Results and Key Findings from the InvestmentNews 2016 ... · Income Statement: Key data points...

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


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


Income Statement: Key data points


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


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


Sources of AUM Growth


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


The firm had high client retention or market appreciation of existing client assets

Advisers generally missed their assigned new business targets

Revenue Growth Goals


10% 13% 13%

79%

2015 AverageActual Growth

2015 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


SuperEnsemble

Revenue per client

$599,524

$931,824

$1,575,989

$2,848,624


SuperEnsemble

AUM per client


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%


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


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


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


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


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


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


Percentage of Firms That Have Negotiated Changes in Partner Ownership


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



20.9% 20.4%22.3%

25.5% 25.2%

2011 2012 2013 2014 2015

Income per Owner over the Past Five Years



$472,000

$424,000$465,000

$526,000$570,380

2011 2012 2013 2014 2015

Revenue per Professional over the Past Five Years



$480,000$517,000

$561,000

$478,000$441,929

2011 2012 2013 2014 2015

Results and Key Findings from the InvestmentNews 2016 ... · Income Statement: Key data points...

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