Rossby Financial, a Melbourne, Fla.-based registered investment advisor platform launched in March 2023, has introduced an Advisor Profitability Calculator, a free tool on the firm’s website that allows advisors to compare their current cost structure to Rossby’s.
The calculator provides a cost-volume-profit analysis, a managerial accounting tool that examines how changes in costs, sales volume and prices affect profit. It takes a number of data points from an advisor, including their AUM, gross production, tech fees, E&O costs, payout rate, revenue mix and variable cost attribution.
The tool then provides a direct cost-volume-profit analysis and the advisor’s breakeven per account.
“Very few advisors actually know their true profitability,” said Andrew Evans, CEO of Rossby. “They don’t really know what the break-even point is on every client, on every account, on that relationship. They really don’t know. And a lot of them don’t know because they don’t break down their costs in an easy or very effective way.”
Of course, because the company wants to generate interest, there’s an additional section of the calculator that lets an advisor see what they’d be paying on Rossby’s platform. Rossby’s pricing structure is a bit different than others, so the calculation is different. Rossby does not charge basis points, and there are no payouts. The firm charges a fixed rate for an office to be a partner firm, plus a charge for each additional licensed person and for each account. The calculation is based on the number of licensed people in the office and the number of accounts.
Evans launched Rossby in 2023 because he was tired of waiting for the industry to catch up with the rest of the world in terms of technology and “antiquated” pricing. He thought advisors should have greater flexibility in selecting and paying for the tools and services that best suit their practice’s needs. The firm now has about $900 million in total assets.
Rossby will provide the essential tools an advisor needs, at a minimum, to run an advisory business, including performance reporting, books and records, archiving and surveillance.
“You could say we’re just trying to bring the modern world of pricing into the industry,” Evans said. “There’s nothing we’re doing in terms of how we price or what we do that’s magical. We just see it more as a cost-to-value ratio that other firms just haven’t adjusted to because that’s the way they’ve always done it. We’re just trying to buck that trend.”
Nexus Strategy President Tim Welsh said there are many models out there for renting out the back office, but a flat-fee model is not scalable. A basis point model incentivizes advisors to grow.
Welsh also pointed out that it’s essentially just a lead-generation tool for Rossby.
“I take your test. I fill out your little form here. Now they know exactly how much money I have,” Welsh said. “All these benchmarking studies we used to do in the past, it was really just to cherry-pick. The advisor typed in, ‘I have $100 million. Here’s my profitability.’ And we go, ‘Look at this firm. This firm is killing it. They are so much more profitable than anyone else. Let’s give them a call and see if we can buy them.’”
Rossby does retain the advisor’s name and email address, but not their AUM and profitability data.
