Planner Revenues Up, But Not Profits�

September 2004
Journal of Financial Planning;Sep2004, Vol. 17 Issue 9, p21
Academic Journal
This article presents the results of a study conducted by Moss Adams LLP and sponsored by SEI Investments that looked at the financial performance of financial planning firms in the U.S. from 2002 to 2003. While revenues grew from 2002 to 2003 for the average financial planning firm, profits did not, according to the study. Revenues for single-professional firms grew by 21 percent, but operational efficiency seriously declined. Overhead expenses as a percentage of revenue rose from 39 percent to 43 percent, due to such factors as rising cost of errors and emissions insurance coverage, rent hikes and staff compensation that increased at a faster rate than revenues. Optimally, overhead expenses should not run more than 30 to 35 percent. Meanwhile, revenues for ensemble firms climbed 15 percent, but overhead expenses as a percentage of revenue did not decline, due primarily to the addition of another administrative or support staff person. The study also found that practices with at least one certified financial planner (CFP) certificant made more money than those without a certificant. Ensemble firms with at least one CFP certificant on staff earned $300,000 more in pretax revenues than those without, and solo practitioners earned, on average, $20,000 more than non-CFP solo practices.


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