AUM Growth Attribution

Overview

Decompose Assets Under Management (AUM) growth into its fundamental drivers to provide transparency into practice health and growth quality. This skill separates market-driven growth (beta) from organic growth (net new assets), further breaking organic growth into client acquisition, existing client contributions, distributions/withdrawals, and client attrition. Attribution enables leadership to distinguish sustainable growth from market-dependent growth and evaluate advisor and team productivity.

When to Use

• Monthly/quarterly management reporting on practice growth
• Advisor performance evaluation and compensation planning
• Business development strategy assessment and planning
• Forecasting AUM and revenue under various market scenarios
• Benchmarking organic growth rates against industry standards
• Analyzing the sustainability and quality of growth
• Board/stakeholder reporting on wealth management business unit performance

Required Inputs

| Input | Description | Format | |-------|-------------|--------| | AUM snapshots | Beginning and ending AUM for the period | Account-level data | | Cash flows | All contributions, withdrawals, distributions, fees | Transaction data | | New accounts | Accounts opened during the period with funding amounts | Account records | | Closed accounts | Accounts closed/transferred with terminal values | Account records | | Market returns | Benchmark returns for asset classes held | Market data | | Fee schedule | Advisory fees charged during the period | Billing data | | Advisor assignment | Account-to-advisor mapping | CRM data |

Methodology

Step 1 — AUM Bridge Construction

Build the period AUM bridge from beginning to ending balance:

Beginning AUM
+ Market appreciation/depreciation
+ New client assets (new relationships)
+ Existing client contributions (additional deposits)
- Client withdrawals and distributions
- Client attrition (lost relationships)
- Advisory fees deducted
+ Other adjustments (account transfers, reclassifications)
= Ending AUM

Each component must be precisely calculated so the bridge reconciles exactly to the actual ending AUM (no unexplained residual).

Step 2 — Market Return Attribution

Isolate the market-driven component of AUM change:

• Method: Calculate the time-weighted return (TWR) of the aggregate portfolio, then apply to beginning AUM
• Market appreciation = Beginning AUM × Portfolio TWR for the period
• Asset class decomposition: Break market return into contributions from each asset class:

| Asset Class | Weight (Avg) | Asset Class Return | Contribution to Return | |-------------|-------------|-------------------|----------------------| | US Equity | XX% | X.X% | X.XX% | | Int'l Equity | XX% | X.X% | X.XX% | | Fixed Income | XX% | X.X% | X.XX% | | Alternatives | XX% | X.X% | X.XX% | | Cash | XX% | X.X% | X.XX% | | Total | 100% | | X.XX% |

• Brinson attribution: If applicable, decompose into allocation effect (asset class weighting vs. benchmark) and selection effect (security/manager selection within asset class)
• Dollar impact: Market-driven AUM change in dollar terms

Step 3 — Organic Growth Decomposition

Calculate net new assets (NNA) — the key organic growth metric:

New client assets:

• Count of new relationships established
• Total initial funding from new clients
• Average new client size
• Source analysis: Referrals, COI introductions, marketing, organic inquiries
• Cost of acquisition (if available): Marketing spend / new client count

Existing client net flows:

• Additional contributions from existing clients (new money)
• Systematic investment plan contributions
• Retirement account rollovers into existing relationships
• One-time events (inheritance deposits, business sale proceeds)
• Scheduled withdrawals and distributions (retirement income, RMDs)
• Ad hoc withdrawals (home purchase, education, emergency)

Net new assets calculation: NNA = New client assets + Existing client contributions - Existing client withdrawals

Organic growth rate: Organic Growth Rate = NNA / Beginning AUM × 100

Industry benchmark for organic growth rate: 3%–5% annually is considered healthy for established practices; 5%+ is strong growth.

Step 4 — Attrition Analysis

Quantify and analyze client losses:

• Accounts lost: Number of relationships terminated or transferred away
• AUM lost: Dollar value of assets departing
• Attrition rate: Lost AUM / Beginning AUM (annualized)
• Gross vs. net: Gross attrition (total departures) vs. net attrition (departures minus new)

Attrition driver analysis:

| Reason | Accounts | AUM Lost ($M) | % of Attrition | |--------|----------|--------------|----------------| | Moved to competitor | X | $X | XX% | | Deceased | X | $X | XX% | | Divorce/relationship split | X | $X | XX% | | Dissatisfaction | X | $X | XX% | | Fee sensitivity | X | $X | XX% | | Advisor departure | X | $X | XX% | | Account consolidation | X | $X | XX% | | Other/unknown | X | $X | XX% |

Controllable vs. uncontrollable attrition: Separate attrition into controllable (dissatisfaction, fees, competitor — actionable) and uncontrollable (death, relocation, life events — expected baseline).

Industry benchmark: Annual attrition rate of 3%–5% is typical; >7% warrants investigation.

Step 5 — Revenue Impact Analysis

Connect AUM changes to revenue:

• Fee revenue bridge: Map AUM changes to fee revenue impact
  • Market-driven AUM change × average fee rate = Market-driven revenue change
  • NNA × average fee rate × partial-year factor = Organic revenue change
  • Attrition AUM × average fee rate × partial-year factor = Revenue loss
• Fee rate analysis: Average fee rate trend (blending effect of new clients vs. departures)
• Revenue per advisor: AUM per advisor × average fee rate
• Breakeven analysis: NNA required to offset fee compression (if fee rates declining)

Step 6 — Advisor-Level Attribution

Break down AUM growth by individual advisor or team:

| Advisor | Beg AUM ($M) | Market ($M) | New Clients ($M) | Net Flows ($M) | Attrition ($M) | End AUM ($M) | Organic Rate | |---------|-------------|------------|-----------------|----------------|---------------|-------------|-------------| | [Name] | $XX | $X.X | $X.X | $X.X | ($X.X) | $XX | X.X% | | [Name] | $XX | $X.X | $X.X | $X.X | ($X.X) | $XX | X.X% | | Total | $XXX | $XX | $XX | $XX | ($XX) | $XXX | X.X% |

• Productivity metrics: New clients per advisor, NNA per advisor, revenue per advisor
• Ranking: Rank advisors by organic growth rate for compensation and recognition purposes
• Trend: Quarter-over-quarter and year-over-year growth rate trends per advisor
• Pipeline analysis: Weighted pipeline of prospective new clients and expected funding

Step 7 — Forecasting and Scenario Analysis

Project AUM and revenue forward under scenarios:

Base case:

• Market return assumption: [X%] (based on CMAs or historical average)
• Organic growth assumption: [X%] (based on trailing 12-month trend)
• Attrition assumption: [X%] (based on trailing 12-month rate)
• Fee rate assumption: [X bps] (current blended rate)
• Projected ending AUM: $[X]
• Projected revenue: $[X]

Bull case: Market +[X%], organic growth +[X%], attrition -[X pp] Bear case: Market -[X%], organic growth -[X pp], attrition +[X pp]

Revenue sensitivity: Show how each 1% change in market return, organic growth, or attrition affects annual revenue.

Output Specification

## AUM Growth Attribution Report — [Period]

### AUM Bridge
| Component | Amount ($M) | % of Change |
|-----------|-----------|------------|
| Beginning AUM | $XXX.X | |
| Market appreciation | $XX.X | XX% |
| New client assets | $X.X | XX% |
| Existing client contributions | $X.X | XX% |
| Withdrawals/distributions | ($X.X) | XX% |
| Client attrition | ($X.X) | XX% |
| Fees deducted | ($X.X) | XX% |
| **Ending AUM** | **$XXX.X** | |

### Key Metrics
| Metric | Current Period | Prior Period | YoY | Benchmark |
|--------|---------------|-------------|-----|-----------|
| Total growth rate | X.X% | X.X% | +/-X.X% | — |
| Organic growth rate | X.X% | X.X% | +/-X.X% | 3–5% |
| Attrition rate | X.X% | X.X% | +/-X.X% | <5% |
| New clients | XX | XX | +/-XX | — |
| Avg new client size | $XXX K | $XXX K | +/-X% | — |
| Revenue impact | $X.X M | $X.X M | +/-X% | — |

### Advisor Leaderboard
[Advisor-level attribution table]

### Growth Quality Assessment
- Market-dependent growth: XX% of total
- Organic growth: XX% of total
- Growth sustainability rating: [Strong / Moderate / Weak]

### Forecast
[Scenario table with base, bull, and bear projections]

Analysis Framework

Apply the GRAIN framework:

• Growth decomposition — Separate market from organic growth precisely
• Retention analysis — Quantify and categorize attrition drivers
• Advisor attribution — Assign growth components to individual producers
• Income impact — Connect AUM changes to revenue effects
• Next period forecast — Project forward under multiple scenarios

Examples

Example 1 — Strong Organic Growth Quarter

Q3 results: Beginning AUM $850M, ending AUM $912M (+$62M, +7.3%). Attribution: Market +$38M (4.5%), new clients +$18M (5 new relationships, avg $3.6M), existing client contributions +$8M, withdrawals -$6M, attrition -$4M (1 relationship lost to competitor), fees -$2M. Organic growth rate: 2.4% for the quarter (9.6% annualized), well above the 3–5% industry benchmark. Growth quality: Strong — organic growth represents 35% of total growth, indicating sustainable practice expansion not purely dependent on market returns.

Example 2 — Market-Masked Attrition Problem

YTD results: AUM grew 11% from $1.2B to $1.33B. Surface-level: appears healthy. Attribution: Market +$168M (+14%), new clients +$22M, contributions +$15M, withdrawals -$18M, attrition -$42M (8 relationships lost), fees -$15M. Organic growth rate: -1.9% (net outflows of $23M). Attrition rate: 3.5% (elevated). Diagnosis: Strong market returns masked a net-negative organic growth problem. Without the 14% market tailwind, the practice would have shrunk. Three of 8 lost clients cited fee dissatisfaction. Recommendation: Conduct fee competitiveness analysis, implement client retention program, investigate advisor service quality for clients at risk.

Guidelines

• Reconcile the AUM bridge exactly to actual ending AUM — no unexplained residuals
• Use time-weighted returns (TWR) for market attribution; money-weighted for client-specific analysis
• Annualize growth rates for comparability across periods of different lengths
• Separate controllable from uncontrollable attrition for actionable insights
• Track organic growth rate as the primary health metric, not total AUM growth
• Benchmark organic growth against industry standards (Cerulli, FA Insight, InvestmentNews benchmarks)
• Include pipeline data in advisor-level reporting to provide leading indicator context
• Present growth quality metrics (organic as % of total) alongside absolute growth

Validation Checklist

• [ ] AUM bridge reconciles exactly (beginning + components = ending, no residual)
• [ ] Market return calculated using time-weighted methodology
• [ ] New client assets distinguished from existing client contributions
• [ ] Attrition tracked by reason with controllable/uncontrollable classification
• [ ] Fee revenue impact calculated for each AUM component
• [ ] Advisor-level attribution sums to practice total
• [ ] Organic growth rate annualized for cross-period comparability
• [ ] Forecasting assumptions documented and internally consistent
• [ ] Industry benchmarks cited for organic growth and attrition rates
• [ ] Growth quality assessment distinguishes sustainable from market-dependent growth