The effective use of management information

… for a New Year’s resolution that financial planning businesses would do well to embrace – and that is to review your approach to using MI


Many financial planning firms hold a wealth of information within their information systems but do not always use this effectively to inform them what is happening in the firm. Decisions can often be made on ‘feelings’ rather than on factual information.

Of course, you do not need masses of information to be able to make decisions but what you do need is effective management information (MI).

Might MI

The starting point is to decide the answers to the following questions;

• What MI do we need?

• Who is going to produce it?

• How frequently do we need it?

Once you’ve worked those out, you’ll then need to set yourself benchmarks/time periods so that you can identify trends.

My suggestion is that when doing so that you concentrate on what is important and really look at the detail if there appears to be a problem.

Some examples of effective MI you might want to gather could include the following:

• Initial & recurring income

• Overheads (costs/salaries)

• Funds under management – new money, net new money & reinvested

• New clients including source of referral, client service segment

• ‘Lost’ clients

• Client demographic; age, location, family

• Complaints

• Portfolio returns (particularly for firms whose ongoing income is intrinsically linked to this)

To ensure that you get the most out of your MI you need to be using a good client management system. But that’s only half the battle. The other vital ingredient is to ensure that you have someone within your team who is effective at managing the quality and extraction of the data. This will minimise the time spent on collating the information and maximise time spent analysing trends. It may take a few months, even years, before you start to collate information that you can use for analysis and to make decisions but you’re well on your way.

Don’t look at your MI in isolation

Firms can often make the mistake of looking at their MI in isolation. However, when looked at collectively, it can provide a meaningful insight into what is actually happening at the firm.

For example, many firms set themselves a target of attracting new client money. On its own this goal could look very impressive but by combing it with other data such as client demographic, net new money, overheads and portfolio return analysis, this gives the fi rm an insight into whether there is actually any real growth going on.

XYZ financial planning

Let’s look at an example of XYZ Financial Planning to illustrate my points:

We’ll say that XYZ has attracted new client money of £20M this year but on a net basis this actually amounted to just £15M as £5M had been withdrawn. Their client demographic suggests an elderly population of clients that are in decumulation. Coupled with this, their overheads show a steady increase and portfolio returns (and thereby ongoing income) have been stagnant.

So, by combining all of their MI data, we can see that overall growth at XYZ has been less impressive. It could also suggest a longer-term issue of declining (net) new money and rising costs – which would need to be addressed as a matter of priority.

However, having got this far, this now allows the fi rm to make justifiable changes to their business based on hard facts. In this example, after a period of time tracking this information, and as a direct result of it, XYZ could start a strategy of creating the capacity to attract new clients within the accumulation phase, streamline their business to control overheads, review their investment mandate and implement a new charging structure.

Other areas which they might consider could be to look at their data around ‘lost clients’ making sure it is coupled with client feedback. This would allow XYZ to determine the root cause of why they have been losing clients. Information on new client acquisition combined with the service segment shows a firm whether they are attracting the right type of client for future business success.

Finally, if the business owners were planning on selling the business, they will need to pay particular attention to concentrating on these metrics over a period of time. These benchmarks can also be used when acquiring other businesses.

And finally…

Personally, I love a good bit of MI particularly as this builds up over time. I cannot start to tell you how many strategic business decisions have been made off the back of doing this well. So, whilst you are reviewing your business plan for 2020, why not ensure that all your objectives have a key piece of MI to back them up?

You’ll then have effective MI, which allows you to make business decisions based on fact rather than ‘feelings’.

About Tracey Underwood

Tracey is the owner and founder of PACE Solutions. The business provides support for financial planning firms by focusing on operational practices including; recruitment, compliance, processes, client proposition and business strategy. This is achieved not only through a consultancy process but by hands on implementation to ensure that firms achieve effective results that would otherwise not be achieved through consultation only.

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