Advisors told to audit profit margins, not AUM, before 2027

Financial advisors should audit their own practice's margins before 2027 rather than treat assets under management as evidence of scale, InvestmentNews reported, citing three practice management specialists.

The Ensemble Practice's 2026 True Ensemble Growth and Profitability study, drawing on 2025 financial data from 173 advisory firms, found an average operating profit margin of 38.6%, according to InvestmentNews. Organic growth from new clients hovered near historic lows.

Dana Burkhardt, vice president and head of business consulting at AssetMark in Concord, California, said a bigger practice is not automatically a more profitable one, and advisors should track operating profit margin, revenue per household, revenue per team member and the cost of delivering the service promised. She also said advisors should separate growth from new relationships from gains the market handed them.

Mary Mock, senior vice president and head of distribution at Touchstone Investments in Cincinnati, focuses on capacity metrics: the advisor-to-household ratio, the dollar-weighted average age of the client book and break-even analysis. Mock said those figures help evaluate a practice's long-term sustainability ahead of succession planning, a merger or a sale.