How To: Turn Flat-Fee Clients Into AUM​

Published May 31, 2022 

Reading Time: 6 minutes

Flat-Fee To AUM | Brooke Thomas | Zoe

Written by:
Brooke Thomas
Client Manager at Zoe

You likely became an advisor because you enjoy helping people. In fact, you probably find purpose in building financial plans that accomplish astounding results for your clients. But, on the flip side, it’s unlikely that you chose to do this because you love the development process of finding and winning new clients daily.

While growth is essential for you and your firm, it doesn’t just mean bringing in as many clients as possible. Finding new clients to fill your book of business is one approach to growth, but you should also set part of your focus on increasing the strength, duration, and commitment of the relationships with your existing clients.

Imagine this: you have a car and want an upgraded sound system. What’s more efficient: buying a brand new car or adding an upgraded sound system to your existing vehicle? If you already have a book of business with many flat-fee clients, these are great people to approach with the potential to evolve into an AUM relationship.

Navigating this conversation requires some forethought, so here are five tips and considerations to better approach your flat-fee client with the possibility of switching to an AUM relationship. 

1. Don’t Underestimate Trust

You already have a relationship with the client, which puts you in a very advantageous situation. Often, individuals are apprehensive of an AUM relationship because it is difficult for them to hand over their life savings to an individual they have only recently met. Your credentials and industry experience aside, trusting you can be a significant psychological barrier for some to cross when they don’t know you. 

Lucky for you, you already have a working relationship with this individual! You can use the trust and rapport you’ve built to deepen your relationship. When approaching your client with this option, structure your conversation on how you could serve them further. With your history, you must have examples of how you’ve optimized their financial life and provided value. Use these examples and explain how including asset management in the relationship could increase your impact.

The key to this whole approach is to be sure they see the value in you. You are not likely to convert a client to a deeper relationship if they aren’t currently satisfied with what you offer. So at your routine check-ins, ask them how they feel the relationship is going up to this point and ensure they feel their financial picture is optimized thanks to you. 

2. See It To Believe It

When talking to your client about a potential AUM relationship, demonstrating your value upfront can be more impactful than simply proposing the steps further. Offer to do a portfolio review as a way to display and affirm your expertise, no strings attached. 

Reviewing their allocations and approach will likely help you identify potential optimization areas, whether in the cost, tax efficiency, or alignment with time horizons and risk tolerance. Then, when you present this to your clients, they will more likely see the value in letting you manage their assets. Think about it this way: it is much easier for someone to transition to a more in-depth relationship when they have a clearer picture of how their approach is faltering and how you can help improve it. 

As the advisor, you understand the investment strategy is the financial plan’s engine, but most clients don’t realize this. Explain how you can integrate investment management into the existing financial plan and how your approach can align them more closely with their long-term goals. Doing so will help them visualize the value of integrating investment management into your service offering. 

3. Make Benefits Resonate

A significant factor in earning your client’s AUM business is ensuring you explain the benefits of the service in a way that resonates with them. Imagine your client doesn’t believe that having you manage their investments will solve a need or meet a priority for them. In that case, they will not feel any urgency or desire to increase the complexity and commitment of their relationship with you. 

The upside is that resonating with your client at this point in your relationship should be a piece of cake! After all, more than anyone, you understand why they’ve chosen to work with a financial advisor and their highest life goals and concerns. Suppose your client originally came to you because they felt they didn’t have the time to create their financial plan; that’s your cue to bring up the AUM relationship. First, start the conversation by discussing how monitoring the markets, rebalancing the portfolio, and tax-loss harvesting are time-consuming tasks. Then, show them how handing you the responsibility of doing all of it would give time back to them while increasing the amount of time their portfolio gets overseen. 

No two people hire a financial advisor for the same reason. But whichever their motivation is, basing your approach on their priorities will be the best way to reinforce your discussion of converting to the AUM structure.

4. Time The Conversation Properly

You do not want to catch your client off guard; they should be primed and already thinking about their financial picture when you bring it up. Therefore, discussing it during a regularly scheduled meeting makes the most sense. Whether it be a quarterly check-in or annual review, these meetings set the proper context for you to talk to a client about increasing their level of commitment to you by paying for additional services.

Each meeting is unique. At some point though,  you will talk about priorities and the future outlook of your relationship and the plan. That would be an excellent time to bring up the AUM discussion. You have spoken of objectives and how you fit into that picture, but your interaction hasn’t ended.

5. Overcome Objections and Accept Their Answer

When you go into the conversation, anticipate that your client will raise some objections. Whatever the explanation is, there is some reason they didn’t elect for AUM in the beginning. You must anticipate your client’s unique objections for being hesitant toward AUM and be ready to address them. Open this up as a dialogue where they feel comfortable raising concerns and questions. In that way, it’s much more likely to feel like a collaborative conversation rather than a pushy sales pitch. 

In the ideal scenario, you will have a new AUM client at the end of the conversation. But it is also possible that they will choose not to change your relationship type.  Whatever they decide, you must be respectful and understanding. Especially since you will hopefully be working with them for many years to come, and it’s vital to preserve this relationship regardless of their choice. 

They should not feel uncomfortable for saying no or as if you will continue to push for AUM at each interaction. Instead, you should politely acknowledge their decision and provide any materials you have for them to consider this structure in the future. This way, you keep the door open while ensuring they feel comfortable. 

Keep The Focus On What Is Important

It can feel like a big ask to talk to your client about switching relationship types. But, ultimately, the focus shouldn’t be on how you can up-sell your client but on how you can up-serve your client. Frame the conversation in terms of how you can bring more value and more significant synchronicity to their financial picture. People are much more inclined to increase their level of relationship with you if they feel you have their best interest at heart (which we know you do!)

Being chosen and hired by each of your clients is a great win! But making the relationship last and the level of trust and commitment increase can be an even bigger one.

Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

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