A recent article from industry research group Kehrer Bielan Research & Consulting, Needed: Better Tracking and Reporting, highlights how tracking the right KPIs remains a struggle for many wealth management programs. It affirms our belief in the importance of having complete data and the suitable tools to mine it. The article observes that data points like household penetration, new assets, and net new assets are key metrics to track in a firm’s management reporting. Household penetration provides a good measure of potential revenue growth for the institution. This is because household count tends to be more insulated from market forces (federal stimulus, rising interest rates, etc.), in contrast to revenue penetration of deposits. The article points out that the “average investment services revenue per institution household improved 31% during 2021, even as revenue relative to deposits remained flat.”

When measuring advisor performance, consider using new assets and net new assets as an alternative to the standard metric of annual GDC per advisor. Kehrer Bielan contends, “asset acquisition (new assets brought into the firm) and net new assets (inflows minus outflows) provide a better window into advisor performance, and that firms should make those measures central to how they manage and compensate their advisor force.”

“Asset acquisition (new assets brought into the firm) and net new assets (inflows minus outflows) provide a better window into advisor performance, and that firms should make those measures central to how they manage and compensate their advisor force.”

Unfortunately, tracking these alternative KPIs remains a struggle for many broker-dealers and RIAs. Among the firms that participated in Kehrer Bielan’s annual survey, “fewer than 1 in 5 were able to report these three data points, despite their growing importance.”

In a follow-up conversation with Tim Kehrer, he shared more insights into why less than 20% of these firms cannot adequately report on these metrics. According to Tim, one of the reasons firms struggle tracking household data is due to legacy data left behind by mergers and acquisitions and changes in brokerage platforms and clearing providers. Tim commented, “All those changes over time have made keeping track of client data, and organizing it into households, very complicated.”

Regarding tracking net new assets, Tim explained, “one major hurdle are the myriad TAMPs and asset managers the typical financial institution works with. Combining asset flows to and from those various platforms into a single view of new assets and net new assets is challenging.”

In short, many broker-dealers and RIAs strain to pull in the right data to make meaningful analyses for business planning. This is something we’ve seen firsthand. One of the top reasons firms come to Terrapin is their desire to grow their program but are held back due to an overreliance on manual processes. When an organization uses manual efforts to track and report on net new assets pulled from multiple platforms and lines of business (especially direct business), it quickly becomes apparent that their current tools and processes are counterproductive. Not only are they inefficient, but spreadsheets also become a single point of failure, with the data and business logic held captive to Excel. A corrupted macro or a simple copy-and-paste mistake can be detrimental to your reporting and forecasting. In 2012 JP Morgan made headlines due to a copy-and-paste error in Excel that cost the bank a $6.2 billion trading loss. Granted, the cost of JP Morgan’s now infamous blunder is an extreme example; nonetheless, it illustrates how spreadsheets pose many risks when used as a standalone desktop tool.

A strategic vision is hard to execute when relying on outdated processes and spreadsheets. To achieve their goals, firms require scalable and sophisticated technology and a partner who understands their unique needs. We have been helping firms do precisely that. The foundation of our platform aggregates data from all lines of business, whether brokerage, direct business, or other third-party sources. This, in turn, provides our customers with a global view of their business, accessibility across their organization, and the ability to make timely data-driven decisions. Our technology makes data a priceless asset in planning strategic business objectives. We help our customers turn strategy into reality. To learn more, click here.

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