We were recently inspired to make a small tweak to one of our business metrics after reading an article on Rethinking65 by columnist James Brewer. In the article, Brewer proposes that financial planning professionals should drop the term “Assets Under Management” (AUM) and replace it with “Lives Under Care” (LUC) to better reflect the work of holistic financial planners. Brewer points out that the term AUM “doesn’t convey that we care about our clients.” Instead, he argues, we should adopt LUC because financial planning is about more than the size of an investment portfolio.
Changing from AUM to LUC was an “aha” moment for us. We’ve always tracked our assets under management because it’s a standard thing to do in the financial services industry. It’s the first number we see on the home pages of our various financial management software. To frame our work in terms of lives under care rather than dollar signs, however, aligns with our process and approach.
Both of these terms, AUM and LUC, are mainly internal metrics that we wouldn’t worry too much about advertising to the general public, but even so, I wanted to share why we find it important to value LUC over AUM.
Assets Under Management
AUM simply refers to the dollar amount of investments that a firm manages on behalf of their clients. The term was popularized by firms that manage investments like mutual funds and ETFs, and it was subsequently adopted by the financial planning profession. But the reality is that financial life planners are doing much more for their clients than managing investments. Holistic financial planning includes understanding a client’s goals and values, analyzing cash flow, building a dynamic, values-based insurance protection plan (for the short term and long term), an estate plan, and much more–not to mention guidance on other assets like employer retirement plans, Social Security, pensions and annuities, none of which factor into the AUM number.
AUM as a marketing tool can be misleading, too. If a firm says they have $100 million in AUM, it doesn’t tell you much except that the firm might have the expertise to manage investments for clients. In my mind, AUM is only mildly informative when viewed in comparison to past years, showing that the firm is bringing on new clients and helping to grow the portfolios of existing clients.
Lives Under Care
As James Brewer illustrated in his article, if the financial plan of a couple involves saving for their two kids’ college education, our work is really tending to four lives. If that same family is planning on financially supporting two sets of parents in their old age, we’re actually caring for eight lives. AUM speaks only to the money we manage. LUC is a more people-centric way of thinking about our book of business.
In light of this new metric, Jim and I recently went through our client list and tallied up an estimated 164 lives currently under our care. Seeing that number, as opposed to 78 (our current number of client households), strengthens our feeling of responsibility towards our clients. It expands our awareness to think even more about how the various parts of a household’s financial plan touches on their family, friends and community.
As CFP® Professionals, we must serve the best interest of our clients, not their money. In fact, one of the primary fiduciary duties of being a CFP® practioner is a duty of care. So if there’s any metric we’d use to measure the impact of our work–aside from the growing net worth of each of our clients, which is highly individualized–it would be the number of lives that are under our care.
We still track AUM for regulatory purposes. (For example, we were required to register as a firm with the SEC this year having passed the threshold of $30 million.) But now we’re adding LUC as a new metric to track. It reminds us to stay mindful of all the different lives the financial planning work is affecting.
Again, even though it’s a small tweak, we find that having a LUC metric boosts the energy of care we bring to the planning work. We look forward to refining this number more as the families and financial plans of our clients grow and evolve.
Brandon Tacconelli is the Director of Client Care at Thinking Big Financial, Inc. Thinking Big is a fee-only financial planning firm in New York City specializing in working with the LGBTQ+ Community.