by FPA staff
Two of the biggest business challenges facing financial planning practitioners are developing an efficient practice and leveraging economies of scale. Study results from the 2007 FPA Practice Management Scorecard, produced by McLagan Partners and sponsored by Fidelity Investments, reveal that sole practitioners are typically more efficient while multi-advisor practices are poised to take advantage of economies of scale. By understanding the metrics behind both practice types, practitioners can examine and correct practice weaknesses.
The typical sole-advisor practice is more profitable than the typical multi-advisor practice by a margin of 32 percent versus 19 percent. This is primarily due to lower compensation and employee benefit expenses as a percentage of revenue for sole-advisor practices.
The sole-advisor practice is also more effective at growing while maintaining lower overhead expenses. However, sole-advisor practices have significantly smaller assets-per-household, creating challenges in practice growth. While multi-advisor practices have an average of $369,000 assets-per-household, sole-advisor practices average $225,000. As a result, multi-advisor practices are able to focus more resources on practice expansion. Sole-advisor practices need to evaluate their client size and strategically consider what type of clients to prospect. Larger clients may enable advisors to spend less time per dollar managing accounts and more time expanding their businesses.
Are you interested in finding out more about how to improve your practice's profitability, growth and staffing issues? The 2008 FPA Practice Management Scorecard is now open for registration. Participation does not cost anything, except about twenty minutes of your time. However, we are excited to announce that Fidelity Investments is offering to cover the cost of your scorecard results*. Gain and retain that competitive edge—register today at https://fpascorecard.mclagan.com/ or contact Rebecca King at 800.322.4237 ext. 7126 for more information.
McLagan Partners, the Financial Planning Association and Fidelity Investments are independent companies and are not affiliated.
* Conditions apply. Participants in this Fidelity Investments (Fidelity) offer will have their entire fees paid by Fidelity in return for agreeing to release a copy of their results to Fidelity for Fidelity's internal recruitment use only. Fidelity undertakes to keep your practice results completely confidential. A representative from Fidelity may contact you to introduce you to Fidelity's services and offer guidance on how Fidelity can help you improve your practice performance.