AUM (Assets Under Management)
Total market value of investments managed by an advisor or fund. Used to calculate 1% annual advisor fees—$500K AUM = $5K/year.
What You Need to Know
Assets Under Management (AUM) is the total market value of all investments a financial advisor or fund manages for clients. Most advisors charge 0.5-2% of AUM annually.
Example: $1 million portfolio with 1% AUM fee = $10,000 per year. As portfolio grows to $2 million, fee doubles to $20,000—even if service stays the same.
The compounding impact is massive: 1% AUM fee on $500,000 invested over 30 years at 7% returns costs you $200,000+ in wealth compared to 0.25% index fund fees.
Fee structures:
- AUM fees: 0.5-2% yearly (common for human advisors)
- Flat fees: $2,000-10,000 yearly regardless of assets
- Hourly: $200-400/hour for specific advice
- Robo-advisors: 0.25-0.50% AUM
Question: Does the advisor's value exceed the compounding cost of 1% annually?
Sources & References
This information is sourced from authoritative government and academic institutions:
- sec.gov
https://www.sec.gov/investment/im-guidance-2019-07.pdf
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