18May2024
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Beyond AuM: How Independent Wealth Managers Prioritise Profitability and Performance ๐Ÿ’ฐ๐Ÿ“ˆ

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

In private banking and wealth management, a frequently asked question is, โ€œWhy is success often measured in terms of โ€˜Assets under Managementโ€™ (AuM) and not actual revenues?โ€ At large banks and traditional wealth managers, AuM is a common yardstick, reflecting trust, stability, and sources of revenue. ๐Ÿฆ

However, the focus shifts when working for independent wealth managers. Why? Their fee structures are typically โ€œall-inโ€, meaning all costs are already included except the price charged by the chosen custodian bank. For an independent wealth manager, thereโ€™s no avenue to generate additional income from transactions or interest business. As a result, the actual return becomes a transparent indicator of their performance and efficiency. ๐Ÿ”

This doesnโ€™t mean that AuM is irrelevant for independent wealth managers. A high AuM value can still reflect the trust of clients. However, the emphasis on returns over AuM for independent providers underscores the significance of profitability and performance. ๐ŸŒŸ

Whether a traditional bank or an independent wealth manager, the businessโ€™s core remains the same: trust and the clientโ€™s well-being are paramount. Thus, the chosen metric should always be viewed in the context of the business model and services offered. ๐Ÿ‘ฅ

Source: LinkedIn

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Graphic illustration showing the comparison between Assets under Management (AuM) and actual revenues in traditional and independent wealth management sectors.

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