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Your AUM Number Isn't Enough to Measure Growth

June 7, 2019
Growth. We talk about it in leadership meetings, at conferences, in our teams, and in the context of our future goals. We talk about growth so much that, sometimes, the concept becomes vague and distorted.

How much growth is enough? It’s a question that doesn’t require a basic answer. In fact, we would argue that growth shouldn’t solely be evaluated by the standard industry measurement that we’re all used to: assets under management (AUM). 

Rather, we believe the question that really matters is: What does growth mean to you?

The majority of advisory firms start the same way, with a single founder who has an entrepreneurial spirit and a passion for building client relationships.  

And this is how it usually works: Through organic growth and a lot of hand-shaking (with just about anyone who shows interest in their mission and expertise), the founder’s client base grows — until it doesn’t. The founder is single-handedly juggling multiple types of clients that require personalized client experiences and investment strategies. The practice has suddenly become unsustainable; the client base plateaus. 

At this point, the founder has reached a fork in the road, standing in front of two paths forward:  
  • The founder continues to be overwhelmed, and the client experience suffers. She loses any semblance of work-life balance and lives in everyday chaos. 
  • The founder either scales down to a lifestyle practice or scales up to a full-fledged advisory business versus a solo practice.
The path that we are primarily concerned with is the latter: the advisory business. It’s the path that requires a completely different mindset— and it’s the one with the most promising growth potential.

Scaling up requires the founder to transform from a service professional to a business management professional. Everything that exists beyond the AUM number becomes increasingly more important — the go-to-market strategy, the right talent, the most efficient tools and technology. What worked for the founder in the past will not work in the future — not if she wants to grow at a healthy rate (around 15%).

What about you? Are you, like the founder, standing at the precipice of real, game-changing growth beyond the AUM number? To move past the fork in the road and choose the right path, incorporate these three steps into your business strategy.
Step 1: Understand Who You Serve and the Value You Deliver

Your ideal client profile and value proposition should guide you through every decision you make in your advisory business. 

You can’t create a solid client experience until you fully understand who your clients are — their behaviors, interests, habits, challenges, and needs. Client “personas” — or semi-fictional representations of your ideal clients, derived from market research and data about your current clients — can play a role in this. The more specific you make your personas, the better. By letting your ideal client profile and personas lead the way, you can better focus your business development efforts on areas that actually matter, and you can improve how you serve your clients going forward.

Next, it’s important to test your understanding of the value you deliver to your clients. A value proposition is a meaningful tool with a much wider application than just marketing your services. The value proposition can help direct every function of your firm — it’s the guiding light, so to speak. It informs your client experience, directs your team’s workflows, and drives the solutions you deliver. To craft your value proposition, focus on these three steps: 
  • Identify how your clients benefit from your services
  • Link those benefits to mechanisms for delivering value
  • Map the basis for your firm’s differentiation or market play
Do the investments, resources, and tools you provide add the value your clients are looking for? Are you trapped by comfort or the fear of change? As you move through these steps, you must be honest with yourself — no exceptions are allowed. After all, the future growth of your business and your client base depends on your willingness to challenge your own status quo.
Step 2: Evaluate Everything

And I mean, everything. Do the talent, tools, outreach, and resources you provide align with the value you want to deliver? Just like step one, this stage of the growth process is probably going to be tough — it requires change and open-mindedness. Real, purposeful growth often means letting go of old habits and looking for new and better ways of doing things. 

Make sure these four areas are aligned with your client personas and value proposition:
  • Talent: Do you have the right people on your team, with the right strengths to position your business to grow faster, smarter?
  • Tools and Technology: Are your systems seamless and working in tandem, with no friction points for your clients, prospects, and team members?
  • Marketing: Are your communications, marketing channels, and networks attracting the right types of clients?
  • Resources: Do the tools, processes, and workflows in the previous three areas provide the simplicity you need to thrive?
Step 3: Focus Your Efforts With a Plan

Grade yourself in each of the three areas above (on a scale of A–F). Are you satisfied with your grades? This exercise will help you determine which areas of your business you need to prioritize — and from there, you can start developing your top improvement objectives for the coming 12–24 months.

Having objectives and long-term goals for your business is great — but they mean nothing if you can’t execute them.
In a previous edition of Designing the Future RIA, we talked about the “SMART” goal-setting method, which is the perfect framework to help you formalize the areas in which you need to improve. Remember that your objectives need to be specific, measurable, attainable, results-oriented, and timely.
Putting It All Together

When you’re standing at the fork in the road, on the brink of a new way forward, these three strategic steps will be the most important things you can do for your business — and as a financial advisor, they allow you to achieve the right kind of growth. The kind of growth that creates efficiency and profitability. The kind of growth that allows for diverse team members that support the business and thrive personally and professionally. The kind of growth that increases the value you provide to your clients and allows them to live better, more fulfilled financial lives.

Are you ready to achieve growth beyond AUM?
Download this worksheet to start the planning process. And if you have additional questions or want to have a conversation, get in touch with us

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Beyond AUM · 1628 W Irving Park Rd Suite 1W · Chicago, IL 60613-2586 · USA

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