Calculating Assets Under Management vs. Assets Under Advisement


ACA Group

Publish Date



  • Compliance
  • SEC

In recent years the SEC has been paying close attention to discrepancies in Form ADV filings and regulators have specifically been spending more time reviewing assets under management. Particularly now, when Annual Updates are due, it’s important to pay close attention to how to calculate your regulatory assets under management (RAUM).

A fundamental mistake that firms may be making that could result in an enforcement action is the misstatement of RAUM to include “assets under advisement” (AUA).  Firms could be reporting assets under management that do not meet the SEC’s specific definition of providing continuous and regular supervisory or management services of securities portfolios, resulting in an overstatement of assets being reported on Form ADV Part 1. In addition to enforcement action, a misclassification of regulatory assets under management (RAUM) versus assets under advisement (AUA) could also make the difference between qualifying to register with the SEC as a large advisory firm with $100 million or more in RAUM and registering with the state. This is because the firm does not meet the $100 million assets under management threshold.

To help you determine which assets you should be calculating and reporting under your management, let’s breakdown the requirements of the RAUM calculation. The SEC provides the following instructions on this topic:

“In determining the amount of your regulatory assets under management, include the securities portfolios for which you provide continuous and regular supervisory of management services.”

What Constitutes A Securities Portfolio?

The SEC defines a securities portfolio as an account in which at least 50% of the total value consists of securities including cash and cash equivalents. Family members’ and proprietary accounts, accounts for which you do not receive compensation, and accounts for non-United States persons are all required to be calculated in your regulatory assets under management.

What Are Continuous and Regular Supervisory or Management Services?

Generally, continuous and regular supervisory or management services apply to accounts over which you have discretionary authority, or, in the absence of such authority, accounts over which you have ongoing responsibility to make recommendations to buy or sell securities and subsequently arrange such purchase or sale.

If you are trying to determine if your services are continuous and regular, there may be clues within the terms of the advisory contract and form of compensation. A statement in the advisory agreement in which you agree to provide ongoing management services suggests that you are providing continuous and regular supervisory management services.

What are Assets Under Advisement?

Assets under advisement refer to assets on which your firm provides advice or consultation but for which your firm does either does not have discretionary authority or does not arrange or effectuate the transaction. Such services would include financial planning or other consulting services where the assets are used for the informational purpose of gaining a full perspective of the client’s financial situation, but you are not actually placing the trade.

Assets under advisement could also be those which you monitor for a client on a non-discretionary basis, where you may make recommendations but where the client is the party responsible for arranging or effecting the purchase or sale.  A common example of this scenario is when an adviser reviews a participant’s 401(k) allocations. If the adviser does not have the authority or ability to effect changes in the portfolio, these assets are likely considered assets under advisement rather than regulatory assets under management.

Assets under advisement are permitted to be disclosed on Form ADV Part 2A as a separate asset figure from the assets under management.  There is no requirement to disclose the assets under advisement figure, but some advisers opt to include the figure to give prospective clients a more complete picture of the firm’s responsibilities.  If you choose to report your assets under advisement, be sure to make a clear distinction between this figure and your regulatory assets under management.

Calculating and Reporting Regulatory Assets Under Management

The key to correctly calculating your Regulatory Assets Under Management on Form ADV Part 1 is to consider the value of all assets in securities portfolios on which you provide continuous and regular supervisory or management services, and add all the values together.  To figure out the value of a securities portfolio, only include the portion of the portfolio for which you are providing continuous and regular supervisory or management services.  Your portfolio management software may be able to calculate your assets under management for you.  If this applies to only a portion of the account and some of the assets are managed by another adviser, only include the value of the portion you manage. If you recommend the use of third-party money managers, you may only include these assets if you the client has granted you discretion to hire and fire the third-party managers.

Remember to always keep proper, dated documentation and an explanation of how the reported assets under management were calculated and maintain the documentation in accordance with your document retention policy and with regulatory requirements. The SEC, and most states, require these records to be maintained for a minimum of five (5) years. Be sure that the assets under management versus assets under advisement reported on the firm’s Form ADV are consistent with the documented calculations maintained by your firm.

With your next annual updating amendment filing, keep in mind the difference between regulatory assets under management (RAUM) versus assets under advisement (AUA) considering your clients’ assets and the services offered by your firm. For any questions on whether assets should be reported as RAUM, contact us here.

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