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Here’s the Key to Growing Median Client AUM

By Miriam Rozen December 19, 2018

Most advisors worry about emerging fee compression draining future revenues. In response, they'd better start countering those trends by adopting tech solutions to bolster the client experience. As identified by Cerulli Associates in the firm’s 15th annual year-end report on the advisory industry, such experiences are key to growing median client assets under management.

Cerulli, scheduled to issue its annual report later this week, provided an advance copy to FA-IQ.

“What we see is that advisors are experiencing more fee awareness. In response, they are looking for other ways to provide value to their clients,” says Marina Shtyrkov, the lead author of the Cerulli report, which was based on multiple surveys conducted throughout this year. About 2,000 of the 300,000 advisors in the industry participated in the Cerulli surveys.

Client experience is hard to characterize and quantify precisely, Shtyrkov concedes. But it develops out of “all those micro-interactions” between advisors and clients. Moreover, it’s often improved with the use of technology, specifically when conducting intergenerational engagement, client segmentation, and high-impact client outreach, she says.

Advisors who say they focus more on client experience coincidentally reported 93% higher median client assets under management than the industry average of $500,000, according to the Cerulli report.

To focus on bolstering the client experience, advisors should segment their clients, collect client data consistently and use that information to automate transactions, Shtyrkov says.

Compared to their peers at independent broker-dealers and independent RIAs, more advisors at wirehouses and hybrid RIAs told Cerulli researchers they were focused on bolstering the client experience. The distinctions among different advisory channels likely reflect the deep-pocket technological investments wirehouses and larger hybrid firms have made, Shtyrkov says. Such investments let the firms’ advisors collect client data, automate transactions, and improve client experiences, she says.

Industry-wide, the majority of advisors told Cerulli researchers they have fallen short of repeatedly making their clients “feel special.” Only 30% of advisors strongly agreed with such a characterization of their practices’ results. Nearly 40% of advisors said they spent too much time on unprofitable clients.

Other developments discussed in the Cerulli report include:

  • Mega teams — those with $500 million or more in AUM — are dominating the market and are responsible for more than two-thirds of AUM overall.
  • The average financial advisor is almost 52 years old.
  • More than half, or 54%, of advisors say their clients fail to understand alternatives, and 31% reported difficulty in accessing top alternative funds and asset managers.