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

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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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