7 Investment Bank KPIs You Can't Afford to Ignore

Welcome fellow investors and entrepreneurs! As seasoned professionals, we understand the importance of keeping up with industry trends and tracking key performance indicators (KPIs) to stay ahead of the game. In this article, we'll be discussing the top seven investment bank KPI metrics to track and calculate, so you can optimize your business for success.

• First up, we have the all-important customer retention rate. This metric measures how many customers you're keeping over a period of time, and is a key indicator of customer loyalty and satisfaction.
• Next, let's talk about assets under management growth rate. This metric reflects the percentage increase (or decrease) of assets that you're managing, and is a vital measure of overall growth and performance.

But that's just the tip of the iceberg. We'll also be diving into metrics such as the number of investment accounts opened, average customer satisfaction score, percentage of customers referred by existing clients, revenue per customer, and percentage of customers with diversified investment portfolios. So, stay tuned to discover how these KPIs can help take your investment bank to the next level!

Customer retention rate

Investment banks track numerous key performance indicators (KPIs) to ensure their business is on track. One of the most important KPI metrics they track is the customer retention rate, which measures the percentage of customers who stay with the bank over a certain period of time.

Definition

The customer retention rate is the percentage of customers who remained loyal to the investment bank over a certain period of time. It measures how well a bank is able to retain its customers by providing high-quality services, meeting their needs, and addressing their concerns.

Use Case

Investment banks track customer retention rate to measure client loyalty and the strength of their relationships. A high retention rate indicates that clients are satisfied with the bank's services and are willing to continue using its services. It can also be an indication of the bank's stability and reputation in the industry.

How To Calculate KPI

The customer retention rate can be calculated using the following formula:

Calculation Example

Suppose an investment bank has 10,000 customers at the beginning of the year. During the year, the bank acquires 1,500 new customers and loses 500 existing customers. At the end of the year, the bank has 11,000 customers. The customer retention rate for the year would be:

KPI Advantages

• Indicates Customer Loyalty: A high customer retention rate is an indication of client loyalty and satisfaction with the bank's services
• Cost-effective: Retaining existing customers is more cost-effective than acquiring new customers
• Better Forecasting: When a bank has a high retention rate, it is more predictable and easier to estimate future business projections

KPI Disadvantages

• One-sided view: The customer retention rate only provides an indication of how well the bank is retaining clients, it does not provide insights into the bank's ability to attract new customers.
• Industry Specific: There is no fixed benchmark for the customer retention rate. It varies by industry, region, and bank size, making it difficult to compare banks.
• Short-term metric: The customer retention rate is a short-term metric and does not reveal long-term trends in customer retention.

KPI Industry Benchmarks for the KPI: 'User Retention Rate'

The industry benchmarks for the customer retention rate differ across industries and institutions. In general, banks aim for a high retention rate of 90% or more. However, some institutions may have specific goals based on their objectives, industry, and target customers.

Assets under management growth rate

Definition

Assets under management (AUM) is a financial metric that measures the total value of the assets that an investment bank manages on behalf of its clients. AUM growth rate measures the percentage increase or decrease in a bank's total AUM over a given period.

Use Case

AUM growth rate is a critical metric for investment banks as it indicates the bank's ability to attract and retain clients. A high growth rate suggests the bank is successfully winning business, while a low growth rate or a decline in AUM may signal a loss of client confidence or market headwinds.

How To Calculate KPI

The formula to calculate AUM growth rate is:

Calculation Example

Suppose an investment bank had an AUM of $100 million at the start of the year and $120 million at the end of the year. The bank's AUM growth rate for the year can be calculated as follows:

KPI Advantages

• Highlights the performance of the investment bank's sales and marketing efforts
• Helps identify trends in client demand and preferences
• Allows for benchmarking against industry peers

KPI Disadvantages

• Can be influenced by factors outside of the investment bank's control, such as changes in market conditions or regulatory changes
• Does not account for the profitability of the assets managed

KPI Industry Benchmarks

According to industry benchmarks, a healthy AUM growth rate for investment banks is around 5-7% annually.

Number of Investment Accounts Opened

As an entrepreneur, keeping track of the performance and profitability of your investment bank is critical for success. One key performance indicator (KPI) to track is the number of investment accounts opened.

Definition

The number of investment accounts opened is the count of new investment accounts opened by the investment bank during a specific period.

Use Case

This KPI is important because it indicates the growth and expansion of the investment bank. A high number of new accounts being opened means the bank is attracting new customers and expanding its reach, which is a positive sign for the business.

How to Calculate KPI

To calculate the number of investment accounts opened, use the following formula:

Calculation Example

For example, if an investment bank opened 500 new investment accounts during the first quarter of the year, the number of investment accounts opened for that period would be 500.

KPI Advantages

• Indicates the growth and expansion of the investment bank
• Helps identify successful marketing and sales strategies
• Provides insight into customer acquisition and retention rates

KPI Disadvantages

• Does not consider the quality of new accounts opened
• May not show the full picture of customer satisfaction or loyalty
• Does not indicate the profitability of new accounts

KPI Industry Benchmarks

Industry benchmarks for the number of investment accounts opened vary widely depending on the size and focus of the investment bank. However, a high number of new accounts opened is generally viewed as a positive sign for an investment bank.

Top Seven Investment Bank KPI Metrics - Chapter 1: Average Customer Satisfaction Score

As an entrepreneur, it's essential to keep track of your investment bank's key performance indicators (KPIs). One of the most important KPIs to measure is the average customer satisfaction score. In this chapter, we will define this KPI, describe its use case, explain how to calculate it, provide an example calculation, and discuss its advantages and disadvantages. We will also discuss industry benchmarks for this KPI.

Definition

The average customer satisfaction score measures the level of satisfaction that customers have with your investment bank's services. This KPI is typically calculated using customer surveys, where customers are asked to rate their satisfaction with various aspects of your services.

Use Case

By measuring the average customer satisfaction score, you can gain insights into the overall level of customer satisfaction with your investment bank's services. This, in turn, can help you identify areas where you may need to improve your services to better meet customer needs and expectations. Additionally, a high average customer satisfaction score can help build customer loyalty and increase repeat business.

How To Calculate KPI

To calculate the average customer satisfaction score, follow these steps:

• Select a sample of customers to survey. The sample should be representative of your customer base as a whole.
• Create a survey that includes questions about various aspects of your investment bank's services that are likely to affect customer satisfaction.
• Ask customers to rate their satisfaction with each aspect of your services using a scale of 1 to 10, with 1 being very dissatisfied and 10 being very satisfied.
• Calculate the average score for each question.
• Calculate the overall average customer satisfaction score by averaging the scores for each question.

Calculation Example

Suppose you survey 100 customers and ask them to rate their satisfaction with three aspects of your investment bank's services: customer service, account management, and investment advice. The results are as follows:

• Customer service: Average score of 8.5
• Account management: Average score of 7.2
• Investment advice: Average score of 6.8

The overall average customer satisfaction score would be:

KPI Advantages

• The average customer satisfaction score can help identify areas where your investment bank may need to improve its services.
• A high average customer satisfaction score can help build customer loyalty and increase repeat business.
• The average customer satisfaction score can be used as a benchmark to compare your investment bank's performance to industry averages.

KPI Disadvantages

• The average customer satisfaction score may not be a reliable indicator of your investment bank's overall performance or profitability.
• The results of customer surveys may be biased by factors such as the timing of the survey, the wording of the questions, or the sample of customers surveyed.
• The average customer satisfaction score may be affected by factors outside of your investment bank's control, such as general economic conditions or changes in industry trends.

KPI Industry Benchmarks

The average customer satisfaction score can vary widely by industry and region. According to a recent study, the average customer satisfaction score for investment banks in the United States is 7.8 out of 10.

Percentage of Customers Referred by Existing Clients

Definition

The percentage of customers referred by existing clients is a key performance indicator (KPI) that measures the number of new customers that are referred by existing clients of an investment bank.

Use Case

This KPI is important for investment banks because it is an effective way to measure customer satisfaction and loyalty. Additionally, it is a cost-effective way to acquire new customers because the cost of acquiring new customers through referrals is typically lower than through other marketing channels.

How to Calculate KPI

To calculate the percentage of customers referred by existing clients, divide the total number of new customers acquired through referrals by the total number of new customers acquired during the same period and multiply by 100.

Calculation Example

Suppose an investment bank acquires 100 new customers during a quarter, of which 25 are acquired through referrals. The percentage of customers referred by existing clients would be:

KPI Advantages

• Measures customer satisfaction and loyalty
• Cost-effective way to acquire new customers
• Referrals are typically of higher quality than other marketing channels

KPI Disadvantages

• May not be a significant source of new customers for some investment banks
• May be affected by external factors, such as market conditions
• May be biased towards certain customer segments

Industry Benchmarks

• For investment banks, the industry benchmark for the percentage of customers referred by existing clients is typically between 20% and 30%.

Revenue per Customer

Definition

Revenue per customer is a KPI metric that measures the average amount of revenue generated by an investment bank for each customer. The metric is calculated by dividing the total revenue generated by the investment bank by the number of customers served.

Use Case

The revenue per customer KPI is essential in helping investment banks to gauge their performance in customer acquisition and retention. The KPI provides insights into whether the investment bank is generating enough revenue per customer and helps them identify areas of improvement.

How to Calculate KPI

Calculation Example

KPI Advantages

• Helps Investment banks to identify their top-performing customers
• Assists Investment banks to maximize revenue from their customers
• Can be used to track customer growth and acquisition

KPI Disadvantages

• The KPI can be distorted if the customer base varies greatly in terms of size, market segment, and purchasing power.
• It can be challenging to obtain accurate data

KPI Industry Benchmarks

The revenue per customer KPI benchmarks vary depending on the size of the investment bank and the services provided. In general, the benchmarks are as follows:

• Large investment banks - $10,000 to $30,000
• Mid-sized investment banks - $5,000 to $15,000
• Small investment banks - $1,000 to $5,000

Percentage of customers with diversified investment portfolios

Definition

The percentage of customers with diversified investment portfolios is a Key Performance Indicator (KPI) that measures the proportion of a bank's customers who have invested their money in multiple asset classes.

Use Case

This KPI is important for investment banks because it indicates the level of diversification of their customers' investments. A higher percentage of customers with diversified portfolios means that the bank is managing a lower risk of concentration in any one asset class, resulting in a lower risk of losses.

How to Calculate KPI

To calculate the percentage of customers with diversified investment portfolios, use this formula:

Calculation Example

Suppose an investment bank has 10,000 customers, and 4,000 customers have diversified investment portfolios. To calculate the KPI:

The investment bank has a percentage of customers with diversified investment portfolios of 40%.

KPI Advantages

• Allows investment banks to measure the level of diversification of their customers' investments
• Indicates the level of risk the bank is exposed to regarding any one asset class
• Helps banks to create more suitable products for their customers

KPI Disadvantages

• The percentage of customers with diversified investment portfolios does not capture the quality of the diversification
• Does not differentiate between customers with 'good' and 'bad' diversification
• Depends on the bank's definition of what constitutes diversified investment portfolios

KPI Industry Benchmarks

The industry benchmark for the percentage of customers with diversified investment portfolios varies depending on the bank's size and the customer segments it serves. Therefore, it is essential to establish a benchmark specific to the investment bank.

In conclusion, understanding and monitoring key performance indicators is crucial for any investment bank looking to stay competitive in today's fast-paced market. By measuring metrics such as customer retention rate, assets under management growth rate, number of investment accounts opened, average customer satisfaction score, percentage of customers referred by existing clients, revenue per customer, and percentage of customers with diversified investment portfolios, you can gain valuable insights into your business and make data-driven decisions to optimize your performance.

Customer loyalty and satisfaction, as reflected in the customer retention rate and average satisfaction score, are crucial for long-term success in the industry. The assets under management growth rate provides a broader perspective on overall performance and growth potential. Meanwhile, the number of investment accounts opened, revenue per customer, and percentage of customers with diversified portfolios offer insight into the validity and profitability of your investment strategies.

Finally, leveraging the effectiveness of existing customer base by encouraging referrals from satisfied customers, can increase your client base and strengthen your reputation in the industry.

• At the end of the day, understanding and analyzing the top KPIs in the industry will help you make data-driven decisions that can improve your performance and help you stay ahead of the competition.