New Tool Helps Advisers Measure Business Success

The Advisor Health Index score is calculated against one of five practice categories based on how a financial advisory firm is structured and its business life-cycle stage. A firm is then benchmarked against category peers across five strategic business measures, weighted according to Russell’s view on their importance to an advisory firm’s growth and success: total revenue per client, recurring revenue percentage, turn (revenue/AUM), active clients per FTE, and AUM per client.  

According to a press release, the Advisor Health Index prompts advisers to answer seven simple questions about their practice. The tool identifies a category benchmark based on practices with similar attributes and then outputs a score between 0 and 100 that reflects how the firm compares to the top quartile practices within the respective category.   

Higher scores indicate that the practice’s metrics match up more closely to those of the top firms in the same category. A lower score indicates that in some key performance areas, a practice differs from high-performing category peers. In addition to the overall index score, the adviser also receives detail on how the firm is benchmarked against each of the five strategic business measures.  

The Advisor Health Index benchmark data is derived from a custom dataset of 534 firms with $25 million or more in assets under management drawn from the InvestmentNews/Moss Adams 2010 Financial Study of Advisory Firms, conducted by Moss Adams, LLP. Within this dataset, prepared for Russell Investments by Best Practice Research, benchmark data represents mean values of high profit firms (top quartile practices in terms of pre-tax income per owner).