The Top 5 Key Performance Indicators that RIA Firms Use to Grow Their Businesses

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What are the Top 5 KPIs a Business Owner should be Looking at Consistently?

Key Performance Indicators (KPIs) enable a business to quantifiably measure its actual success in comparison to its objectives and goals. While the vision and purpose of the business will drive your KPIs, each industry derives its own metrics.

Metrics used by wealth management firms to gauge performance may focus on financials (gross profit margin and growth), aspirations (technology, mergers and acquisitions), customer experience(s), and employee engagement/compliance.

Top 5 KPIs your RIA Firm should Look at Consistently:

KPI #1 – Assets Under Management: Assets under management (AUM) is a key finance metric that refers to the market value of all investments managed by an RIA on behalf of their clients (AUM can also be attributed to the total value of assets managed for a client). The definitions and formulas for AUM can vary by company. The Benchmarking Study conducted by Schwab revealed that the average AUM growth for RIA firms of all sizes was 6.5 percent over a four-year period between 2014 and 2018.

KPI #2 – Profit Margin: Direct expenses refer to the costs of directly servicing clients (the costs related to financial advisors working with clients directly), while overhead expenses account for the costs related to administration, operations, software, and technology.

Once broken down into the two categories, RIA firms can evaluate the #1 key performance indicator that indicates the health of their business – profit margins. The gross profit margin is the profit that remains after deducting direct expenses, while the net profit margin is the profit accrued after accounting for overhead expenses.

KPI #3- Profitability from Individual Clients: Another key metric your RIA firm should consider is the overall profitability of each individual client. You can begin by assessing the average revenue you earn per client, and then later analyze the distribution of revenue from each client. For instance, a firm may generate an average revenue per client of $5,000. The distribution might show that a majority of clients are centered around the average, while another firm with the same average can have many wealthy clients balancing out smaller, unprofitable clients.

KPI #4 – Client Acquisition and Retention: Growth for an RIA firm can be classified under two categories of revenue – revenue generated from new clients, and revenue generated from existing clients. This classification helps larger RIAs understand where their revenues are coming from, further allowing them to assess their client relationships and begin developing new strategies to achieve even greater revenues. Firms paid on an AUM basis can then categorize new revenues into two separate fields – revenue generated from market performance that adds to the AUM, and new revenue from clients who contribute net, new dollars.

Apart from new revenue, RIA firms also need to look at the retention of revenue ever year. Key metrics that can be looked at include the percentage of recurring revenue from AUM, ongoing trials, retainer fees, hourly fees and/or commissions, and clients retained by year.

As per the 2019 Schwab RIA Benchmarking Study, the fastest growing firms experienced a 9.3 percent increase in clients.

KPI #5- Time Spent on Each Client: Metrics used to monitor the time spent on each client by an advisor can also give you an indication of profitability. By linking the time spent to a ‘cost’ per advisor, your firm can arrive at an estimate of the revenue generated per hour for various clients, and consequently, the profitability of each of your clients.


Compass CFO Solutions LLC is the leading provider of outsourced CFO, accounting, and bookkeeping services to the wealth management industry. Compass CFO Solutions’ services allows RIA firms to spend more time growing their business. Learn more at

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