What Are The Average Assets Under Management Per Client?

By Yash

Assets Under Management

Assets under management (or AUM) are a critical metric for investment advisors, as it represents the total value of assets being managed by the advisor. Advisors with high AUM generally have more prestige and opportunities for growth. However, many new advisors may be hesitant to reveal their AUM when they first meet prospective clients. Why? Because advisors who are just getting started probably won't have a high number right away. That doesn't mean that these prospective clients will doubt your services or think you aren't worth their time. Instead, it just means that you need to build trust with them slowly through great service over time. When you first meet a potential client, there are different ways to answer this question without giving them the impression that you don't have much experience or represent a low risk. Here are some tips on how to answer the question, "What are your average assets under management per client?"

 

Tip 1: Assets Under Management is an Investment Advisor Measure, Not a Client Measure

 

AUM is calculated based on an advisor's total value of assets. These assets could come from you as well as all your other clients. In other words, it's not based on just one client's assets. It's based on the total of all clients' assets. For example, if you have five clients with $100,000 invested, your AUM would be $500,000.

 

Tip 2: Don't Reveal Your Assets Under Management Immediately

 

If your AUM is $100,000, your clients will know that when you first start working with them. But you might have more credibility if you have $100,000 in assets under management from eight clients. Although you may start with just one client, it's normal for clients to come and go. New clients might come along as others end their relationships with your investment advisor firm. If you have a low AUM, you may want to hold off on sharing the number until you've had a chance to build trust by providing excellent services to the client. That way, you can be honest about your AUM without scaring clients away. But be sure to eventually reveal the value of your AUM. Otherwise, clients won't know how much you're managing for others and won't be able to judge your credibility.

 

Tip 3: Explain That AUM is Based on Assets Under Management and not Asset Value

 

Many clients will assume that your AUM is the total value of assets they have invested. For example, if they have $400,000 invested, they might think that's the value of their assets under management. But it's not. It's the total amount of assets that you are managing for them. In fact, their assets could actually be worth less than $400,000 if you've invested them in a diversified portfolio. Because you may not have a chance to explain this during your first meeting with a client, be prepared to send a follow-up email. In the email, you can provide a more detailed explanation of assets under management versus asset value. You can also ask the client if they have any questions or would like to schedule a follow-up meeting.

 

Tip 4: Distinguish Between Risk Tolerance and Investment Risk

 

Clients will generally assume that the higher your AUM, the lower the risk in the investment portfolio. However, just because you manage more assets doesn't mean that you are taking on less risk. Instead, you may be taking on riskier assets to earn higher returns. When a client asks you about your AUM, discuss the risk level of your client's portfolios. For example, you might say, "Although our AUM is low, we take on a moderate level of risk with our client's portfolios. We put our clients in a diversified portfolio of stocks and bonds."

 

Tip 5: AUM is Determined by Asset Values, Not Just Investment Size

 

Some clients might assume that assets under management are just the size of their investment. In other words, they might think their $400,000 investment is the same as your managing $400,000 in assets. But that's not the case. For example, if a client has $400,000 in stocks, that's a lot of risk. You can only manage $400,000 in assets if you put a portion in bonds. In fact, if you have 20 clients with $400,000 of stocks, that's $8 million. If you have 20 clients with $400,000 in bonds, that's $8 million. AUM is based on total asset values and not just the size of your client's investments.

 

Tip 6: Provide an Example of Average Assets Under Management Per Client

 

You can find it online if you don't want to reveal your exact AUM but are still curious about what others in your industry are reporting. For example, if you search "average assets under management per client," you'll find that the range is anywhere from $400,000 to $50,000. Suppose you want to discover the range of AUM for specific investment advisors. In that case, you can also search for "average AUM for independent financial advisors." This will help you discover the range of AUM for both small and large independent financial advisors. You can also ask other financial advisors what their AUM is and see how close it is to the average range. This might help you decide how much to reveal. You may want to share a lower range if you have a low AUM. You might want to share a higher range if you have a higher AUM.

 

Impact of Assets Under Management on Mutual Funds

 

This metric holds significant weight in deciding the performance of mutual funds in the markets. It mainly hinges on the specific fund houses involved. This is because these firms prefer stocks from asset-rich organizations. After all, clients and users are more inclined towards them. A major asset fund can permit any asset manager to react quickly against the fluctuating opportunities in the financial markets. This can involve entering or exiting a certain investment when the chances of profiting from it are high. The investors also look at the assets under management to compare their returns and overall performance. Equity funds should give good returns and outperform the index they track through the markets' highs and lows. These funds do not depend a lot on the assets under management. They depend more on the skill of the asset manager to increase their returns over a given period. The total asset is one of the most vital in debt funds. These funds have more capital and can spread the expenses to a bigger group of investors. This helps to decrease the fixed fund expenses for each person and increases the returns.

 

Conclusion

 

Assets under management are a critical metric for investment advisors, as it represents the total value of assets managed by the advisor. However, many new advisors may be hesitant to reveal their AUM when they first meet prospective clients. When you first meet a potential client, there are different ways to answer this question without giving them the impression that you don't have much experience or represent a low risk.