Picking up from where we left off in our deep dive into the metrics that define success in our industry, today we’re continuing with Part 2 of ‘Unlocking the Metrics of Success’. We’ve already established that while AUM, revenue, and client count are the conventional hallmarks of achievement, they only tell part of the story. Now, let’s peel back the layers to reveal the core drivers of a wealth firm’s prosperity: the sales productivity ratios that gauge our true prowess in client acquisition and organic growth. Join me as we further unravel these critical metrics and discover how they can shape our strategies and sharpen our competitive edge.

1. Wallet Share: This is one of the most important ratios within the realm of wealth business, offering a nuanced glimpse into the depth of a firm’s client relationships and the effectiveness of its growth strategies. At its core, Wallet Share represents the proportion of a client’s total investable assets that are managed by a firm, serving as a critical indicator of client trust and satisfaction. It goes beyond mere acquisition, delving into the realm of retention and expansion within existing client relationships.

Increasing a firm’s Wallet Share is synonymous with deepening client engagement—a testament to the firm’s ability to understand and meet client needs, often before they are even articulated. A high Wallet Share signifies that clients view the firm not just as a service provider, but as a trusted advisor, integral to their financial well-being. This metric, therefore, not only sheds light on the firm’s success in captivating the client’s financial landscape but also highlights the firm’s proficiency in delivering value, securing loyalty, and fostering long-term relationships. In a competitive industry where new client acquisition is often costly and time-consuming, optimizing Wallet Share emerges as a strategic imperative, enabling firms to maximize growth and profitability through their existing client base.

But how do you improve this ratio or get 100% wallet share from your clients…

You do that by working on the most important one – Share of Heart.

2. “Share of Heart” is a metric that goes beyond the traditional financial measures to gauge the emotional and relational investment a client has in their wealth management firm. While Wallet Share quantifies the portion of a client’s assets managed by a firm, Share of Heart assesses the depth of the client’s loyalty, trust, and overall satisfaction with the firm. It’s about understanding the client’s emotional connection and commitment, which can be a powerful indicator of long-term relationship potential and stability.

At its essence, Share of Heart is built on the foundation of relationship quality. It reflects how well a firm understands and aligns with its clients’ values, goals, and needs. A high Share of Heart means that clients don’t just see their wealth firm as a service provider but as a trusted partner in their financial journey. They are likely to turn to the firm first for advice, view the partnership as invaluable, and are less likely to be swayed by competitors.

Developing a high Share of Heart involves consistent, genuine engagement with clients (I will be doing a separate post on this topic soon) and a world class client experience. This means not just meeting their financial objectives but also connecting on a personal level, showing empathy, and going the extra mile to provide personalized service. It’s about creating memorable experiences, being responsive and proactive, and demonstrating integrity in every interaction.

Moreover, a strong Share of Heart can lead to organic growth through referrals. Satisfied clients who feel a deep emotional connection with their firm are more likely to recommend the firm to friends and family, expanding its client base through the most trustworthy marketing channel: word-of-mouth.

In practice, measuring Share of Heart can be challenging, as it involves qualitative assessments such as client feedback, satisfaction surveys, and Net Promoter Scores (NPS). However, these indicators can provide valuable insights into how clients perceive their relationship with the firm and highlight areas for improvement.

In conclusion, while Wallet Share focuses on the financial aspect of client relationships, Share of Heart captures the emotional and relational dimensions. For wealth firms aiming for sustainable growth and deep client engagement, paying attention to Share of Heart is just as crucial as increasing Wallet Share. It’s a testament to a firm’s ability to win not just the client’s business but also their trust, loyalty, and advocacy.

3. Assets Under Management (AUM) per Advisor: A critical measure of an advisor’s capacity and effectiveness. It reflects not only sales acumen but also the advisor’s ability to maintain and expand existing client relationships.

4. Cost per Acquisition (CPA): How much does the firm spend to acquire a new client? This ratio helps to assess the efficiency of marketing strategies and the sales team’s effectiveness.

5. Client Retention Rate: While not a direct measure of sales productivity, a high retention rate indicates that the sales team is not only good at closing deals but also at nurturing relationships that contribute to sustained revenue. This ratio is generally very high for most firms in our industry, often at 90+%. Because this ratio is high, many founders take organic growth lightly…

6. Revenue per Advisor: This ratio is straightforward—it measures the average revenue generated by each advisor in the firm. A high ratio suggests that advisors are effectively managing and growing their client portfolios.

7. Revenue per Employee: This ratio measures the total revenue divided by the number of employees. A higher figure indicates a lean operation where each employee contributes significantly to revenue generation. It can reflect a company’s ability to leverage its talent effectively.

8. Sales Efficiency Ratio: This ratio measures a client acquisition person’s productive time against their total available time and would look at the efficiency of the person in terms of time management. This can be particularly useful for understanding how much of their time is spent on activities that directly contribute to generating sales versus administrative or other non-sales tasks.

This is super important for every firm (including yours) as this is responsible for most of the other ratios. The best is most professionals do not know this ratio for their firms.

Here is a formula that could be used to calculate such a ratio:

Sales Efficiency Ratio (Time Based) = (Productive Sales Time/Total Available Time) ×100

In this formula:

Productive Sales Time refers to the time a salesperson spends on direct sales activities, such as prospecting, client meetings, follow-ups, and closing deals.

Total Available Time is the total work time available to the salesperson, which could be a standard workweek (e.g., 40 hours).

To calculate the ratio, you would:

• Measure the Productive Sales Time over a given period (e.g., a week).
• Take the Total Available Time for that same period.
• Divide the Productive Sales Time by the Total Available Time.
• Multiply the result by 100 to get a percentage.

For example, if a salesperson has 40 hours available in a week (Total Available Time) and spends 32 hours on direct sales activities (Productive Sales Time), their Sales Productivity Ratio would be:

Sales Productivity Ratio = (32 hours/40 hours) ×100=80%

This would mean that the salesperson is spending 80% of their time on sales-related activities, which could be considered highly productive. You can use this metric to identify areas where you or your other client acquisition team members may need help managing their time or reducing time spent on non-sales activities.

9. Client Lifetime Value (LTV): In wealth and financial services businesses, the Lifetime Value (LTV) of a client is a projection of the net profit attributed to the entire future relationship with a client. The calculation of LTV can be complex and takes into account factors such as the revenue generated from the client, the margins on that revenue, the retention rate (or churn rate) of the client, and the discount rate applied to future cash flows.

This metric is extremely important to us for several reasons:

Client Acquisition Cost Justification: LTV helps wealth firms assess the viability of their marketing and sales investments. If the cost of acquiring a client is justified by the LTV, the investment is considered sound.

Service and Retention Strategy: Understanding the LTV of clients enables firms to tailor their service levels and client retention strategies. Firms are more likely to invest in maintaining relationships with clients who have a high LTV.

Segmentation and Personalization: Firms can use LTV to segment their client base and personalize services. Clients with higher LTV might receive more personalized attention, more sophisticated wealth services, or have more resources allocated to them.

Product Development: LTV data can inform product development by highlighting the types of services that lead to long-term client retention and profitability.

Profitability and Valuation: The aggregated LTV of the client base can also be used as a metric for valuing the firm, forecasting future revenue, and assessing overall company health.

Client’s Lifetime Value (LTV) should also include referral value as referrals can significantly impact growth. The referral value accounts for the additional revenue generated from new clients brought in through existing client recommendations/introductions/referrals.

In summary, LTV is crucial in the wealth business because it represents the total value a client brings over the duration of their relationship with the firm, beyond just initial or annual profits. It encourages a long-term view of client relationships, which is essential in an industry where trust, care, and sustained service quality are paramount for success.

Boosting Sales Productivity Ratios:

Improving these ratios is not about pushing sales teams to work harder but to work smarter.

Leveraging technology for better customer relationship management, employing data analytics for targeted sales campaigns, and refining the client onboarding process can all lead to more significant outcomes.

The Human Element:

We must not forget that at the core of our business is trust, care, connection, and personal relationships. Sales productivity goes hand in hand with the quality of client experience, and service provided. Financial professionals who are trusted and who understand their clients’ needs will naturally have better ratios.

Looking Ahead:

As the wealth industry evolves with digital advancements and changing client expectations, the firms that keep a close eye on their sales productivity ratios—and understand the stories behind them—will be the ones that stay ahead. These ratios are more than just figures on a spreadsheet; they reflect a firm’s strategic alignment and operational effectiveness.

In conclusion, sales productivity ratios are not just an end but a means to a deeper understanding of your firm’s capabilities and growth potential. They offer a quantifiable look into the qualitative aspects of client relationships and your and team’s performance, providing a roadmap for continuous improvement and success.

The most important question is – Do you know these ratios for your firm?