Key performance indicators (KPIs) are a clear way to determine how you are faring as an RIA or financial advisor. It’s possible to look at all kinds of data points as success indicators, however, it’s important to scale those KPIs to measurable success—no fluff stats needed. Here are the top KPIs to keep in mind.
Two of the most important KPIs that you will want to focus on are your leads, your closes, and the ratio between the two.
Leads are a major source of new clients and they can be people who are seeking out financial services but haven’t made an appointment, those who expressed interest in resources that you have provided, etc. When it comes to leads and KPIs, you should track YoY on a monthly or quarterly basis. Because the financial services industry can be seasonal, tracking previous year’s months is a good indicator of where you are now.
Even more important than prospective clients are new clients. While leads can show where your marketing efforts have paid off, closed leads are what you are ultimately hoping for. This is another KPI to track YoY and see how many prospects that you have met with for initial meetings became a customer of your services.
The ratio between the leads that you get and the closes that you secure matters. High lead volume does not necessarily mean a successful year for you as an RIA. If you find yourself with leads but potential clients who don’t want to use your services, consider taking the time to rework your marketing efforts. It’s possible you are targeting a type of customer who may need something different than what you offer. Online marketing is extremely competitive in the financial world, so many RIAs choose to work with a company like Senior Finance Advisor who can match you with the type of clients that you’re looking for.
Client turnover is another KPI that RIAs should always be tracking. It’s true there will always be turnover in any industry and in a highly-competitive industry like financial advice and planning, even more so. However, your client retention rate should stay steady in the 80% range. If your client turnover is higher than your retention, it’s again time to rethink either your marketing strategy or how you approach your relationships with your clients. It’s possible that your services are not up to par with the quality that other RIAs are offering or you are not connecting with your clients and making them feel comfortable.
Having a well thought out marketing strategy is also key in keeping client expectations realistic and minimizing turnover. Keep your marketing strategy and sales pitches honest and don’t oversell yourself. People who are seeking out financial services often feel vulnerable, so the financial planner they end up with is usually the one who makes them feel like their money and livelihood is in capable hands.
It’s true that in the financial planning world, client acquisition costs (CACs) can be high. Due to the nature of financial services having low customer trust, finding and retaining clients is expensive. Creating commercials, online marketing campaigns, brochures, samples, and websites all add up. But, for many RIAs, it’s essential to spend that money to find the right fit for your services.
As previously discussed, optimized online marketing will be important to your success. While many RIAs and firms have decided to go the “word of mouth” or referral approach to keep costs down, strategic digital marketing and advertising can keep your overall costs low, when accounting for other KPIs like turnover rate.. While you may be spending more up front finding the right matches to your services, your total closes will likely be higher with a lower turnover rate.
Regardless of how you decide to market yourself to prospects, it’s a fact that CACs will be higher than in almost any other industry. This will continue to be the case as long as public trust is low. To mitigate this, don’t oversell yourself or your services, be honest about what you provide, and keep open communication.
There are countless KPIs that you could consider when trying to determine success. However, the important, measurable KPIs are what will help you keep your business on track. Focus on leads and closes and the ratio between them, your overall client turnover rate (and why they might be leaving), and your overall client acquisition costs.
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