Peer perspectives: RIAs share how benchmarking drives success

Transcript:

My name is Mike Amash with Westmount Asset Management, and as a principal at the firm, my role really touches on many things, including the management of the firm, our investment committee, working with client relationships, marketing, and business development.

We participate in the Benchmarking Study because we always find something valuable in going through the process, and, for us, it's a requirement in order to keep our business managed in an optimal way, and growing as best we can.

One of the benefits of participating in the study annually is that you're able to recognize trends you otherwise might not see. In any one year, you can look at things and think it's an anomaly, but when you participate regularly and you see trends, whether it's with compensation or with client retention, you know that's it's something you need to work on or improve on if you see it happening regularly.

There's really two key takeaways that we've gotten in the last couple years from the Benchmarking Study. One is our margins used to be one of the highest amongst our peers, and it wasn't really until we looked under the hood through the Benchmarking Study that we realized that was only because we were overworked. We had too few employees for each of our client relationships, and we realized that we had to resize our relationships per advisor in order to serve them better.

Another insight was just this year when we realized that even though we thought our client retention rate had been very high and amongst the highest in our peer group, we realized we were off by about 1- or 2%, and then when we did the math, we realized that 1- or 2% was equal to $300,000 in revenue per year that we were leaving on the table. So just this year, we implemented a new strategy around bringing up our client retention rate across all the advisors of the firm.

Now that we spend more time in our relationships and do more financial planning per relationship, the relationships feel much more sticky, more in-depth, and, in turn, that's led to more client referrals.

Our advice to another firm that hasn't gone through the Benchmarking Study is just to do it. Our industry is way too competitive to not do it, and burying your head in the sand isn't a solution.

Two things that we realize: We always find answers to the questions that we're looking for in going through the study, but, also, we find questions that we didn't know we were looking for through part of the process, as well.

Josh Miller:
My name is Josh Miller. I'm the president of Colorado Financial Management. We are a small registered investment advisory firm in Northern Colorado servicing about 220 households and about $260 million of assets under management. For our firm, the benchmarking study is extremely important. I mean, we are a single firm so we don't have any other firms that we can learn by, get best practices from. So, for the amount of time that we put into the Schwab survey to complete the data, we get way more out of it than we put into it. The peer analysis, the composite income statements, the executive summary kind of highlighting what's going on in the industry and also what's working for other advisors. It's invaluable.

Josh Miller:
I think the "aha moment" for us is just the amount of revenue growth that firms have seen since the 2009 downturn, and then kind of the steps that they took in order to get to that, or what they did and the best practices that they date they did to actually grow beyond 2009. As a sole firm, you don't know kind of where you're at versus your peers, but the composite income statement provides kind of expense ratios, it provides profitability analysis, revenue growth. Gives us a great idea of where we're at, the quality of the data, the quality of the survey that Schwab does is far superior to anything that you get out of other publications. Definitely hits home to what you're doing and what other firms, again, in your size group, bigger than yours, and where you want to be. The time commitment is certainly not to be thought of.

Bijan Golkar:
We're currently managing around $90 million of assets and we work with a lot of high-tech clients in Silicon Valley and other retired executives. I could not imagine FPC not completing a benchmarking study every year moving forward. It creates so much value, so much insight into the industry and it's always I look forward to seeing our relationship manager come to the office and review it with us and share all of his stories with his other advisors.

Bijan Golkar:
The biggest change that we've made from viewing the results of the benchmarking study would be our billing process. When we got our first benchmarking study back, I noticed that we were drastically undercharging our clients and we actually developed an entire new billing system and it's increased our profitability quite a bit.

Bijan Golkar:
The first time we did the benchmarking study, we kind of just filled in the blanks. We didn't take it too seriously because we didn't know what to expect from it. And the second time after I realized all the value that's in there and I really wanted a good metric of where we stood with our peers. Just doing the basics. Even you'll get a lot out of it, but the more time you put in, the better, in my opinion.

Bijan Golkar:
Yes. Is it worth it? Absolutely.