3 Reasons Why AUM is a Meaningless Stat
The wealth management industry is full of meaningless jargon, acronyms and statistics. Assets Under Management (AUM) is one of the most worthless measurements of a firm’s success – here’s why.
Bigger is NOT better. Big AUM numbers mean you’re a good asset gatherer. Unfortunately, being a good salesperson has absolutely nothing to do with being a good advisor.
The best advisors focus on planning. The value of planning is not measured by AUM. So many firms get this wrong. They charge for AUM and investment management and “give away” planning advice for free. It should be the opposite. Planning is the value.
The biggest assets aren’t AUM. Often, the most valuable assets on a client’s balance sheet don’t qualify as AUM. Instead these assets are real estate or private businesses or other unmanaged assets. If an advisor is overly focused on AUM, they may ignore these massive assets to the detriment of the client.
The wealth management industry and much of the media who covers it are lazy. They want an easy way to tell the good companies from the bad. They settle on AUM because it’s a defined and measurable term. Unfortunately, it’s useless. The best advisors ignore AUM and focus on adding value and impacting their clients’ lives. Are you one of these advisors? Plug-in today.
Financial Planner | Guiding women entrepreneurs & executives to build financial freedom, reduce taxes & make confident money decisions | Financial Wellness Speaker
6 年Totally agree! I am an advisor that focuses on financial wellness and building authentic long term relationships with clients. I don't get caught up in the traditional measurable ways to "track" business.
Field Operations - Chambers Bay Insurance Group
6 年Yes, Mitch
Global Head of Wealth @ Charles River Development, a State Street Company
6 年AUM is a publicly available number because it's in an ADV, and it's a rough approximation of size and a proxy for gross revenue. All of those other metrics (e.g. producing plans) may be highly valuable to investors, but the reality of the economics of the industry make AUM a much more telling number in valuing a business. As such, it's hardly "useless".
Leader in #Wealthtech Strategy | Helping #WealthManagement firms drive tech value | #DataStrategy | EzraGroup.com
6 年These all sound like much better metrics for comparing RIAs. So why don't we gather data from every RIA on the number of plans they generate annually, the percentage of their clients that received a financial plan, and the percentage of their clients' goals that were actually reached. I think that would produce a very different list and probably would be much more useful.