Assets under advisement refers to the total value of assets that an investment advisor provides investment advice on but does not necessarily own. These assets are typically owned by clients and are managed by the advisor. AUA includes all assets that an advisor provides advice on, including equities, bonds, mutual funds, exchange-traded funds (ETFs), and alternative investments. AUA is a crucial metric for investment advisors and their clients. It provides insight into the value of assets that an advisor manages and helps measure an advisor's business growth. AUA is also essential in assessing the performance of investment advisors and their investment strategies. For example, an advisor with a high AUA may be viewed as more successful than an advisor with a low AUA. Additionally, AUA can provide insight into an advisor's client base and their investment preferences. One of the primary characteristics of AUA is that it represents assets that an advisor manages but does not necessarily own. The advisor provides investment advice on these assets, but the client ultimately owns them. This is different from assets under management (AUM), which includes assets that the advisor manages and owns. Another characteristic of AUA is that it includes all assets that an advisor provides investment advice on. This includes equities, bonds, mutual funds, ETFs, and alternative investments. The advisor may provide advice on these assets, but the client ultimately decides whether to invest in them. Finally, AUA includes all assets that generate fees for the advisor. These fees can include management fees, performance fees, and transaction fees. The fees generated from AUA are typically the primary source of revenue for investment advisors. There are two methods of calculating AUA: gross AUA and net AUA. Gross AUA includes all assets that an advisor provides investment advice on, regardless of whether they generate fees for the advisor. Gross AUA is calculated by adding up the total value of all assets that the advisor provides advice on. Net AUA only includes assets that generate fees for the advisor. Net AUA is calculated by subtracting any assets that do not generate fees from gross AUA. Several factors can affect the calculation of AUA, including market value fluctuations, client withdrawals, and new client acquisition. The value of assets can fluctuate significantly based on market conditions. If the value of assets increases, the AUA will increase as well. Conversely, if the value of assets decreases, the AUA will decrease. It's essential to note that market value fluctuations can have a significant impact on AUA calculations, especially in volatile markets. Client withdrawals can also affect AUA calculations. If clients withdraw their assets, the AUA will decrease. However, if new clients are acquired, the AUA can increase, offsetting the impact of client withdrawals. New client acquisition is another factor that can impact AUA calculations. If an advisor acquires new clients, the AUA will increase. However, if an advisor loses clients, the AUA will decrease. It is essential to note that the impact of new client acquisition can take some time to manifest fully. AUA is an essential metric for measuring an advisor's business growth. As an advisor's AUA grows, their revenue typically increases, allowing them to reinvest in their business and expand their services. AUA can also provide insight into an advisor's client base and their investment preferences. By understanding their client base, advisors can develop more effective investment strategies and improve their overall performance. AUA can also serve as a performance metric for investment management. Advisors with a high AUA are typically viewed as more successful than advisors with a low AUA. However, it's important to note that AUA should not be the sole metric used to assess an advisor's performance. Other factors, such as investment returns, risk management, and client satisfaction, should also be considered. Finally, AUA can also be an indicator of the strength of an advisor's relationship with their clients. Advisors with high AUA typically have strong relationships with their clients and can maintain a high level of trust and confidence. This is important for advisors, as it can lead to increased client loyalty and retention. While AUA is an important metric, it does have limitations as a performance metric. AUA does not provide insight into an advisor's investment performance or risk management capabilities. It's possible for an advisor to have a high AUA but poor investment returns or inadequate risk management. Another challenge with AUA is ensuring data accuracy. AUA calculations can be complex, especially when factoring in market value fluctuations, client withdrawals, and new client acquisition. Ensuring that AUA data is accurate and up-to-date can be a significant challenge for investment advisors. Finally, AUA can also be subject to industry regulations and compliance requirements. Investment advisors must comply with industry regulations and maintain accurate records of their AUA. Failure to do so can result in penalties and legal consequences. Assets Under Advisement is a crucial metric for investment advisors and their clients, representing the total value of assets that an advisor provides investment advice on but does not necessarily own. AUA includes all assets that an advisor provides advice on, and it is calculated as gross AUA or net AUA, depending on whether it includes all assets or only assets that generate fees for the advisor. Several factors can affect the calculation of AUA, including market value fluctuations, client withdrawals, and new client acquisition. AUA serves as a performance metric for investment management, an indicator of the strength of an advisor's relationship with their clients, and a way to measure an advisor's business growth. However, AUA has limitations as a performance metric and can be challenging to ensure data accuracy. Investment advisors must comply with industry regulations and maintain accurate records of their AUA to avoid penalties and legal consequences.Definition of Assets Under Advisement (AUA)
Characteristics of Assets Under Advisement
Calculation of Assets Under Advisement
Gross AUA
Net AUA
Factors That Can Affect AUA Calculation
Market Value Fluctuations
Client Withdrawals
New Client Acquisition
Significance of AUA
Measuring an Advisor’s Business Growth
Performance Metric for Investment Management
Indicator of Advisor/Client Relationship Strength
Challenges With AUA
Limitations of AUA as a Performance Metric
Challenges With AUA Data Accuracy
AUA in Relation to Industry Regulations and Compliance
Conclusion
Assets Under Advisement (AUA) FAQs
AUA refers to the total value of assets that a financial advisor manages or advises on behalf of their clients.
AUA is calculated by adding up the total value of all the assets that a financial advisor manages or advises, including stocks, bonds, mutual funds, and other investment vehicles.
AUA is a key metric for financial advisors as it indicates the size of their client base and the amount of assets that they manage. AUA can also help advisors to benchmark their performance against industry standards.
Factors that can affect an advisor's AUA include changes in the stock market, fluctuations in interest rates, and the overall performance of the economy. Additionally, the advisor's ability to attract and retain clients can also impact their AUA.
Yes, there is a difference between Assets under advisement (AUA) and Assets under management (AUM). AUA includes all the assets that a financial advisor manages or advises on behalf of their clients, while AUM only includes the assets that the advisor has full discretionary control over.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
