AUM is short for assets under management. “Assets” means your investment money. “Under management” means an adviser manages that money for you.
What it means
An AUM fee is what you pay the adviser each year. The fee is usually shown as a percent of the investment money the adviser manages.
The fee may come out of your investment account every three months. You may not notice it unless you look for the dollar amount on your statements.
A simple example
An adviser manages $1 million for you and charges 1% a year. That costs about $10,000 a year. If the account grows to $2 million, the fee rises to about $20,000 a year even if the service stays the same.
That price may include investment management, retirement planning, tax help, or regular meetings—or it may include very little. Ask for the fee in dollars and list the help you actually receive. Then compare that value with a flat fee, an hourly planner, or managing the money yourself. The useful question is not simply whether 1% sounds small. It is whether the service is worth $10,000 or $20,000 every year.
What people often miss
The dollar fee usually rises when your account rises, even if the adviser does no more work. Money paid in fees also loses the chance to grow for you.
Paying a fee is not always bad. Ask what help you receive and whether that help is worth the full dollar price.
Three questions worth asking
- How many dollars did I pay last year?
- What help did I get for that money?
- Did I pay any other fees too?
Checked against primary sources
This explanation was checked against the sources below. Rules and limits can change, so check the source before making a decision.
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