Connect with us

Sales Strategy

Robo Advising and The Death of the AUM Business Model for Independent Financial Advisors


Robo Advising and The Death of the AUM Business Model for Independent Financial Advisors

The canary has died…

Recently, one of my clients shared with me that their Broker/Dealer had created their own ‘robo advisor’ platform to help them compete with the likes of Schwab, Scotttrade et al. My response was grim: “They just committed professional suicide.” You are now being told to sell the one product that will completely destroy your value to your customers.

Whether you like it or not, the traditional AUM model for financial advisors is dead. The days of you being able to sit back and charge 1% (or more) for ‘managing money’ are almost over. Robo advising is here and will not leave and they will take your clients if you don’t move to a better model for your customers … that’s right a better model for your customers.

When you figure out that investment performance, for almost all of you ‘advisors’, is actually a commodity…you will immediately be on the path of future proofing your business. The only ‘future proof’ investment advisors I believe will be successful going forward are the ones that actively manage individual stocks from companies that they know intimately. If your value to your client is based upon rebalancing a portfolio of mutual funds…you are going to lose (bad) to robo advising. You might keep your clients, but, you will be continually faced with a decreasing margin of profitability and less percieved value.

Related: Future Advisor: Once You Realize That You Need to Change, How Are You Going to Get There?

The other path for many of you, that don’t have the ability or inclination to really do investment management is that of becoming a true financial advisor. You will need to be able to deliver enough value to your clients through comprehensive financial advise that they will be willing to pay you significant revenue in consulting and coaching services.

The good news: some of you have already jumped on this and are experiencing amazing profit growth and the requisite confidence in your future.

All I do for a living is help independent financial advisors write a better version of that story and help them step into it with more confidence and profit. You can do it…if you accept the change.

Success, in the face of industry change, requires that you take action. The way I begin the process of working with new clients starts with a phone call or Zoom meeting. Connect with me and we will start working on your story.

Continue Reading