5 Top Growth Takeaways from XYPN's 2023 Annual Benchmarking Study

Seven years ago XYPN started conducting an annual benchmarking survey of its members to provide data-backed firm journey analysis for fee-for-service financial planning firms. With each year, the resulting Benchmarking Study has painted a clearer and more intricate picture for planners looking to map out their own firm journeys during their implementing, building, and scaling phases.

The survey focuses on revenue and expenses, client services, sources of clients/business, and pricing. Each piece of information is tracked year-over-year to show trends and provide fee-only financial planning firm owners with key metrics which they can measure their own businesses against.

During XYPN LIVE 2023, XYPN Co-founders Alan Moore and Michael Kitces recorded a live episode of XYPN Radio where they reviewed the study's highlights. Alan and Michael pulled five graphs to spotlight what’s working and not working for member firms. The episode tells the data-backed story of an XYPN firm's journey, from the average growth in revenue, client profitability, and client relationships, to staff productivity.

Give the episode a listen here, and check out some of the highly anticipated figures and highlights below: 

Figure 1: Median Annual Growth Rate of Client Household Relationships since 2018

The first graph that was reviewed was Figure 1, which explored the median annual growth rate of client-household relationships since 2018. Kitces shared that this is “one of the best ways to understand in the purest sense what growth looks like in the fee-only space.”

XYPN members have seen an impressive 28% average growth rate over 5 years but suffered a slight decrease in 2022. Why? Michael and Alan discussed the current environment and how market cycles affect growth—including how interest rate sensitivity can lead to an overall slowdown of new client growth. But don’t get too worried about the dip, as they reassured the packed room, “This too shall pass.”

Figure 2: Average Annual Revenue for Members Who Joined With Few Clients

Figure 2 covered the average annual revenue for members who joined with few clients. On average, this graph helps answer the question about how XYPN members are doing. You’ll see that more growth happens in the 4th year than in the first 3 years combined. Why? It takes time to be known, liked, and trusted.

It can be hard to accelerate at first. Some advisors get there faster because they are breaking away from another firm and taking existing clients with them, but if you are truly starting from scratch, this is the path XYPN has seen advisors take over and over again.

Figure 11: 2022 Revenue Growth by Niche Focus for Members Joining with Few Clients

There’s one big takeaway from Figure 11…riches are in the niches! It’s clear you can grow a successful financial planning practice when you have a niche focus. Looking further, in the Implementing (5-20 clients) and Building (20-75 clients) phase, having a niche or not having a niche is neither holding you back nor accelerating your growth. But, in the Scaling phase (75+ households), the data shows there is significant growth when you focus on a niche. 

Alan and Michael reiterate that they’ve never heard anyone say they niched too soon or too narrowly, but they have heard folks say they wish they had niched sooner. The most successful firms are the ones where all of their processes and marketing are geared toward their niche and not focused on anyone outside of that. Working with anyone else almost feels uncomfortable because it’s different from the usual processes. Choosing a niche helps you to be clear with who you work with, and why.