Assets under management, usually shortened to AUM, is the total market value of every investment a financial firm oversees for its clients. The firm doesn’t own that money. You do. AUM matters because it decides which regulator supervises the firm, how much you pay in advisory fees, and what the firm has to disclose before you sign anything.
What the Number Actually Represents
AUM tallies the current market value of client holdings a firm manages, priced at what those investments are worth today rather than what anyone paid for them. The advisory relationship gives the firm authority to oversee your portfolio and, depending on the arrangement, place trades on your behalf. Legal ownership of the securities stays with you throughout. The Investment Advisers Act of 1940 imposes a federal fiduciary duty requiring advisers to act in your best interest when handling those assets.1Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers
The ownership distinction has real consequences. If an advisory firm fails, your investments aren’t part of its bankruptcy estate. The firm is a manager, not an owner. AUM simply measures how much wealth sits under that management at any given moment.
What Gets Counted
A firm’s AUM covers every kind of investment held across client accounts: stocks, bonds, mutual funds, exchange-traded funds, cash positions, and other priced securities. Those holdings live inside individual brokerage accounts, institutional portfolios, and tax-advantaged retirement accounts.
Accounts split into two categories. In discretionary accounts, the adviser has authority to buy and sell without calling you first. In non-discretionary accounts, the adviser recommends trades and you make the final decision. Both types can count toward AUM, but the SEC applies a specific standard to determine which assets receive “continuous and regular supervisory or management services” and therefore belong on regulatory filings.2U.S. Securities and Exchange Commission. Form ADV General Instructions
Regulatory AUM Versus Marketing AUM
The SEC uses a defined term for what firms must report on registration filings: Regulatory Assets Under Management, or RAUM. An account only qualifies as a “securities portfolio” for RAUM purposes if at least 50 percent of the account’s value consists of securities. Cash and cash equivalents like bank deposits and certificates of deposit count as securities for that test.2U.S. Securities and Exchange Commission. Form ADV General Instructions
RAUM has to include family accounts, proprietary accounts, accounts generating no fees, accounts belonging to non-U.S. clients, and every dollar of any private fund the adviser manages, including capital investors have committed but not yet contributed. There’s no carve-out for accounts a firm would prefer to leave off the books.
“Marketing AUM” is different. The SEC doesn’t define it, and there’s no standardized way to calculate it. Firms sometimes advertise a broader figure that includes assets they merely advise on without ongoing management. The number on a firm’s website may not match the RAUM on its Form ADV. The regulatory number is the one with rules behind it.
How Firms Have to Calculate It
The SEC requires RAUM on a gross basis. Firms cannot subtract outstanding debts, accrued fees, or borrowings from the total.3U.S. Securities and Exchange Commission. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission Valuations must reflect current market value using the same method the firm uses to report account values to clients or to calculate its own advisory fees. Firms must determine the figure within 90 days before filing their Form ADV.2U.S. Securities and Exchange Commission. Form ADV General Instructions
If a firm manages only part of a client’s portfolio, only that part counts. For private funds, though, the firm must include the entire fund value, uncalled capital commitments and all. The gross-value rule keeps firms from making their books look leaner than reality and keeps registration comparisons honest.
What Moves AUM Up or Down
Two forces push a firm’s AUM around: market performance and client behavior. When markets rise, the existing portfolio appreciates and AUM climbs without a single new dollar coming in. A downturn pulls the number down even if every client stays put. A firm’s AUM can therefore swing hard between quarters without saying anything about how well the firm is doing its job.
Client flows are the other engine. Inflows come from new clients signing on, existing clients adding money, or accounts transferring in from competitors. Outflows come from withdrawals, closed accounts, and clients leaving for another adviser. A firm can grow AUM through a falling market by winning enough new business, and it can shrink AUM through a rising market if clients leave faster than the remaining portfolios appreciate. The balance between market returns and net flows tells you more about a firm’s health than the headline number.
Why AUM Decides Who Regulates the Firm
Where an advisory firm registers depends almost entirely on how much it manages. Federal law sorts advisers between state regulators and the SEC using AUM tiers.4Office of the Law Revision Counsel. 15 US Code 80b-3a – State and Federal Responsibilities
- Under $25 million: the firm registers with its home state. SEC registration is generally off-limits unless the firm advises a registered investment company.
- $25 million to $100 million (mid-sized advisers): the firm typically stays with its state regulator, with exceptions when the home state doesn’t regulate advisers or the firm would otherwise have to register in 15 or more states.5U.S. Securities and Exchange Commission. Transition of Mid-Sized Investment Advisers
- $100 million to $110 million: the firm may register with the SEC but isn’t required to. This band works as a buffer.
- $110 million and above: SEC registration is mandatory unless a specific exemption applies.5U.S. Securities and Exchange Commission. Transition of Mid-Sized Investment Advisers
The buffer keeps firms from bouncing between regulators every time markets move. Once registered with the SEC, a firm doesn’t have to deregister and shift back to state oversight unless AUM falls below $90 million.6eCFR. 17 CFR 275.203A-1 – Eligibility for SEC Registration A few million dollars in either direction can change which regulator has authority, which is why the gross-value calculation rule matters.
How AUM Sets Your Fees
Most advisory firms charge a percentage of your AUM as their management fee, so the cost of advice scales with the size of your portfolio. Research from Cerulli Associates puts these fees around 1.25 percent for clients with $100,000 in investable assets and down to about 0.67 percent for clients with $10 million. The larger the account, the lower the rate.
Many firms use a tiered or blended structure instead of a flat rate. The first million might be billed at 1.00 percent, the next million at 0.75 percent, and higher balances at lower rates. Your effective fee is the blended average across all the tiers, not the top rate applied to the whole account. On a $2 million portfolio using those tiers, the effective annual rate would be 0.875 percent.
Fees are usually charged quarterly, calculated on the account’s ending balance from the previous quarter. Because the fee ties to portfolio value, rising markets increase both your wealth and the dollar amount you pay in fees; falling markets shrink both. The percentage never drops to zero, so you pay whether the portfolio gained or lost that quarter.
Performance Fees and Who Can Be Charged Them
Some advisers charge performance-based fees, taking a cut of profits above a benchmark rather than a flat AUM percentage. Federal law restricts who can be charged this way: under the Investment Advisers Act, only “qualified clients” are eligible.
Effective June 29, 2026, the SEC raised the qualified client thresholds for inflation:7Federal Register. Performance-Based Investment Advisory Fees
- AUM test: at least $1.4 million in assets managed by the adviser immediately after entering the advisory arrangement (up from $1.1 million).
- Net worth test: a net worth exceeding $2.7 million, excluding the value of your primary residence (up from $2.2 million).
If you meet neither threshold, an adviser legally cannot charge you a performance fee. The rule exists because performance fees can push advisers toward outsized risk, and regulators want that fee model limited to investors who can absorb the downside.
How to Check a Firm’s AUM Yourself
You don’t have to rely on a firm’s word about its AUM, its fees, or its record. The SEC maintains the Investment Adviser Public Disclosure database at adviserinfo.sec.gov, where you can look up any registered firm and read its Form ADV filings.8U.S. Securities and Exchange Commission. IAPD – Investment Adviser Public Disclosure The filing includes the firm’s reported RAUM, its fee schedules, the types of clients it serves, and any disciplinary events involving the firm or its key personnel.
Compare the RAUM on Form ADV to any AUM figure the firm uses in its marketing. A meaningful gap isn’t automatically fraudulent, but it’s worth asking what’s being counted in the marketing figure that doesn’t meet the SEC’s regulatory definition. If the ADV shows a disciplinary disclosure the firm didn’t mention, or the firm isn’t registered at all, that’s your answer. The search takes about five minutes and is the single most underused tool available to individual investors.