What is AUM? Assets Under Management

Q: What services are typically included in an AUM fee?

Services often included in an AUM fee are portfolio management, regular portfolio rebalancing, financial planning, retirement planning, tax loss harvesting, and regular client meetings and updates. However, services can vary by advisor, so it's important to clarify what's included in your fee.

Q: How do I know if an AUM fee is worth it?

To determine if an AUM fee is worth it, consider the complexity of your financial situation, the value of the services provided, your comfort level with managing investments, the advisor's track record and expertise, and the potential for the advisor to improve your returns or help you avoid costly mistakes. Compare the fee to the potential benefits and consider alternative fee structures to make an informed decision.

Introduction

In this guide, we break down this concept so you fully understand how to calculate AUM fees. Investing with a financial advisor is not free, but it's probably a lot more affordable than you may realize. You don't really have to pay a fee on top of your assets under management. Instead, this percentage fee is automatically withdrawn from your account as your wealth grows throughout the year. It's almost like the percentage fee is being scraped off the top of your gains. Some advisors will take the fee on a monthly or quarterly basis, while others may opt for a different frequency of charging their AUM fee.
‍

New to AdvisorFinder? Welcome! Our mission is to help people make more informed financial decisions. Once you're finished with this guide on AUM, you might want to subscribe to our newsletter.

Drew Keever

Co-founder of AdvisorFinder

Last updated October 10, 2025

10~ min read

Definition of AUM Fees

What is AUM? Assets Under Management

AUM, which stands for Assets Under Management, is a key metric in the financial advisory industry. It's the total value of investments a financial advisor or investment manager manages for their clients.

For you, an individual client/household, AUM fees are charges based on the amount of money an advisor manages for you. These fees are usually a percentage of your total investments.

Here's how AUM fees typically work:

The advisor sets a percentage fee, often between 0.5% to 1.5% per year.
This fee is applied to your total investment amount.
The fee is usually charged quarterly.

For example:

If you have $100,000 invested
And your advisor charges a 1% AUM fee
You'd pay $1,000 per year, or $250 every three months

As your investment grows, so does the fee amount. If your $100,000 grows to $150,000, your 1% fee would now be $1,500 per year.

Some key points about AUM fees:

They align the advisor's interests with yours - when your investments grow, they earn more.
The percentage often decreases for larger account balances.
These fees cover ongoing management and often include financial planning services.

It's important to understand exactly what services are included in your AUM fee. Always ask your advisor for a clear breakdown of costs and what you're getting in return.
‍

Infographic titled 'Calculating Your AUM Fee' showing how to calculate the annual AUM (Assets Under Management) fee. A calculator is depicted in the upper right corner. The calculation example shows a 1% AUM fee multiplied by $1,000,000 in assets under management, resulting in a $10,000 annual AUM fee. Below the example, there's a note stating 'Typical AUM Fee Structures Include Breakpoints,' explaining that 1% of assets under management per year is a common fee for accounts under $1 million.

‍
‍Typical AUM Fee Structures Include Breakpoints

1% of assets under management per year. This is a common fee for accounts under $1 million.
0.75% of AUM for accounts between $1-5 million. As assets grow, the percentage fee often decreases.
0.50% of AUM for accounts over $5 million. Larger accounts can negotiate a lower AUM fee percentage.
Some advisors charge a flat annual fee instead of AUM percentage. This might be $5,000/year or more.

Please keep in mind, this list above is just an example of AUM breakpoints and does not reflect what your advisor will charge. You can negotiate these fees with your individual advisor.

Advisors may also charge separate fees for financial planning. This can range widely: advisors may charge a flat-fee for planning, or an hourly rate.

AUM Fee Calculator

Use this calculator to understand how advisor fees impact your long-term portfolio growth and see the potential value an advisor can add.

Current Portfolio Value ($) *

Expected Annual Return without Advisor (%) *

Estimated Value Added by Advisor (%) *

Investment Time Horizon (years) *

Advisor AUM Fee (% per year) *

Email Address *

I agree to the Terms of Service and Privacy Policy

By submitting, you agree to receive communications from AdvisorFinder and our sponsors/partners.

‍

^{*Important Notice: This calculator provides general estimates based on the information you enter and should not be considered professional financial, tax, or investment advice. The results are approximations for informational purposes only and may not reflect your actual financial situation or outcomes. Market conditions, tax laws, contribution limits, and other factors can change and may significantly impact your results. We recommend consulting with financial, tax, or legal professionals before making major financial decisions. Your actual results may vary.}

How this AUM Fee Calculator Works

Our calculator uses compound interest formulas to estimate portfolio growth with and without an advisor. Here's the methodology behind the numbers:

1. Portfolio Value without Advisor

Simple compound growth using your expected market returns:

\[FV = PV(1 + r)^n\]

FV Future Value

PV Present Value (initial portfolio)

r Expected Annual Return

n Investment Time Horizon (years)

2. Portfolio Value with Advisor

Accounts for advisor's added value minus their fees:

\[FV = PV(1 + r + a - f)^n\]

a Advisor's Value Added (annually)

f Annual AUM Fee

Plus all variables from formula #1 above

3. Total Fees Paid Over Time

Annual fees calculated on growing portfolio value:

\[TotalFees = \sum_{i=1}^n PV(1 + r + a - f)^{i-1} \times f\]

Fees compound as your portfolio grows, so early fees have less impact than they appear

4. Net Benefit of Working with an Advisor

The bottom line: your gain after all fees are paid:

\[NetBenefit = FV_{with} - FV_{without} - TotalFees\]

This is the number that matters. A positive result means the advisor's value exceeded their cost.

Pros and Cons of AUM Fees

While AUM fees directly impact your investment returns, it's crucial to consider the value they provide. Let's explore some scenarios to illustrate how AUM fees compare to alternatives and why they might be more cost-effective than you think.

The DIY Investor vs. The Advised Investor

Meet Sarah and Mike, twin siblings who each inherit $500,000 at age 35. They decide to take different approaches to managing their windfall.

Sarah (DIY Investor)

Self-Managed Portfolio

Sarah decides to manage her investments herself. She spends about 5 hours a week researching investments, rebalancing her portfolio, and trying to stay up-to-date with market trends.

Over 20 years:

Portfolio grows to $1,500,000 (assuming 5.5% annual return)
Time spent: 5,200 hours (260 hours/year for 20 years)
Opportunity cost of time: $260,000 (at $50/hour)

Total Value: $1,240,000

$1,500,000 − $260,000 = $1,240,000

Mike (Advised Investor)

Works with Financial Advisor

Mike chooses to work with a financial advisor charging a 1% AUM fee. The advisor provides comprehensive financial planning, tax optimization, and behavioral coaching.

Over 20 years:

Portfolio grows to $1,800,000 (assuming 6.5% annual return, factoring in advisor's added value)
Total fees paid: $220,000
Time spent: Minimal (~10 hours/year for reviews)

Total Value: $1,580,000

$1,800,000 − $220,000 = $1,580,000

The Result: Despite paying $220,000 in fees, Mike ends up $340,000 ahead of Sarah. This scenario doesn't even account for the stress reduction and peace of mind Mike experiences by delegating his financial management.

Scenario 2: AUM Fee vs. Flat Fee

Now, let's consider Lisa, who has $1,000,000 to invest and is deciding between two advisory firms:

Firm A (AUM Fee)

1% AUM Fee

Services: Comprehensive financial planning, tax optimization, estate planning, and active investment management
Fee in Year 1: $10,000
Annual Growth: 7% (including advisor value-add)

Portfolio after 10 years: $1,967,151

Total fees paid: $138,164

Firm B (Flat Fee)

$10,000/Year

Services: Basic financial planning and investment advice, but less comprehensive services
Fee in Year 1: $10,000
Annual Growth: 6%

Portfolio after 10 years: $1,790,848

Total fees paid: $100,000

At first glance, the flat fee seems more attractive because the total fees paid are lower. However, consider:

Value of comprehensive services: Firm A's more comprehensive services led to higher overall returns, even after fees.

Alignment of interests: As Lisa's portfolio grew with Firm A, they were incentivized to work harder to maintain and increase its value.

Scalability of services: As Lisa's portfolio grew, she received increasingly comprehensive services without her fee percentage increasing.

The Bottom Line: The difference in portfolio value is $176,303 in favor of the AUM fee structure, even though Lisa paid $38,164 more in fees. This illustrates how the alignment of interests in the AUM model can lead to better overall outcomes.

Quick Reference: Pros & Cons

Pros

Aligns advisor incentives with client goals of growing assets
Fees scale with portfolio value
Easy to calculate and built into account
Advisor has incentive to provide good service to keep assets

Cons

Fees are ongoing regardless of advisor activity
A 1.5% fee can seem small but can be large in dollar terms
Advisor may be incentivized to take inappropriate risks to grow AUM
Advisors may "churn" the account to generate more transactions/fees

These scenarios demonstrate that while AUM fees may seem high on the surface, they often result in better long-term outcomes due to the comprehensive services provided, the alignment of interests between client and advisor, and the value added through professional management.

The Key Takeaway: When choosing an advisor, look beyond the fee structure and consider the total value proposition—including the range of services offered, the potential for enhanced returns, and the peace of mind that comes with professional financial management.

Questions to Ask Your Financial Advisor

Hidden Costs Beyond the AUM Fee

While the AUM fee percentage is the primary cost paid to your financial advisor, there can be additional hidden costs to watch out for:

Underlying Fund Fees - The investments within your portfolio might charge their own expense ratios. These fees are separate from the advisor's AUM fee and can range from 0.05% to over 1% annually depending on the types of funds used.
Transaction Fees - Your advisor may charge commissions or ticket charges when buying and selling investments for your portfolio. These incremental fees can add up over time.
Miscellaneous Account Fees - Your brokerage account provider or custodian may charge annual account maintenance fees, transfer fees, wire fees and other miscellaneous costs.
Advisor Expense Ratios - If invested in the advisor's proprietary mutual funds or ETFs, these may have high expense ratios that benefit the advisor.

Discuss these secondary costs with your advisor to fully understand the complete costs of their service. A 1% AUM fee could end up being closer to 1.3-1.6% after factoring in potential additional fees.

Flat Fee vs. AUM Fee

While AUM fees are common, a flat annual fee model may be preferable in certain situations:

If your portfolio is relatively small (under $500k), an AUM fee of 1% could represent a large portion of your expected returns. A flat fee of $2,000 per year may cost less.
If you have mostly fixed income and cash holdings, paying an AUM fee on stable assets may not make sense. The advisor does not have to actively manage or trade these assets.
If you plan to be very hands-on and self-direct most investment decisions, paying an ongoing AUM fee for advice you won't utilize can be wasted money.
If you need one-time advice or financial planning for a specific goal like retirement or college savings, a flat project fee allows you to pay for customized guidance without ongoing fees.
If the advisor cannot clearly demonstrate how they will add value in excess of their AUM fee, opting for an hourly rate or flat fee gives you more control over costs.

Flat-Fee ($)

AUM Fee (%)

Charged as a flat dollar amount

Charged as a % percentage of your investable assets

Typically collected on a monthly or quarterly basis

Fee is collected from your account, so it's not a separate payment

Common for financial planning, less common for ongoing investment management

Very common for ongoing investment management

The optimal fee structure ultimately depends on your unique needs and the value provided by the advisor. Assess your personal situation, advisor relationships, and portfolio management preferences when deciding if an AUM or flat fee model is more appropriate for you.

Partner Spotlight

An Alternative to AUM Fees

Domain Money offers fully integrated wealth management for a predictable flat fee.

Flat, transparent annual fee (no AUM)
CFP® professional portfolio review and guidance
No asset minimums

Learn More

Tips on How to Negotiate Your AUM Fees

Consolidate accounts - Combining multiple accounts to increase your total assets under management can help you qualify for a lower AUM fee percentage. Advisors often have tiered fee schedules that decrease at higher asset thresholds.
Increase assets - Growing your portfolio value through additional investments or appreciation can push you over an AUM tier threshold and reduce your fee percentage. Communicate your plans to increase assets under management.

👉 When and How to Communicate with Your Financial Advisor‍

Negotiate fee schedule - Request a declining AUM fee schedule over time as your assets grow. AUM fees should decrease as a portfolio gets larger. Make the case for an incremental reduction.
Lock-in assets - Commit to keeping your assets under management with the advisor for an extended period of time in exchange for a lower AUM percentage. This provides the advisor predictable revenue.
Bundle household accounts - If you have multiple accounts across family members, negotiate to bundle them together to aggregate assets which may qualify for a reduced AUM fee.
Refer friends and family - Some advisors offer fee discounts for client referrals who also open accounts. Referring new clients can earn you a lower AUM rate.

Negotiation Strategies

Bundle Household Assets

Combine family accounts to reach higher asset tiers and qualify for lower fee percentages

Consolidate Accounts

Move multiple accounts under one advisor to increase total AUM and negotiating leverage

Lock-in Assets

Commit to keeping assets with the advisor long-term in exchange for reduced fees

Direct Negotiation

Present competitive quotes and ask directly for fee reductions or tiered pricing

Demonstrate Growth Potential

Show expected portfolio growth or upcoming inheritances to negotiate better long-term rates

Questions to Ask Your Financial Advisor When Negotiating

What is your firm's standard AUM fee schedule? Do you offer any flexibility in fee percentages for larger portfolios?
How do your AUM fees compare to other advisors? Are you willing to match or beat competitive offers?
Do you offer any fee discounts for long-term clients who reach certain asset thresholds?
Are there opportunities to lower my fee percentage if I consolidate multiple accounts with your firm?
Do you offer comprehensive financial planning services for the AUM fee or are those charged hourly as well?
How often do you review your client portfolios and communicate updates? Is the level of service proportional to the AUM fee?
What value-added services are included with your AUM fee? How do you aim to earn your fee and improve my after-fee returns?
Are there any additional transaction fees or commissions charged on top of the AUM percentage?
Will part of our annual review cover the re-evaluation of fees and your overall value?

Frequently Asked Questions about AUM Fees

Understanding AUM (Assets Under Management) fees is crucial for anyone working with a financial advisor. This FAQ section addresses common questions about AUM fees, helping you make informed decisions about your investments and financial management.

What is AUM?

AUM stands for Assets Under Management. It refers to the total market value of investments that a financial advisor manages on behalf of their clients.
‍

How are AUM fees calculated?

AUM fees are typically calculated as a percentage of the total assets an advisor manages for a client. For example, if you have $500,000 invested and your advisor charges a 1% AUM fee, you would pay $5,000 annually.
‍

Are there hidden costs beyond the AUM fee?

Yes, there can be additional costs beyond the AUM fee, including:

Underlying fund fees (expense ratios)
Transaction fees
Miscellaneous account fees
Advisor expense ratios for proprietary funds

It's important to discuss all potential costs with your advisor to understand the total expense of their services.
‍

How do AUM fees compare to flat fees?

AUM fees are based on a percentage of your assets, while flat fees are a set amount regardless of portfolio size. AUM fees may be more suitable for larger portfolios, while flat fees might be more cost-effective for smaller portfolios or those seeking specific, limited services.
‍

Can I negotiate my AUM fees?

Yes, AUM fees are often negotiable. Strategies for negotiation include:

Consolidating accounts to increase total assets
Committing to increase assets over time
Requesting a declining fee schedule
Bundling household accounts
Referring new clients to the advisor
‍

Are AUM fees tax-deductible?

As of 2018, investment management fees, including AUM fees, are generally not tax-deductible for individuals. However, it's best to consult with a tax professional for the most up-to-date information regarding your specific situation.
‍

How often are AUM fees charged?

AUM fees are typically charged quarterly, based on the average daily balance or the balance at the end of the quarter. Some advisors may charge monthly or annually.
‍

What services are typically included in an AUM fee?

Services often included in an AUM fee are:

Portfolio management
Regular portfolio rebalancing
Financial planning
Retirement planning
Tax loss harvesting
Regular client meetings and updates

However, services can vary by advisor, so it's important to clarify what's included in your fee.
‍

How do I know if an AUM fee is worth it?

To determine if an AUM fee is worth it, consider:

The complexity of your financial situation
The value of the services provided
Your comfort level with managing investments
The advisor's track record and expertise
The potential for the advisor to improve your returns or help you avoid costly mistakes

Compare the fee to the potential benefits and consider alternative fee structures to make an informed decision.