, they simply deliver more efficiently. Measure only what you need to measure, and strive to measure important things related to your mission, vision, strategy and process as much as or more so than your results.

If service is your key differentiator, make sure you’re benchmarking the client experience (based on solicited feedback). If asset growth is top-of-mind, rather than just focusing on outcomes, consider measuring specific activities related to client acquisition and business development. It may tell you more about the underlying “why” rather than simply the “how much.”

Think about the results that are most critical to your firm’s success and then dig beyond the surface to find the measures that will be most meaningful. For example, if a key element of your strategy is to bridge and connect with the next generation, perhaps you may want to consider benchmarking the number of family meetings you’re holding, the number of new accounts you’re opening for your clients’ heirs, or the number of trusts you’re setting up to help prevent those assets from walking out the door should a client pass away.

Whether you have more or fewer assets, are growing faster or slower or have better or worse portfolio performance than your peers is always nice to know – but those are NOT the measures that are going to be most meaningful to your future success. Focus your measurements to a handful of things that are most critical to your practice, keep a close eye on how you are performing against those benchmarks and make frequent necessary adjustments all along the way.

wealth management advisor building an enterprise  

Coaching Questions from this article:

  1. Consider the areas of your practice (strategies and actions) that drive results. Which of them are most critical to your success and what measures can you use to track continual improvement?

  2. Think about the uniqueness of your client niche and/or service offering. What elements of your value proposition and client service delivery are essential components and how can you effectively benchmark those elements?

  3. Once you’ve identified the most critical measures to track your practice’s continued success, who on your team will be responsible for measuring progress, how frequently, and how will adjustments be implemented?


Topics: Business and Operations Management metrics how advisors should benchmark their practices

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