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Advisor Health Index

What is the Advisor Health Index?

At Russell, we know that advisors' practices can be as unique as the men and women running them. However, our experience has taught us that many firms face similar challenges. Using our own custom methodology and data drawn from over 500 firms, the Advisor Health Index is a single score that allows you to compare your business to other firms to help you gain insight into the health of your practice. In addition to your overall score, we show you how your firm compares to our benchmark across five strategic business measures that we believe are vital to success.

What does my Advisor Health Index score mean?

Your score is a guide to help you relate how your business compares to similarly structured financial practices. Scores can range from 0 to 100. The higher your score, the more closely your practice's metrics match up to those of the top firms in your category. A lower score indicates that in some key performance areas your practice differs from these peers.

How is my Advisor Health Index score calculated?

Using the inputs you provide, we first assign you to a Practice Category. This category establishes a group of peers from which your benchmark data are calculated. Next, we compare your metrics to the benchmarks for each of the five strategic business measures. Finally, we calculate a weighted score for each of these measures and add them together. This sum is your Advisor Health Index score.

How do you determine the different Practice Categories?

Financial advisory practices display different performance tendencies depending upon how they are structured and where they are in their life-cycle. The Advisor Health Index takes these differences into account and benchmarks your practice within the following Practice Category framework:

• Early Solo – Practices with no more than one financial advisor that were established after 1999.
• Mature Solo – Practices with no more than one financial advisor that were established during or before 1999.
• Early Ensemble – Practices with more than one financial advisor that generate less than $2 million in revenue per year.
• Mature Ensemble – Practices with more than one financial advisor that generate between $2 million and $5 million in revenue per year.
• Market Dominator – Practices with more than one financial advisor that generate more than $5 million in revenue per year.

How are the five strategic business measures weighted?

• 30% – Total revenue per client
• 25% – Recurring revenue percentage
• 20% – Return on Assets (Revenue/AUM)
• 15% – Active clients per Full-Time Employee
• 10% – AUM per client

Is a higher score better than a lower one?

No, not necessarily. Your Advisor Health Index score is a simple, high-level assessment of your business. It is not a perfect measure and should not be taken as such. We believe that your score can help you formulate a directional path for analysis. It looks at five key ratios and not the whole of your practice. We believe that these ratios are important, but value comes from understanding what's driving those numbers and why. Russell's Practice Management consultants can help you understand these measures more fully should you have any questions.

Where do you get your data?

Benchmark data are taken from a custom dataset of 572 firms with $25 million or more in assets under management drawn from the InvestmentNews/Moss Adams 2011 Adviser Compensation and Staffing Study. Within this dataset, prepared for Russell Investments by IN Adviser Solutions, benchmark data represent mean values of high profit firms. High profit firms are defined as top quartile practices in terms of pre-tax income per owner.

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