The Practice Management Scorecard results illustrate how much practice performance varies by market and that national benchmarks can be a misleading statistic. According to the FPA, relying solely on national benchmarks can lead a financial adviser to miss improvement opportunities or set inappropriate goals.

"These results demonstrate how important it is for financial advisers to benchmark their practice against relevant local peers and the limited value of national benchmarks", said Peter Keuls, Head of Private Client at McLagan Partners. "Using data that is too generic can lead to erroneous conclusions and disastrous business decisions."

The Practice Management Scorecard provides independent financial advisers with a complete range of local market benchmarks to help them set realistic goals for improving their practice in a customized, easy to use report. Measures tracked in each report include practice revenues, assets, number of clients, average client size, new assets, profitability, compensation, staffing and expenses. The Scorecard also provides participants with their rank in their market on each performance measure so that they can know exactly how they are positioned relative to their peers.

Findings regarding practice profitability and growth from the survey of practice performance for the year ended December 31, 2006, highlight how practice performance varies by market.

Specifically:

• Total practice revenue ranges from almost $800,000 in and around New York City to just under $300,000 in smaller and rural markets throughout the Northeast.
• Net effective payout (practice profit margin before owners’ draws) ranges from 68 percent in New York City to only 45 percent in Dallas-Ft. Worth.
• Markets with the highest net effective payout enjoy a combination of high productivity levels, low overhead rates and low professional compensation costs. For example, while the New York tri-state area features high productivity levels that generate scale economies for practices located there, Virginia and North Carolina achieve high effective payout rates with moderate productivity because of relatively low professional compensation costs
  Markets such as southern California, Wash., D.C., and San Francisco have lower net effective payout rates primarily because of the high overhead costs relative to the productivity of practices in those markets.
• Washington, D.C., and San Francisco offer opportunities for growth that may make up for the higher cost of those markets. Wash., D.C. features the 2nd highest new assets per financial adviser of the markets surveyed with over $9 million of new assets per financial adviser.
• New York City provided some of the greatest opportunity for asset growth in 2006 as well as high profitability with the highest new assets per financial adviser of any market ($9.3 million). St. Louis, while a high margin market, has one of the lowest levels of new assets per financial adviser ($3.7 million).

Top 5 Markets by New Assets per Financial Adviser

Market	New Assets per Financial Adviser ($ mm)
NYC/Long Island/Fairfield County	9.3
Wash., D.C./Bethesda/Baltimore	9.1
Northern New Jersey	8.0
Phil./Atlantic City/Wilmington	8.0
San Francisco/Oakland/San Jose	7.5

Top 5 Markets by 2006 Profit Margin before Owner’s Draw

"We view the Scorecard as one of the most important benefits FPA has ever launched," said Ian MacKenzie, Managing Director of Knowledge and Business Development of FPA. "This tool will ultimately help financial planners become more successful business owners.

The FPA Practice Management Scorecard, provided by McLagan Partners, provides a comprehensive set of benchmarks covering revenues, assets, clients, revenue by product, financial adviser productivity, growth, expenses, and profitability. The Scorecard is produced annually to deliver current market trend information and practice performance.

For more information on the FPA Practice Management Scorecard, visit www.FPAscorecard.mclagan.com.