For various reasons, there’s a lot of consolidation going on in the industry. We’re seeing larger financial advisory firms acquiring smaller ones as there are obviously a range of benefits for both parties. However, it’s not always that easy to pre-analyse the acquisition client base for potential risks, opportunities or even an accurate estimate of monthly recurring revenue or client profitability.
A great way to have a proper in-depth look at what’s going on in an advisor’s client base is to analyse at least 12 months’ worth of commission and fee data in order to establish:
- An expansive list of all clients from whom revenue has been generated over the last year (unsurprisingly, there are often information gaps and missing clients in CRM data).
- A view of profitable vs unprofitable clients, which can be overlaid with other information, such as AUM, or more subjective details such as relationship strength, potential revenue or advocacy.
- An objective analysis of initial vs recurring revenue over the period.
- Platform concentration and the potential ease or difficulty of switching clients to new brokerage codes.
- Potential claw backs in risk books.
All of this information is available within commission and fee data and, when combined with the advisor’s book reports, a very holistic view of the revenue and the clients can be obtained prior to take-on. More complete knowledge also puts you in a better position for communicating with the clients and establishing a solid relationship from the start, lowering the risk of losing clients who perceive the change to be non-beneficial.
Need a hand assimilating and analysing commission data for this purpose?