Belongings underneath administration (AUM) is the overall market worth of belongings an advisor or agency manages on behalf of its shoppers. As a person investor, your AUM is the quantity you’ve invested. Buyers might use AUM to judge the standard of a agency; advisors might use it to set their charges.

Learn how to calculate belongings underneath administration (AUM)

Belongings underneath administration (AUM) is the overall market worth of an individual or agency’s invested belongings. These belongings might embody:

A agency’s AUM is the combination market worth of the overall belongings they handle for his or her whole pool of traders. Which means an advisor’s AUM may very well be based mostly on many consumers with small investments, or a couple of shoppers with massive investments — or a mixture of the 2.

Usually, traders, funding advisors and regulatory companies use AUM in 3 ways.

Buyers in search of an skilled and secure monetary advisor might think about belongings underneath administration within the analysis course of. A excessive AUM might (or might not) be one indicator of a strong advisor.

AUM isn’t the one or greatest metric for selecting a monetary advisor; there are different issues to contemplate to judge the standard of an advisor:

• Lengthy agency historical past: A agency that’s been round for awhile and has a big consumer base might have the expertise and stability you’re in search of, even when its AUM is decrease. 

• Low client-to-advisor ratio: Usually, companies with a decrease client-to-adviser ratio might present extra individualized consideration. A excessive ratio might imply the agency is extra centered on bringing in enterprise than supplying you with personalised recommendation. 

• Price-only construction: A fee-only monetary advisor is usually most popular over one who receives a fee for recommending sure monetary merchandise, which introduces a battle of curiosity.

• Credentials: “Financial advisor” is a generic time period, so double-check whether or not the advisor is a licensed monetary planner and is legally allowed to supply funding recommendation.

• Fiduciary responsibility: Fiduciaries are obligated to behave in your greatest curiosity.

This data, together with a agency’s AUM, is within the agency’s Type ADV, which is a disclosure doc that funding advisors should file with the U.S. Securities and Alternate Fee and state securities authorities.

Advisor charges are sometimes a share of the investor’s AUM. The share can vary from 0.25% per 12 months for a robo-adviser to 2% per 12 months for a fee-only advisor. So, for instance, in case your belongings underneath administration are $100,000, your charges could also be:

• $125 a 12 months with a robo-advisor. 

• $1,050 a 12 months with a human advisor.

Usually, the share decreases for traders with extra investable belongings.