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How should Independent Financial Advisers measure the health of their business?

Conventional measures paint a simplistic picture. Basic accounting metrics like looking at your balance sheet or charting revenue growth give you a snapshot of current financial success. But they won’t tell you how robust the business is – where there’s room for growth and what your concentration risks may be in the future.

You may be able to tell what your revenue is, but do you really know the who, how and where of your revenue?

With advanced revenue analytics, you can meet clients’ needs as their lifestyles change. It’s a more dynamic way to ensure you always provide a fully holistic service to every client.

Enter Revenue Analytics

Revenue analytics is the ability to drill down to the segmented, underlying detail within your revenue, which may include commission from service providers and direct fee-for-advice income.

How do you build one single source of truth? Commission statements come in, they’re possibly plugged into Excel, revenue numbers are generated and that’s that. However, the underlying information paints a much fuller picture of your business.

Client Segmentation

Let’s suppose you want to get answers to questions like “Which client age bracket do I earn the most/least revenue from?” or “Which of my 20 to 30-year old clients have not started saving for retirement yet”? or even “Which of my clients with medical aid do not have gap or dental cover?”

To get accurate answers to these questions, you need proper client segmentation based on a number of factors. In order to get that, you’d normally have to painstakingly create a spreadsheet (and we all know what a nightmare Excel can be for stuff like this) and then carefully cross-check all permutations that are likely to be relevant. That’s a lot of tedium and error-prone guesswork.

Commspace Revenue Analytics was built to turn that guesswork into instant, actionable insights.

Our system automatically collates client data, enabling you to segment your clients at the touch of a button.

A question of concentration

Let’s say you want to see revenue by age group. A glance at the analytics dashboard will let you determine precisely how much income is generated by clients in each age bracket.

Now imagine a large percentage of that revenue is concentrated in the upper age brackets. What might that mean for your revenue stream down the line?

It’s not unusual for older clients to spend more on financial products, but if income is too heavily weighted towards loyal older clients, you may need to work on acquiring younger clients to ensure the long-term viability of the client base.

After all, as a responsible IFA, you’re always careful to watch out for concentration risk in a client’s portfolio. Why should you analyse your own client book any less scrupulously?

Keeping the Balance

Consider your revenue data from another angle. You select a revenue breakdown from all clients. You see that a large percentage of your revenue is concentrated in a handful of clients. Perhaps one or two high-net-worth families.

How should Independent Financial Advisers measure the health of their business?

Or perhaps income is patterned in other unusual ways you haven’t even considered. Revenue analysis technology is powerful precisely because you don’t have to know what you’re looking for to get actionable insights. Ultimately, the system is designed to reveal relevant patterns that help you make strategic, data-driven decisions.

Become more client-centric through analytics

At scale, there’s simply no way even the best IFA can know how financially secure each client is across all services, especially as their needs change. That’s if there is no technology involved that provides an overview of opportunities missed.

Revenue analytics also helps you to ensure there are no gaps in your clients’ needs. For example, your clients may effectively be investing for the future, but how secure are they against financial shocks?

Now let’s dig a little deeper. How many of your clients aged 30 – 40 have investments and medical aid in addition to basic life cover? It may turn out to be lower than you expected; life cover may have been the main financial need that was relevant when you onboarded those clients a decade ago, but now their needs have changed.

With advanced revenue analytics, you can meet clients’ needs as their lifestyles change. It’s a more dynamic way to ensure you always provide a fully holistic service to every client.

Want to find out how rich revenue analytics can transform your business? Give Commspace a shout to experience the full power of technology designed especially for independent financial advisers.