Post on 26-Jul-2020
Results and Key Findings from theInvestmentNews 2016 Financial
Performance Study of Advisory Firms2016 Fusion Business Planning Summit
October 26th, 2016
Baltimore, MD Sponsored by:
In partnership with:
Study Overview
• Conducted between April 19 and June 22, 2016
• 222 independent advisory firms supplied financial statement information for their organizations, in addition to providing staffing, growth & strategy, business development & marketing, services & fees and equity management data on their practice
• Typical firm was founded 17 years ago (1999)
65%
18%
17%
RIA only
Broker-Dealer AffiliatedOnly
Hybrid
InvestmentNews 2016 Financial Performance Study 2
14%
62%
16%
8%
Solo
Ensemble
Enterprise Ensemble
Super Ensemble
Evolutionary Stages
$65M$183M
$1,108M
$2,077M
Solo Ensemble EnterpriseEnsemble
SuperEnsemble
Median AUM
InvestmentNews 2016 Financial Performance Study 3
Median Staff Count
Solo:single-professional practice
2.0
Ensemble: Revenue <$5M
6.5
Enterprise Ensemble: Revenue $5M–$10M
24.0
Super Ensemble: Revenue > $10M
49.0
New to the study
•More detailed revenue data breakdown
• Institutional vs. household sources of assets
• Sources of new clients / clients lost
•Revenue growth targets
• Tracking leads, prospects and conversions
• In-depth equity management data
InvestmentNews 2016 Financial Performance Study 4
Income Statement: Key data points
InvestmentNews 2016 Financial Performance Study 5
All Firms
Total Revenue $3,890,220 100.0%
Total Direct Expenses $1,472,549 37.9%
Compensation: Owners $734,824 19.1%
Compensation: Non-Owners $666,251 17.1%
Gross Profit $2,417,671 62.1%
Total Overhead Expenses $1,456,244 37.4%
Support Comp; Payroll Taxes, Benefits, etc. $745,347 19.1%
Technology Cost $115,509 3.0%
Operating Income $961,427 24.7%
Pretax Income per Owner $570,380 14.7%
EBOC (Earnings before owner comp) $1,705,251 43.8%
Revenue Growth Rate over the Past Five Years
24%
9%
18%
15%
8%
2011 2012 2013 2014 2015
Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies
InvestmentNews 2016 Financial Performance Study 6
Average Revenue, All Participating Firms and Super Ensemble Firms
$2,297,000$3,422,000 $3,042,000 $3,241,000 $3,890,220
$14,606,172
$16,826,741$15,684,000
$18,213,000$19,262,590
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2011 2012 2013 2014 2015
Average Participant Size Average Super Ensemble Size
InvestmentNews 2016 Financial Performance Study 6
Sources of AUM Growth
InvestmentNews 2016 Financial Performance Study 8
Note: Figures are expressed as a % of year-end 2014 AUM
1.8%1.2%
6.4%
2.8%
-2.7% -2.4%
-1.4%
5.7%
ClientReferrals
ProfessionalReferrals
BusinessDevelopment
Contributions Clients Lost Distributions Performance Total AUMChange
Why Firms Did – or Did Not – Meet Their Growth Targets
46%
8%
10%
20%
8%
54%
23%
2%
9%
20%
Yes - We Achieved Our Growth Goals
All advisers hit their assigned new business targets
Most advisers hit their assigned new business targets
The firm had high client retention or market appreciation ofexisting client assets
The firm added exceptionally large new client(s), not expected torepeat next year
No - We Missed our Growth Goals
Advisers generally missed their assigned new business targets
Lack of teamwork among advisers and staff toward businessdevelopment
No capacity to business develop and there were unclosed newbusiness opportunities
Lost clients that negatively impacted revenue growth
InvestmentNews 2016 Financial Performance Study 9
The firm had high client retention or market appreciation of existing client assets
Advisers generally missed their assigned new business targets
Revenue Growth Goals
InvestmentNews 2016 Financial Performance Study 10
10% 13% 13%
79%
2015 AverageActual Growth
2015 AverageTarget Growth
2016 AverageTarget Growth
2020 AverageTarget Growth
In 2015, 46% of firms met their 2015
revenue growth target
AUM and Revenue per Client by Firm Size
$4,476
$7,306
$11,293
$22,407
Solo Ensemble EnterpriseEnsemble
SuperEnsemble
Revenue per client
$599,524
$931,824
$1,575,989
$2,848,624
Solo Ensemble EnterpriseEnsemble
SuperEnsemble
AUM per client
InvestmentNews 2016 Financial Performance Study 11
Are You Tracking Leads?
28%
11%62%
Yes, tracked at a firm-level and shared among advisers
Yes, tracked by individual adviser, but not shared among advisers
No, not tracked formally
Average Median
Leads generated in 2015 225 90
Leads per professional 30 12
Leads per active owner 59 24
Percent of leads elevated to prospects
54% 50%
Percent of prospectsconverted to clients
37% 37%
Percent of leadsconverted to clients
21% 17%
InvestmentNews 2016 Financial Performance Study 12
Individual Sales Goals Not the Norm
21%
27%
12%
$150,000
$100,000
$67,500
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
0%
5%
10%
15%
20%
25%
30%
Practicing Partners Lead Advisers Service Advisers
Percent of Firms That Have a Target at the Position Median New Business Target2
InvestmentNews 2016 Financial Performance Study 13
Hypothetical Firm Growth:If Target Reached
9% 6% 4%
Sources of organic growth, 2013 - 2015
3.6%2.8%
6.4%5.8%
12.2%
2.8%2.2%
5.0%
3.9%
8.9%
1.8%1.2%
3.1%
6.4%
9.5%
New assets from clientreferrals
New assets fromprofessional referrals
Total New assets fromreferrals
New assets from firmbusiness development
Total New assets from newclients
2013 2014 2015
InvestmentNews 2016 Financial Performance Study 20
Intensifying Competition
10%
16%
74%
New client from independent financialadviser (RIA or IBD)
New client from wirehouse, regional BD,insurance BD, bank or trust
New client previously self-directinginvestments or without a financial adviser
InvestmentNews 2016 Financial Performance Study 15
Most successful marketing tactics
TOP PERFORMERS
Method % of firms using
1 Community involvement 64%
2 Hosting networking events 23%
3 Sponsoring community events 42%
4 Volunteering on non-profit boards 55%
5Actively capturing leads on firm’s website
28%
ALL OTHERS
InvestmentNews 2016 Financial Performance Study 16
Method % of firms using
1 Hosting networking events 34%
2 Community involvement 66%
3 General public relations 29%
4 Radio/television shows 11%
5 Volunteering on non-profit boards 58%
To Build or to Buy: The Five-year Growth Plan
66.8%56.9%
76.7%
47.5% 51.1%
12.3%
8.6%
13.2%
13.4% 7.5%
All firms Solos Ensembles Enterprise Ensembles Super Ensembles
Organic Growth Strategic Growth
InvestmentNews 2016 Financial Performance Study 17
Revenue % Growth Targets for Year 2020 by Source
Firms Seeking to Merge or Make an Acquisition
32%
23%
31%
40%35%
43%
30%
44%49% 47%
All firms Solo Ensembles Enterprise Ensembles Super Ensembles
Past two years Next two years
InvestmentNews 2016 Financial Performance Study 18
Percentage of Firms That Have Negotiated Changes in Partner Ownership
InvestmentNews 2016 Financial Performance Study 19
15%
11%
31%
41%
6%3%
14%
24%
5% 5%
9%12%
All firms Ensembles Enterprise Ensembles Super Ensembles
Added Owners Retired Owners Equity Sold from One Owner to Another
Operating Profit Margin over the Past Five Years
Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies
InvestmentNews 2016 Financial Performance Study 20
20.9% 20.4%22.3%
25.5% 25.2%
2011 2012 2013 2014 2015
Income per Owner over the Past Five Years
InvestmentNews 2016 Financial Performance Study 21
Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies
$472,000
$424,000$465,000
$526,000$570,380
2011 2012 2013 2014 2015
Revenue per Professional over the Past Five Years
InvestmentNews 2016 Financial Performance Study 22
Note: 2011–2014 data sourced from previous Moss Adams/InvestmentNews annual benchmarking studies
$480,000$517,000
$561,000
$478,000$441,929
2011 2012 2013 2014 2015