Case Study - Financial Services

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Recent changes in financial services regulation, consolidation of dealer groups and a highly competitive environment has not only put pressure on financial adviser earnings, but also resale value of practices.

A prominent Australian Financial Services Dealer Group appointed PCM to Performance Benchmark and develop Dashboard Reporting, in an effort to grow profitability and add tangible value for proprietors.

An intangible product, a healthy desire for market share and exhaustive industry criteria set the challenge for adding value.

The Challenge

Financial services has typically been a data rich, knowledge poor industry, when reviewing adviser and dealer group profitability.  Although operating platforms within dealer groups tend to be consistent, the consistency and quality of source can vary significantly.

For most financial planning practices, there is at best, a high level view of client and service profitability. In many cases, the true profit contribution of specific client profiles and/or service offers are not known.

PCM’s challenge was to introduce best practice Activity Based Costing principles, so that the actual profit contribution and long term value of individual clients and services, for each practice, could be derived.  Then apply these insights, combined with dealer group benchmarks, to refine client mix, service levels and pricing.

The PCM Approach

PCM invested time to fully understand the functions of several financial practices within the group, focusing on both client facing and back off functions. Activities and time required were allocated on a client profile and functional basis, so that the true Costs to Serve could be derived, for individual clients, for each interaction.

A full Performance Benchmark was then undertaken, with a 90+% participation rate. Profitability and operational performance were benchmarked, taking into account differences in practice and client profiles. Practices were then assessed and ranked by key performance area, with specific opportunities and their profit impact documented for each practice.

Dashboard Reporting was developed, to enable real time performance benchmarking, trends and achievement of pre-defined targets. Investible wealth, benchmarked with ABS and industry databases, was also reported, to define the true market share of a practice within a given catchment.

The Results

Over $4.6M per annum in genuine upside opportunities were identified, based on performance variations within the Dealer Group, in areas that could be directly influenced by proprietors.

Corporately, more than $3.0M per annum in additional Dealer Group income was highlighted, based on improved market share of investible wealth.

Performance Dashboard Reporting, integrated with existing information systems, delivered timely and valuable business insights. The need for labour intensive collation and analysis of data from disparate systems was also removed, saving approximately 3.5 FTE’s, or around $400k per annum.