Managerial insights about profitability
Cash study of American investment management services and the exhibit depict about the various customer segment and their related cost. In the exhibit, the account set up cost before the customer- acquisition has been analyzed. Through this study, it has been analyzed that the HNW segment is more profitable than any other segment in the market. Further, it has also been investigated that the 2 million people are there in the HNW segment and from them the profit of the company is $ 62.2 million. Further it has also been analyzed that the worst situation is at Par in the category if 36-60 where the total profit is Just 7.4 million (Lafond & Roychowdhury, 2008).
According to this analysis, it has been found that the managerial insight must focus over the HNW segment to manage and enhance the level of the profits. The investment must be done by the company in this segment to enhance the worth of the invested amount. This would help the management of the company to make some profitability action in regards to the investment company.
|
profitability across segment and deciles – 1999 |
|||
|
Segment |
Top 10% of households |
Bottom 10% of households |
% of households that are unprofitable |
|
HNW |
|||
|
2M+ |
$ 62.2 |
$ -3.5 |
12% |
|
.5 to 2M |
96.6 |
-12.8 |
14% |
|
AT |
|||
|
>200 Trades |
14.5 |
-1.2 |
11% |
|
60-200 |
9.4 |
-2 |
23% |
|
36-60 |
7.4 |
-3.2 |
36% |
|
retirees |
|||
|
100-500 K |
45.4 |
-7.8 |
9% |
|
<100 K |
23 |
-16.1 |
55% |
|
Core |
|||
|
100-500K |
80.5 |
-11.9 |
12% |
|
Boomers |
72 |
-45.7 |
59% |
|
Young Professionals |
12 |
-14.5 |
82% |
|
all other |
21.3 |
-5.7 |
56% |
|
Total |
$ 444.3 |
$ -124.4 |
ABC analysis:
|
Calculations of activity based costing |
|||||||
|
HNW |
AT |
Retiree |
Core |
||||
|
2M+ |
.5M-2M |
60-200 |
100-500 |
YP |
Boomer |
The average customers |
|
|
Branch visits |
$ 0.29 |
$ 0.86 |
$ – |
$ 0.14 |
$ 0.07 |
$ 0.21 |
$ 0.02 |
|
Rep assisted calls |
$ 1.27 |
$ 2.12 |
$ 1.03 |
$ 0.40 |
$ 0.46 |
$ 0.85 |
$ 0.15 |
|
automated calls |
$ 0.14 |
$ 0.23 |
$ 0.48 |
$ 0.06 |
$ 0.06 |
$ 0.23 |
$ 0.01 |
|
On line visits |
$ 0.09 |
$ 0.26 |
$ 0.29 |
$ 0.04 |
$ 0.41 |
$ 0.15 |
$ 0.03 |
|
On line quotes |
$ 0.11 |
$ 0.75 |
$ 0.52 |
$ 0.00 |
$ 0.05 |
$ 0.49 |
$ 0.00 |
|
Transactions |
$ 2.12 |
$ 0.29 |
$ 0.81 |
$ 0.04 |
$ 0.17 |
$ 0.13 |
$ 0.05 |
|
Number of accounts |
$ 0.15 |
$ 0.12 |
$ 0.10 |
$ 0.07 |
$ 0.05 |
$ 0.05 |
$ 0.07 |
|
Assets (000) |
|||||||
|
Revenue average basis point |
|||||||
|
Mutual fund fees |
$ 30 |
$ 26 |
$ 71 |
$ 45 |
$ 92 |
$ 131 |
$ 35 |
|
Brokerage fees |
$ 4 |
$ 42 |
$ 125 |
$ 14 |
$ 79 |
$ 103 |
$ 30 |
|
$ 29.84 |
$ 63.37 |
$ 192.78 |
$ 58.23 |
$ 169.73 |
$ 231.90 |
$ 64.67 |
Through these calculations, it has been analyzed that the activity based costing of the company depict about the positive of the company (Nobes & Parker, 2008).
Two management action:
|
Management actions |
Implement |
|||
|
2M+ |
Enhance the level of the revenues |
Reduce the level of the administration OH) |
30 |
|
|
HNW |
.5M-2M |
focus over the customer services |
Development of the strategies |
63 |
|
AT |
60-200 |
reduce the level of the promotion |
Personal relationships |
193 |
|
Retiree |
100-500 |
reduce the level of the promotion |
Personal relationships |
58 |
|
Core |
YP |
Reduce the level of the administration OH) |
focus over the customer services |
170 |
|
Boomer |
high investment opportunity |
focus over the customer services |
232 |
|
1999 revenue and expenses calculations |
|||||
|
HNW |
AT |
Retiree |
core |
Total |
|
|
Revenues |
|||||
|
Brokerage fees |
219.6 |
101.6 |
53.1 |
201.4 |
575.7 |
|
Mutual fund fees |
294.7 |
8.7 |
216.6 |
517.6 |
1037.6 |
|
514.3 |
110.3 |
269.7 |
719 |
1613.3 |
|
|
Expenses |
|||||
|
Customer services |
|||||
|
advisors |
7.5 |
0.1 |
1.5 |
1.9 |
11 |
|
trading |
32.8 |
14.9 |
19 |
69.1 |
135.8 |
|
transfer agent |
14.6 |
2 |
35.2 |
114.2 |
166 |
|
call center |
76.7 |
26.2 |
58.5 |
166.6 |
328 |
|
branches |
4.7 |
0.8 |
11.6 |
38.2 |
55.3 |
|
on line |
11.9 |
11.8 |
5.6 |
34.4 |
63.7 |
|
communication |
5.1 |
0.2 |
3.9 |
12.8 |
22 |
|
153.3 |
56 |
135.3 |
437.2 |
781.8 |
|
|
Customer retention and devlopment |
|||||
|
Call center |
14.9 |
4.8 |
11.1 |
25.8 |
56.6 |
|
barnched |
6.7 |
0.9 |
15.9 |
48.1 |
71.6 |
|
on line |
2.4 |
2.1 |
1.3 |
7.8 |
13.6 |
|
Prom and marketing |
18 |
1.8 |
12.1 |
34.6 |
66.5 |
|
42 |
9.6 |
40.4 |
116.3 |
208.3 |
|
|
New customer acquisiton |
0 |
||||
|
Call center |
1.8 |
0.3 |
3 |
5.5 |
10.6 |
|
barnched |
0.1 |
0.1 |
0.7 |
4.9 |
5.8 |
|
on line |
0.1 |
0.1 |
0.9 |
6.2 |
7.3 |
|
Prom and marketing |
21.2 |
6.7 |
32.3 |
120.1 |
180.3 |
|
23.2 |
7.2 |
36.9 |
136.7 |
204 |
|
|
advertiseent OH |
50 |
20 |
40 |
58 |
168 |
|
Total |
268.5 |
92.8 |
252.6 |
748.2 |
1362.1 |
|
Net margin |
245.8 |
17.5 |
17.1 |
-29.2 |
251.2 |
|
10% excess capacity reserve |
270.38 |
19.25 |
18.81 |
-32.12 |
|
|
revenues |
514.3 |
110.3 |
269.7 |
719 |
|
|
expenses |
268.5 |
92.8 |
252.6 |
748.2 |
|
|
difference |
1.88 |
-73.55 |
-233.79 |
-780.32 |
According to the above calculations, the company is required to make the control over the cost of entire segment except the HNW and through the 10% capacity reserve the cost must be controlled according to the above given calculations.
Through this analysis, it has been found that the American investment management services express that the company is required to make and manage the investment opportunity on the basis of the given guidelines. Though it has been analyzed that the current market scenario is not in the favor of the company and thus company is required to make come changes into the strategies, market behavior, products and the focus segment to make the profitability condition again. Further, it has been analyzed that the current situation of the company depict that the company must focus over the HNY segment most to enhance the stability and profitability (Deegan, 2013). Further, it has also been found that the changes according to the above analysis would help the company to grab the more opportunities and the market share.
To conclude, the company is required to make next steps through analyzing the feasibility of the policies and the project and then the next step must be moved. The company is required to control all the related factor and make a better strategy accordingly.
References:
Deegan, C., (2013). Financial accounting theory. McGraw-Hill Education Australia.
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A., (2010). Managerial accounting. Issues in Accounting Education, (25(4), pp.79(2-793.
Lafond, R. and Roychowdhury, S., (2008). Managerial ownership and accounting conservatism. Journal of accounting research, 46(1), pp.101-135.
Nobes, C. and Parker, R.H., (2008). Comparative international accounting. Pearson Education.
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