The Right Data Will Increase Your AUM

August 12, 2014

by Dan Solin

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I have often wondered what kind of data resonates most with prospects and moves them to choose an advisor. It turns out that it’s not any of the investment-oriented subjects advisors typically spend so much time discussing.

Advisors seeking to increase their AUM have no end of data at their disposal. That can be both a benefit and a burden. The judicious use of data can be very persuasive. It can also inundate the prospect and cause “data fatigue.”

Most advisors believe providing data on investing is a good idea. I have seen advisors use reams of information in presentations to prospective clients, including historical returns, mutual fund ratings, market timing, stock picking, tax information, bond yields, asset allocation … and the list goes on.

But to understand what data is more persuasive, you need to be familiar with the principle of social proof and the related power of positive association. Both are described in detail in Robert Cialdini’s book, Influence: Science and Practice.

The principle of social proof

The decision to retain an investment advisor is fraught with anxiety and uncertainty. Prospects have many concerns, the most critical of which is whether they will run out of money in retirement.

This situation illustrates the principle of social proof, according to Cialdini. This principle states that people – especially when they are uncertain or the situation they are confronting is ambiguous – will be strongly influenced by what other people do in similar circumstances. The “other people” most likely to affect their judgment are those who are most similar to them.

How can you use the principle of social proof to your advantage? Recognize that if your prospect is a lawyer or an engineer, the most convincing data you could provide would be the names (assuming you have obtained permission) of other lawyers or engineers who use your services. The more similar your references are to your prospects, the more likely they will find them persuasive.

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