DEFINITION:
Assets Under Management (AUM) refers to the total market value of the investments that a financial professional or firm manages on behalf of clients.
WHEN AND WHY IT’S USED:
AUM is used as a metric to gauge the size and success of an investment firm or advisor. It can indicate the level of trust that investors place in the firm and reflects the scale of assets being managed. When you evaluate different financial services, comparing AUM may help you understand the resources available and the firm’s overall stability.
IMPORTANCE IN COMMUNICATION:
Discussing AUM with your advisor can give you insight into how your investments are managed within the larger context of the firm’s portfolio. It helps you understand whether the firm has the capacity and expertise to manage your assets effectively. This conversation builds confidence in the advisor’s ability to handle your investments and manage risk.
Moreover, knowing the AUM can also inform you about fee structures and the resources available for research and client support. It is an important factor when comparing different advisors or investment options, ensuring that you are comfortable with both the scale and the strategy behind your investments.
EXAMPLES IN CONVERSATION:
“How does your firm’s AUM reflect on the resources available for managing my portfolio?”
“Can you explain how AUM might influence the fee structure for my investments?”