In most wealth management firms, one person is responsible for profitability – you! There is one hot seat. There is one report detailing total revenues, expenses, and hopefully a profit. But you still cannot see what relationships are making or losing money. To do this, you need to map your revenues and costs to portfolios so you can show profit/loss by account and relationship.  What if you could really see this?  What if you find that 30% of accounts are hugely profitable and generate most of the profits of the business, 40% are break even, and 30% are losers, big time?  What are you going to do to manage profitability? Here are some more questions which we can help you answer:

• What do we mean by “manage profitability”?   We suggest that this is making relationships more profitable.  This is not raising overall revenues and reducing overall expenses.  This is the process of protecting and enhancing your most profitable accounts, improving margins in breakeven accounts, and reducing cost/increasing revenues for your unprofitable accounts.
• Who will you assign to manage profitability?  Each relationship manager? Regional managers? others?
• Do you offer discounts to accounts that already lose money?
• Do you meet with customers with profit problems?  Are these one time, or recurring losses?
• Are you delivering services customers do not want or need?  Is there an alternative, lower cost delivery which may be preferred by you and the client?
• Can you uncombine accounts without a valid group deal?
• What is your strategy to protect your hugely profitable accounts? – spend the time and service needed to thwart competitors
• Meet with customers with profit problems.  You may be able to save you both money and create a service that is more satisfying.
• Reprice accounts that are losing money
• Consider add on pricing for accounts using service levels that exceed levels used by 80% of other accounts
• Move losing accounts to lower cost service such as call centers or brokerage accounts
• Best of all, send detail profit/loss by account reports to those you have assigned to manage profitability so that you have a real “Profit Manager” minding the store.
• Follow up – ask your Profit Managers to explain results – every 6 months.  Prepare rank order summaries.
• Now you are managing profitability, and your profits will increase dramatically.

Adding “Profit Manager”
If you are using the Q4 Wealth Management System (Q4), your revenues are already loaded to accounts.  Various account characteristics such as values, positions, account type, calculated discounts, etc. are already loaded as well.  To add Profit Manager, we load costs to accounts using industry best practice rules.  You get to review and modify these rules if you like.  So adding Profit Manager is a relatively low cost/huge payback feature when added to Q4.

Add Cost, P/L to All Your Business Reports
A number of clients are including cost and profit/loss results in all their business reporting. This is an exciting prospect.  Discounting and new fee reports can now show current and revised margins and profit/loss.