The Fact:
Between 2000 and 2001, the average advisor’s profit margin declined almost 6%. While assets grew at a healthy clip, expenses grew faster than gross revenue.

The Implications:
Positive markets have allowed advisors to ignore the hidden threat of declining profit margins. While the average advisor has a 70% profit margin (re-investing 30% of gross revenue back into the business), that number is declining. If current relationships hold, many advisors will see a decline in absolute profit in the next five years, despite increases in assets and revenue.

The Idea:
Many advisors respond to declining profit margins by cutting costs, which may have a detrimental effect on the practice in the long-run. In order to respond strategically, advisors will have to increase average revenue per client and reduce the underlying costs of managing client relationships. Delegation is one of the simplest and most effective ways to reduce the cost of a client relationship. Your overall profit picture will change dramatically simply by transferring contact responsibility for your low priority clients to a licensed assistant. In addition to reducing costs, this process creates capacity in your practice and gives you the room to attract more high priority clients.

The Next Step:
The Business Success Kit provides you with the tips, tools and templates that you’ll need to enhance practice productivity and profitability. It’s the most practical and comprehensive guidebook available for financial advisors. For more information, visit www.caifastore.com and click on the Business Success Kit.