Beyond the AUM Boom: Preparing for the Tides of Change

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

I ended last week’s post ‘2024- The Year of Strategic Rethinking with the question, What are you going to change your mind about in 2024?I am sure you would have thought this question through. If you haven’t, you probably should, after reading this post. In fact, I am super excited to learn about your answers. There is also a nice gift for the best five answers. Send me your responses by the end of this week. I am waiting.

While I was working on an interesting marketing post for this week, I felt an itch to continue the topic of last week’s post by connecting “rethinking to a few common traits successful future firms in our industry globally are likely to have. But before I get into these traits, let me ask you a simple question.

“Imagine you are giving a multiple-choice question test. At some point during the test, you start to second guess an answer. You think you have selected the right answer but then there is this little doubt in your head, ‘I think the answer is b.’ But you power on. You face this dilemma for a few more questions. You now have extra time. Should you stick with your first instinct or change the answers?”

Prof. Adam Grant in his book, “Think Again”, wrote, “About three quarters of students are convinced that revising their answer will hurt their score. Kaplan, the big test-prep company, once warned students to exercise great caution if you decide to change an answer.

When a trio of psychologists conducted a comprehensive review of thirty-three studies, they found that in everyone, the majority of answer revisions were from wrong to right.

Yet we not only hesitate to rethink our answers. We hesitate at the very idea of rethinking. Take an experiment where hundreds of college students were randomly assigned to learn about first instinct fallacy. The speaker taught them about the value of changing their minds and gave them advice about when it made sense to do so. On their next two tests, they still weren’t any more likely to revise their answers.

Part of the problem is cognitive laziness. Some psychologists point out that we are mental misers. We often prefer the ease of hanging on to old views over the difficulty of grappling with new ones. Yet there are also deeper forces behind our resistance to rethinking. Questioning ourselves makes the world more unpredictable. It requires us to admit that the facts may have changed, that what was once right may now be wrong.

But rethinking is not a struggle in every part of our lives. We change our wardrobes when they go out of style and renovate our kitchens when they are no longer in vogue. When it comes to our knowledge and opinions, though, we tend to stick to our guns. We favour the comfort of conviction over the discomfort of doubt, and we let our beliefs get brittle long before our bones. We laugh at people who still use Windows 95, yet we still cling to opinions that we formed in 1995.

Unfortunately, this is so true in our industry/profession.

We don’t question ourselves. We don’t admit that we might be wrong today. We cling to beliefs and business models formed in 1995 or 2005 (feel free to put your own year). We stick to our knowledge and opinions. We don’t challenge ourselves. We don’t rethink.


Because for many, assets under management (AUM) are increasing thanks to the stock market rally of 2023. These rallies often make people cognitively lazier. More importantly, a growing asset base and a high client retention rate create an illusion of growth.

Even amidst this seemingly prosperous phase, where AUM numbers are climbing and clients appear content, a nagging sense of disquiet lingers in the back of our minds. We know, deep down, that this upward trajectory isn’t solely the product of our strategic acumen. Market tailwinds have been favourable, and while they buoy our AUM, they can also mask underlying issues of real organic growth of new clients and new assets.

It’s the kind of problem that’s easy to overlook when all indicators are green; it’s more comfortable to bask in the warmth of success than to acknowledge the cold potential of underlying issues. This is the quiet dissonance of knowing that true growth — sustainable, strategic growth — is not just about riding the wave but also about understanding the tide that propels it.

The hard truth is that a passive approach to growth during these times will lead to stagnation in innovation and the value of your firm. It’s akin to navigating with an outdated map; it may get you through familiar territory, but when the landscape changes, you may find yourself lost. We must remind ourselves: what we’re witnessing isn’t necessarily a testament to our expertise or a validation of our long-term strategies but a temporary alignment of circumstances that favours us.

As the steward of my firm, I know that the illusion of growth can be intoxicating. It lulls us into a sense of infallibility, where the increasing numbers on our clients’ portfolios might mask the need for introspection and innovation. However, as history has repeatedly shown, the financial tides will turn. When they do, the real measure of our firm’s worth will be in how well we’ve prepared for the future.

Therefore, I constantly remind my team: ‘Success is never owned; it’s rented, and the rent is due every day.’

What worked for us till now will certainly not work in the future. The winners of the future will be different. Mark Hurley wrote about the common traits of these winning firms in his Financial Advisor Magazine post.

While all ten are important, I reproduce a few (made some minor tweaks to the language) that are relevant in the Indian context.

1. They will have decisive owners with very long-term investment horizons:

Their single greatest competitive advantage of any wealth firm is having decisive owners with very long investment horizons, those who think in terms of decades rather than years. Successful firms will make substantial investments that won’t pay off for a very long time. They will also decide on and implement strategies today that will determine their outcome in 10 to 15 years.

2. They will do whatever is necessary to capture as many new clients as possible:

This is such an important topic that we will be covering this in our one-day workshop on Growth.

3. They will re-engineer their operating models to better use their talent:

In simple words this means that you as a founder will only focus on what you do best. If your skill lies in acquiring clients, you will focus your time on recruiting new clients.

4. They will quickly collaborate with the right professionals to acquire the necessary talent to grow.

5. Successful firms will be aggressive in expanding their value propositions.

6. The managers/executives at successful firms will have the necessary skills, temperament, and expertise to execute.

Does your firm have these traits? If not, what do you need to do to build these? What do you need to rethink?

Our commitment to our clients is not just to manage their wealth but to anticipate the shifts in the market and adjust our sails accordingly. It is our duty to pierce through the fog of short-term success and scout for icebergs on the horizon. This requires a culture that values continuous learning, encourages rigorous questioning, and embraces adaptability. We must be willing to dismantle and rebuild our strategies, ensuring they’re robust enough to withstand the risks we face.

This is my pledge as the leader of this firm: to remain vigilant, to challenge the echo chamber of the industry, and to steer clear of the cognitive laziness that can creep into decision-making. The icebergs of change are not threats but opportunities for us to prove our mettle and redefine the meaning of growth. As we navigate these complex financial waters, our true north will be the well-being of our clients, the integrity of our practice, and the foresight to move with the times, reshaping our firm’s strategy to fit the financial landscapes of the future.