After decades of research, we find the biggest problem investment professionals face is increasing their assets under management. It rarely matters how they describe themselves—as investment advisors, financial advisors, wealth managers or multi-family offices. Their primary objective is to increase the monies they manage.

After all, AUM fees are how they generate the bulk of their revenues. Unless an investment professional is winding down or exiting the business, we find that they want to grow, and that means finding more assets to manage.

There are only two ways to do this: get more assets from existing clients or get more clients.

It’s common for established investment professionals to not focus very much on existing clients. They’d rather find new ones. That means they are usually failing to maximize the opportunities with the people they’re already working with. And if you want to greatly boost your assets, it is frequently wise to optimize relationships with select current clients, not just find high-value new clients.

The Power Of Wealth Mapping
Over the last 20 years coaching investment professionals, we regularly hear them say they already have all their current clients’ assets.

And we regularly find they are wrong. There are often additional pools of money and cash flows they could conceivably manage. And they could likely be delivering wealth planning strategies to clients that would net them additional AUM.

When you’re thinking about adding AUM, ask yourself these things:

· Is a large percentage of your book composed of successful business owners?

· Are you working with clients that have entrusted $2 million or more to you?

· Are your clients’ lives complicated? Do they require the expertise of other professionals such as attorneys or accountants?

If so, you very likely can grow your AUM fairly quickly—by 20% or more.

By using what we call the “wealth mapping process,” you can develop an in-depth understanding of selected clients. Why not all clients? Because, for one thing, it’s not likely you could increase AUM by 20% with all of them. Also, the process takes time and effort. You are probably already pretty busy, and it only makes sense to concentrate on those clients who are undoubtedly going to get you the greatest return on your efforts.

The process begins with discovery. At this point, you are looking to learn as much as you can about some of your clients. Some investment professionals tell us they already know all about their clients. But most know a limited amount that usually correlates with the services they’re already providing.

Some advisors hesitate to ask useful questions, feeling their clients would be put off. This can be a major problem, but it won’t be if handled properly.

Let’s say you are going to approach a successful business owner client for whom you are managing $4 million (the client meets two of the key criteria described above). Also, you are managing all of the client’s discretionary monies. A very effective way to initiate discovery is to say something along the lines of, “Bob, what’s going on in your business lately?”

Business owners like Bob tend to happily and extensively talk about their businesses. Your job is to listen carefully and probe. Skillful probing will enable you to fill in all the information you need, enabling you to find opportunities for your services or the services of other professionals.

Consider a common scenario: Bob owns a number of fast-food franchises and has to pay a lot in income taxes. He is always very interested in ways to legitimately lower taxes on his company and personal income.

You confirmed this perspective during discovery. You also learned that what he is doing to lower his taxes … is not much. And you found out he has a company 401(k) plan with very little money in it. There’s no company match, and the people in his business tend to leave after a few years. Also, the people running the company with him are his children, who will one day inherit the business.

Connecting the dots, you see that a defined benefit plan might make a lot of sense for Bob. Depending on circumstances, you can save him $1 million annually in income taxes. Moreover, almost all the monies will end up going to him or his children.

Now that you have fleshed out the opportunity, you have to frame it for him. One way to do that is to say, “Bob, there’s a way you can probably pay close to $1 million less in income taxes with most of that money going to your family in the future. Also, the money will probably grow until you or your children take it. Why don’t I run the numbers for you?”

Very, very rarely will a successful business owner not be very, very interested in having you do such an analysis. Now, if the numbers work out as expected and the client’s situation is the same as when you started the conversation, there is a strong likelihood your client will go ahead with the defined benefit plan. In this case, you may very well be managing an additional $800,000 more each year (and that doesn’t include appreciation).

That would be a 20% increase in Bob’s AUM ($800,000 = 20% of $4 million) in year one. Each year, Bob would be adding to the monies you’re managing.

But we are not done yet. Bob is well networked into other franchisees. They have study groups and major conferences. Unless one of his peers approaches him asking for a referral to a money manager, Bob will almost never bring up the topic. However, he is much more inclined to share with some of his closer peers how he saved $1 million in income taxes.

To increase the probability of getting Bob to discuss the value you just provided, it is useful to teach him how to summarize the most important aspects of what you did as well as highlight you and your firm. The focus should be heavily on outcomes and not the mechanics of the defined benefit plan. Additionally, you should know when Bob is going to one of these meetings and you will talk with him right before he attends, prompting him to talk about his peers, whom you are willing to meet.

Once you have been referred in, there are usually other ways you can add value and pick up even more assets to manage from these new clients.

You are not done with maximizing your relationship with Bob, however. He wants to have his children take over the business. His net worth exceeds $20 million with all of it in the business except his house ($1.2 million) and the $4 million in investable assets. At the same time, he is planning on substantially increasing the number of franchisees he owns over the next five years, so his estate is going to expand. There are a number of wealth planning strategies Bob can potentially use to ensure his family never pays estate taxes.

While this is not your area of expertise, you recognize the situation and you have a strategic partnership with a top-of-the-line estate planning attorney. By smartly setting the stage and introducing Bob to the attorney, the attorney will most likely have a new client.

We are not advocating the “trading” of clients with other professionals as a way to grow your investment management business. You are simply delivering value to Bob while helping the estate planning attorney grow his or her practice. Somewhere down the line, you can ensure this will translate into the estate planning attorney sending you wealthy clients for investment advisory services.

Many “Bobs”
You may very well have a good number of “Bobs” among your existing clientele. While we centered the discussion on a defined benefit plan, there are often a number of different possibilities that allow you to deliver significant value to a client and add more AUM for yourself.

Do you know, for example, how many of your wealthier clients have children with severe disabilities? It’s highly likely some of them either do or know affluent parents who do. This is another area where you could add tremendous value and get assets to manage as well as source new wealthy clients.

There are very likely a fair number of these opportunities lying fallow in your book of business. Your ability to find them and facilitate action will allow you to increase your AUM. If you have a solid book of business, then a 20% increase is very doable.         

Russ Alan Prince is president of R.A. Prince & Associates. Brett Van Bortel is director of consulting services for Invesco Consulting.