Understanding Assets Under Administration vs Assets Under Advisement

Disclaimer: This content is provided for informational purposes only and does not intend to substitute financial, educational, health, nutritional, medical, legal, etc advice provided by a professional.

What Are Assets Under Administration (AUA)?

Assets under administration (AUA) refer to the total assets that a financial institution provides administrative services for. This includes tasks such as record-keeping, reporting, and transaction processing. AUA can encompass a wide range of assets, including investments, retirement accounts, and insurance policies.

Understanding Assets Under Advisement (AUA)

Assets under advisement (AUA) are a measure of the total assets that a financial advisor provides advice on. Unlike assets under administration, advisors do not have the ability to directly trade or manage AUA. Instead, they offer guidance and recommendations to help clients make informed decisions about their investments.

AUA vs. AUM: How Do They Differ?

Assets under advisement (AUA) and assets under management (AUM) are two financial metrics used by advisors to attract prospective clients. While both metrics relate to the assets that advisors work with, there are key differences between AUA and AUM.

What Are Assets Under Assets Under Advisement (AUA)?

Assets under advisement (AUA) represent the total value of assets that a financial advisor provides advice on. These assets include investments, such as stocks, bonds, and mutual funds, as well as other financial products like insurance policies and retirement accounts. While advisors offer guidance and recommendations for AUA, they do not have direct control over these assets.

What Are Assets Under Assets Under Management (AUM)?

Assets under management (AUM) refer to the total value of assets that an advisor can physically execute trades on. These assets are typically on the advisor's platform and can be discretionary or non-discretionary. AUM includes assets that the advisor directly manages on behalf of clients, making investment decisions and executing trades based on the client's objectives and risk tolerance.

What Fees Do AUA and AUM Charge?

Both AUA and AUM may involve fees charged by financial advisors for their services. These fees can vary based on the advisor's fee structure and the specific services provided. For AUA, advisors typically charge a fee based on a percentage of the assets under advisement. This fee structure aligns the advisor's compensation with the performance of the client's investments. On the other hand, AUM fees can also be based on a percentage of the assets under management, but may also include additional fees for specific investment services or transactions.

AUA vs. AUM: Comparing Financial Backgrounds and Goals

When considering the difference between AUA and AUM, it's important to understand the financial backgrounds and goals of investors. AUA is often suitable for individuals who prefer to have control over their investments and make their own trading decisions. These investors may seek the advice of a financial advisor for guidance and recommendations, but ultimately want to retain control over their assets. On the other hand, AUM is typically more suitable for investors who prefer to delegate the management of their investments to a professional advisor. These investors may have less experience or interest in actively managing their investments and prefer to rely on the expertise of a financial professional.

Bottom Line

Assets under administration (AUA) and assets under advisement (AUM) are two important financial metrics used by advisors to attract clients. AUA represents the total value of assets that advisors provide advice on, while AUM refers to assets that advisors can physically trade on. Understanding the difference between AUA and AUM can help investors make informed decisions about their financial goals and the type of advisor they may need.

Tips for Hiring a Financial Advisor

When considering hiring a financial advisor, it's essential to do thorough research and consider the following tips:

  • Assess your financial goals and needs: Before seeking a financial advisor, determine your specific financial goals and needs. This will help you find an advisor who specializes in areas relevant to your situation.
  • Check credentials and experience: Look for advisors who hold relevant certifications and have a solid track record of experience in the financial industry.
  • Understand fee structures: Ask potential advisors about their fee structures and how they are compensated for their services. Make sure you understand all fees and any potential conflicts of interest.
  • Seek referrals and read reviews: Ask friends, family, or colleagues for recommendations on financial advisors they have worked with. Additionally, read online reviews and testimonials to gather insights from other clients.

By following these tips and understanding the difference between assets under administration (AUA) and assets under advisement (AUM), you can make informed decisions when it comes to managing your investments and selecting a financial advisor.

Disclaimer: This content is provided for informational purposes only and does not intend to substitute financial, educational, health, nutritional, medical, legal, etc advice provided by a professional.