Rethinking AUM: A Better Way for RIAs to Measure Success with Lacey Shrum
Episode 106: Lacey Shrum, Founder of Smart Kx, is an accomplished professional with a diverse background in law, compliance, and entrepreneurship. At Smart Kx, Lacey applies her extensive experience to drive strategic initiatives and deliver innovative solutions within the legal and technology sectors.
This week, Kyle and Lacey do a deep dive into the metric that truly matters for advisory firms—revenue. Lacey shares why AUM can be a vanity metric, how to calculate and use blended rates, and ways to streamline billing for greater efficiency and profitability. They discuss common challenges during firm growth and acquisitions, how average daily balance reconciliation can smooth out revenue volatility, and why automation reduces friction in advisor operations.
In this episode:
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(00:00) - Intro
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(04:32) - Why protecting revenue matters more than chasing AUM
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(08:26) - How Smart Kx gathers the data to power its calculations
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(09:55) - The risks of relying on spreadsheets for billing
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(14:17) - Why due diligence on revenue metrics is critical in acquisitions
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(17:22) - Using Average Daily Balance (ADB) reconciliation for fairer, more transparent billing
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(22:13) - Lacey's take on the fee structure debate
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(23:39) - What’s holding RIAs back from adopting automation
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(27:46) - The key revenue metrics every advisor should track
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(32:59) - How Smart Kx is leveraging technology and AI
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(36:07) - Lacey’s predictions for the future of the industry
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(40:07) - Lacey's Milemarker Minute
Key Takeaways
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Build a true revenue system—not just billing. Go beyond sending invoices. Create a complete revenue framework that combines accurate AUM fee calculations, airtight documentation of every client agreement, and detailed revenue analysis. This holistic view will give you clarity and control over your firm’s financial health.
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Ditch the spreadsheets for fee management. Spreadsheets are fragile, error-prone, and a single point of failure. Replace them with specialized technology that automates and validates calculations, ensuring accuracy while freeing your team from time-consuming manual work.
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Do real revenue due diligence in acquisitions. Don’t stop at surface-level metrics. Examine a target firm’s actual revenue drivers—average client size, blended rate, and revenue per client. This will reveal hidden gaps or “potholes” in their billing process and help you plan a smooth integration.
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Automate to eliminate friction. In a slow-to-adopt industry, actively seek tech that reduces clicks and speeds up payment workflows. The less time you spend chasing revenue, the more time you can invest in serving clients and growing your business.
Quotes
"Revenue is so important to anybody's business. We are trying to make a profit here, provide for ourselves, and build a business." ~ Lacey Shrum
"If you are responsible for signing that ADV and representing your firm in that contract, you have to have some orderly system, or you're just kicking the can down the road of a regulatory and probably litigation nightmare." ~ Lacey Shrum
"Advisors are not in the billing business. They're in the business of managing money. So, try to get billing down to the least amount of time possible so you can manage money." ~ Lacey Shrum
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