Times have changed. Intuition and instinct, the preferred methods of practice management, have failed even the savviest advisors in the market mayhem we traverse these days. But to my mind, the downfall lay less in advisors' investment selection than it does in business intelligence-or the profession's lack of it.

The term business intelligence refers to the use of analytics and data to manage your business more effectively. An advisor recently asked me, "How is it you believe my business would be faring better if I had more data and had done more analysis; have you been paying attention to the markets?" Indeed, I have. I've also paid attention to successful advisory firms for 13 years. I told him that firms that rely on business intelligence to develop strategy, design infrastructure, drive processes and choose clients and staff fare better in this market than those that don't.

ARM YOURSELF WITH DATA

Financial planning is in its infancy in its use of business intelligence. Most companies can generate statistics, such as revenue per employee or average order size, but our profession has barely begun to define such metrics, much less standardize them. Business intelligence can improve performance, helping your firm become more profitable. Here are some areas in which advisors can gather and use business intelligence:

Client satisfaction. Client surveys produce lots of information, but few firms harness the power of what they gather. They often fail to ask the right questions in the first place. For example, an advisor who correlated client risk profiles to client satisfaction in past market declines can identify clients who require more hand-holding or portfolio adjustments in down markets. Or take the question, "Are you satisfied with the frequency of client meetings?" Here, I'm most concerned with what their response means to the business.

By analyzing the relationship between number of client meetings, client satisfaction, additional assets gathered and referrals, we can identify trends that improve the business. Clients may say they want more meetings, but if data shows they're unlikely to be more satisfied, you're looking at an increase in costs and a decrease in profits. If data indicates that clients with the highest meeting frequency add assets to their accounts or refer more, then meeting more frequently has benefits.

Marketing. Advisors frequently tell me that the more often they see clients, the more referrals and assets they receive. Instinct says they might be right, but "might" isn't the best way to make decisions. Tracking client referrals and new assets by date in relation to last meeting is a clear way to determine if this is true. Without data that demonstrates that more meetings equal more revenue, there's no case for increasing activity.

One of my new clients invests in dinner seminars to generate return on investment (ROI). But during our exploratory conversation, it was clear that there was no data to support or contradict this belief. The advisor said it wasn't worth the effort to track the information because generating revenue was more important.

But I learned that prospects often delayed making a decision after this first meeting, resulting in an extended sales cycle. In my view, people do not schedule discovery meetings if they're not interested and motivated, so a closing rate of less than 80% suggests that the sales process doesn't build trust or add value.

If he had tracked how many were invited, how many attended, how many requested a meeting, how many closed and how many said no, as well as the revenue generated, all the information needed to evaluate ROI-besides his sales process-would be there. You have to see the power in the information.

Human capital. Hiring and retaining quality advisors and staff is probably the best investment your firm will make. Yet, the feel-good method of management prevails. If you knew that other advisors ranked client services assistants with a certain psychometric profile-such as Kolbe or DISC-higher in performance and satisfaction, you'd see that a person with such a profile is more likely to succeed in that position. Business intelligence helps show the correlation between personality profiles and why some employees perform better, stay longer and are happier. Research also identifies how each advisor is doing in segmentation, profitability, fees and client satisfaction. This gives firms the ability to improve productivity, performance and profitability.

Client model. One firm was concerned about too little time and too little staff. We found that the bottom 50% of the firm's 400 clients generated 8% of revenue. First, we discontinued 200 unprofitable relationships. Then, by increasing fees and delegating remaining clients to an associated advisor, the firm reduced its staffing needs, supercharged productivity and improved profitability.