Maximize Your RIA’s Performance With KPIs • Financially Simple


As an independent registered investment advisor (RIA) owner, you likely understand the importance of tracking your business’s financial performance. However, you may be unsure of where to start, what metrics to track, and how to create a system that works for you and your team. In today’s entry, I’ll provide you with insights on how to maximize your business’s financial performance with Key Performance Indicators (KPIs) – the metrics that matter most in tracking your firm’s financial health. Likewise, I’ll explore what KPIs to track, how to create a system to keep information, and how to get your team involved in tracking and improving your financial performance.

Follow Along With The Financially Simple Podcast!

This week on The Financially Simple Podcast: 

  • (2:45) How do we determine if we made the right decision?

  • (5:55) What are the KPIs that RIAs need to track?

  • (7:56) Financial KPIs common to the financial world

  • (12:20) Create a system

  • (15:58) Use KPIs to modify behavior

  • (16:30) A strong KPI system provides a bottom-down approach and a top-down view

  • (18:04) Conclusion

Addressing The Pain Points

Before diving into the specifics of KPIs, let’s address some of the common pain points you may be experiencing as an RIA owner. You may ask yourself, “Where is my business at right now?” “Why am I not growing in value and profitability?” or “My competitors, friends, and colleagues are throwing %s out in conversations, but I don’t know mine.”

In the last three blog entries, we’ve looked at three different aspects of the financial department in your RIA: financial controls, a designated CFO, and your most profitable service(s). All three of these have the ability to increase the intrinsic value of your firm – meaning you can ask your buyer for a premium because you took action on areas that matter to them.

But perhaps you have implemented financial controls, hired a CFO, and identified your most profitable service. How can you determine if each of these tactics is working? Do you have the data to make the right decisions for you and your business?

KPIs: What is Most Important to Track in My Finances?

Peter Drucker famously said, “What gets measured gets improved.” I believe and can defend this point. Firms that keep accurate measures can report accurate trends month over month and year over year. The Schwab RIA Benchmark Study found that firms with assets under management (AUM) of $250-$500 million have had a median revenue growth rate of 11.5% over the last five years (2016-2021). Can you report what your growth rate was quarter over quarter? Is it better or worse than the industry median?

When it comes to KPIs, Bernie Smith, a multiple-title author on KPI tracking and founder of Made to Measure KPIs, suggests it’s best to keep it to 2-4 per goal. Lending further credibility to this statement, TD Ameritrade Institutional states, “When it comes to choosing KPIs, less is more. Ideally, you’ll select just a handful of KPIs to track.”

Now, I’m not listing every KPI here in the blog. If you’d like the full list of commonly tracked financial KPIs, just check out the podcast. In the meantime, here are a few of the financial KPIs I believe are critical to track on your way to an eight-figure exit:

  • EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
  • EBIT (Earnings Before Interest and Taxes) Growth
  • EBOC (Earnings Before Owner Compensation) Growth
  • Average Revenue Per Employee
  • Debt to Equity Ratio
  • Total Payroll to Gross Profit Ratio
  • Profitability Per Client
  • Revenue Per Client
  • Stock Price Increase/Decrease Per Quarter

Create a System to Keep Information

Once you’ve identified the KPIs you want to track, you must create a system to keep track of the information in an organized and user-friendly way. This system should be strategic and not require too much investment in terms of time and resources.

Creating a KPI system can be a time-consuming process. In my own business, it took around 90 days to identify the right indicators. It’s also essential to read up on KPIs and learn from experts in the field. Friends, let me tell you there is a ton of information out there on this subject. I read somewhere in the ballpark of 25 books when we were identifying our KPIs. For a list of the books I found most helpful during this journey, click here.

The tracking system you choose should be simple and easy to use, such as forms or spreadsheets. However, it’s crucial to ensure that the program or system you use is secure and safe to protect your proprietary information. Likewise, it’s also important not to make tracking your KPIs cumbersome, as it may lead to inconsistency and errors.

One important aspect of tracking financial KPIs is to ensure that it’s not done in a lagging pattern. You don’t want to be looking backward. That’s why I suggest having all of your financials ready by the 10th of each month. This will help you stay on top of your operations and address any issues before they become major problems. A dedicated CFO will help in this regard, but software such as Quickbooks and Fathom are also excellent tools that can be used to connect your KPIs to your operational processes.

Get Your Team Involved in Tracking KPIs

Discipline creates desire, and KPIs can be an excellent tool to keep your team disciplined and motivated. While KPIs can be helpful during performance reviews, it’s essential not to make them the sole factor for bonuses or promotions, as this can distract team members from other important tasks.

Promoting ownership and involving your team in the KPI tracking process can help align your team toward your objectives. A strong KPI system can provide an objective view of your firm’s health and enable you to decentralize operations. This means that you can look at the KPIs and know exactly what’s going on in your business, even when you’re lounging on the beach with a good book and an umbrella drink.

Wrapping Up…

Friends, I want you to succeed. I want you to know that an eight-figure exit is possible. KPIs can be powerful tools that can help you track your business’s performance and achieve your dreams. With the right KPIs and a robust tracking system, you can stay on top of your operations and take your practice to the next level.

As an independent RIA owner, there are times when you just want to throw your hands in the air and scream in frustration. I get it. I’ve been there. But it doesn’t have to be frustrating. KPIs are the measure to help you achieve the growth and forward movement you’ve been looking for. So, life is hard, but life is good. But implementing KPIs to track and measure your RIA’s success can make it at least financially simple. Hey, let’s go out and make it a great day!

Don’t know if you’ve got the time to commit to solidifying and implementing KPIs in your firm? Reach out to our team. We’re always here to help.

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