Why Financial Advisor AUM Isn’t Growing

The Business Case for Transforming your Advisor marketing. Identify Section BannerFinancial Advisor Analyzing growing chart floating above a tablet screen. showing successful increase in business profit

To financial planners, a gauge of the relevancy of information is “What is your AUM?” Advisors are facing challenges in continuously growing their AUM. The strategies that were once successful are not working the way they used to.

The landscape of what customers want and expect has changed, and the traditional strategies of growing AUM model can be a detriment to the advisor’s growth. 71% banking Millenials would rather go to the dentist than listen to a bank. Ouch. Technology isn’t the only reason why banks are struggling to grow their managed asset portfolio. There are four reasons we are examining as to why advisors might be struggling these days; a lack of new leads, providing bad service, a failure between generations, and self-advisors.

1. No leads

The marketing messaging required to bring in new clients is always evolving. While certain messages may have been successful in the past; it may no longer be the case today. Many advisors have business card websites that don’t get updated frequently and when they do don’t provide enough value that would result in someone wanting to contact them. These websites generate very few to no leads. Gone are the days of offering a free toaster for new customers. Incentives do not bring in as many people as they once did. In fact, incentives of a gift can have a negative effect. It may present an image that the brand is trying to entrap people in a negative service behind a shiny item. Additionally, people may think there are too many hoops to jump through to get the gift.
For modern consumers, there are five core values they share and should be appealed to:

  1. Optimism: They seek products and services that give an optimistic outlook on the future.
  2. Control: They want to make the decisions about their future, not have someone TELL them.
  3. Open-mindedness: They may hold strong opinions but could be changed.
  4. Social butterfly: There is value in social interactions to make life decisions
  5. Crave Information: They will gather information to make decisions.

Messaging is not the only factor that creates a lack of new leads. The reasons are all intertwined and that is why a single initiative will not resolve the struggle.

2. Bad Service

Competition for businesses, including banks and wealth management firms, has evolved. Competitors are no longer other banks of similar size, in the same geographical location. Customers are comparing the experience they receive across different industries. The experience people from their financial advisor is compared to all companies, such as Apple, Amazon, Starbucks, and others. Take for example a customer who receives birthday cards, has quarterly check-in meetings, receives emails with articles on topics that actually interest them will have a positive experience with their advisor.  Organizations who provide services are still finding ways to set themselves apart.

3. Generational Gap

The inability to acquire new clients and to bring in new assets into the organization would be a major loss. As baby boomers get older, there’s an opportunity for advisors to create and build relationships with their children. For example, Millennials are set to be the largest generation with the largest amount of wealth in several years. By 2022, they will constitute 44% of the workforce. Additionally, over the next 30 to 40 years, Millennials will inherit trillion. However, the targeting efforts do not match this importance. The messaging has not been informative because over half don’t think their bank offers anything different to its competitors.

Efforts to bring in new clients should have started when Millennials were much younger. While advisors were working with the parents, there was little to no effort put in to make the kids financially literate and help set them up for the future. Millennials sat on the sidelines and watched how banks worked with their parents.

The Crash of 2008 was when the complete distrust of banks became concrete. People saw their friends and family go into debt and even lose their homes because of banks trying to make a profit through shady business practices. The result of this distrust is that they are seeking out financial alternatives. These alternatives include pre-paid credit cards, payday loans, money transfer agents, even cryptocurrency. Finally, when people are using traditional banking services, more and more are doing it self-managed or with a robo-advisor.

Robot finger point to laptop button with bokeh background.

4. Self-Advisor

With the lack of financial literacy and a distrust for the traditional model of financial advisors, people take to the internet to educate themselves. There are tons of resources and expert opinions that are readily available to learn everything from debt management, investments, mortgages, wills, and any other financial services. This self-advisorship meets the modern consumer’s core values: Crave Information – they are seeking out and getting the answers they need; Social Butterfly – they turn to friends and even social media for insight on financial decisions; Open-mindedness – they are learning multiple viewpoints and will stand by the one they trust; Control – they have complete control in their decisions and actions because their best interest is the only goal; and finally, Optimism – since of all these previous factors are met, they have a more optimistic outlook on the future.

In addition to self-advisors, customers are leveraging Robo-Advisors. With the heavy influence of technology in all industries, people are comfortable with technology and are confident in their own decision making as guided by Robo-Advisors which have lower fees and work with the customer to make their lives simpler.

The Bottom Line

This means that advisors have a real opportunity to differentiate themselves from the competition and by doing that, they will increase assets under management. By identifying and acknowledging that these problems exist, and more importantly are affecting growth, enterprises can closely consider options on how they can support advisors to grow their AUM.