-Insights-
How Key Performance Indicators (KPIs) Can Help Define A Pathway to Growth
In management literature there is widespread use of the concept of ‘what gets measured gets improved,’ highlighting the power of tracking metrics to drive meaningful progress toward goals.
Key Performance Indicators (KPIs) are measurable metrics used to evaluate the success of an individual, team, or organization in achieving specific objectives or business goals. They can act as a guiding compass, enabling firms to evaluate their performance, align with business objectives, and set a trajectory for future growth. As advisory firms strive to meet their clients’ evolving needs and improve profitability, KPIs offer a data-driven pathway to achieving these goals.
Why KPIs Matter
By focusing on KPIs that reflect specific objectives, advisors can identify areas for improvement and prioritize actions. Capital Group’s 2024 Advisor Benchmark Study found the highest-growth advisors assess the impact of KPIs in several areas of their business and are more likely to use those metrics to refine business plans.
The 2024 Nitrogen Firm Growth Survey highlights that firms using targeted KPIs can unlock higher client satisfaction, stronger client engagement, and improved operational efficiencies, all of which can contribute to sustainable growth.
Here are some other reasons to consider using KPIs in your firm:
1. Strategic Decision-Making: KPIs help advisors to make informed decisions. For instance, understanding the source of new clients can guide where to allocate your marketing budget and other resources.
2. Benchmarking Performance: Comparing firm performance against industry benchmarks shows how the business is performing relative to peers. Tools like the InvestmentNews Pricing & Profitability Study and the Capital Group’s Pathway to Growth study offer valuable benchmarks.
3. Enhancing Profitability: Tracking KPIs like revenue per advisor and operating profit margin can help identify inefficiencies and optimize resource allocation.
4. Client Retention and Satisfaction: With 61% of new leads for advisors originating from referrals*, tracking KPIs related to client engagement and satisfaction is critical. High client satisfaction can correlate with more referrals and long-term growth. Monitoring KPIs related to client satisfaction can also identify gaps in engagement *2024 Nitrogen Growth Survey
5. Insights into Potential Growth Opportunities and Risks
KPIs should not merely assess historical performance but can also serve as predictors for future outcomes. By tracking KPIs related to the composition of your book of business, you can clearly understand client demographics and put strategies in place to help ensure future sustainability. For instance, a book of business heavily concentrated on older clients may indicate a need for proactive approaches to engage younger generations.
Important KPIs for Financial Advisors
Measuring KPIs doesn’t require tracking every possible metric; instead, it focuses on a few key indicators that directly align with your business goals. Below are some examples of KPIs that align with strategic goals. Prioritize 2-3 KPIs that reflect your strategic objectives.
| Strategic Goal | Key Performance Indicators |
| Client Growth | Number of ideal new clients Client retention percentage Source of new clients |
| Increase Revenue | Revenue per client Revenue per advisor |
| Increase Profitability | Gross Profit Margin Earnings Before Owners’ Compensation (EBOC) |
| Client Engagement & Satisfaction | Net Promoter Score (NPS) |
| Client Base Demographics | Average age of book Number of multigeneration client relationships |