Assets under advertisement refer to the assets on which investment advisors can give informed investment advice and guidance without having the control to make investment decisions on their own. This is different from Assets under advertisement, where the advisor has full control over the investments.Â
With Assets under advertisement, advisors can give advice. However, the decisions are based on the client’s decision. Let us know about Assets Under management in this article.
What is Assets Under Advisement?
Assets under management are all assets on which an advisor can give guidance or advice. However, they do not have the right to make any investment decisions on their own. The investment decisions are taken by the client.Â
Assets Under Advisement: Key Takeaways
- Assets under management are all assets on which an advisor can give guidance or advice without making any direct decisions.
- It is affected by market volatility, client withdrawals, and new client acquisitions.
- AUA stands for Assets under Advisement and AUM stands for Assets under Management.Â
- In AUA advisors do not have full control over making investment decisions. While AUM includes assets that are owned and managed by the advisors.
- Final investment decisions are taken by clients.
Factors Affecting Asset Under Advisement?
Some of the major factors that affect assets under advertisement are mentioned below.
1. Market Volatility
The value of an asset can change based on market conditions. With the increase in the value of assets, there will be an increase in both Assets under advertisement (ASA) and Assets under Management (AUM). With the decrease in the market value of assets, the AUA will also decrease.
2. Client Withdrawals
The value of AUA is inversely proportional to client withdrawals. With the increase in client withdrawals, the value of AUA will decrease. However, if new clients are added then the value of AUA will increase.
3. New Client Acquisition
If an advisor acquires new clients it can also lead to an increase in Assets under advertisement (AUA). It is also an important factor in the AUA calculation.Â
Benefits of Asset Under AdvisementÂ
Some of the best benefits of assets under advertisement are mentioned below.
1. Client Autonomy
Major investment decisions are taken by the client ensuring the investment controls are well regulated. They make a move only when they analyze the advice that will work.
2. Flexibility
Clients can seek advice from the team to make the final call. It provides a greater flexible approach to investment.
3. Broader Service Range
Advisors can provide advice or guidance over a wide range of assets, even if they are not directly the owner of the asset.
4. Better Investment Decisions
With the help of expert financial advisors, clients can make more informed investment decisions. They can consider various factors, such as risk management, time horizon, and financial objectives, to create a well-diversified portfolio based on your personal goals.
5. Risk MitigationÂ
Advisors help to mitigate risk factors by diversifying client’s portfolios across different asset classes, sectors and regions.Â
6. Access to Professional Expertise
The financial advisors can provide guidance on various aspects of wealth management based on their experience with the clients. These clients can benefit from their expertise and knowledge to make informed investment decisions.
Calculating Assets Under Advisement
AUA is calculated by adding up the total value of assets managed by the financial advisors such as stocks, bonds, mutual funds, equities, etc. There are two methods used to calculate assets under advisement given below.
1. Gross AUAÂ
Gross AUA is calculated based on the assets that provide fees to the advisor as well as the assets which do not provide fees. It is calculated by adding up the total value of assets advised by the advisors.
2. Net AUA
Net AUA is calculated by summing up the assets, which provide fees for the advisor. It is calculated by subtracting the assets, which do not add fees to the advisors.
Challenges with Assets Under AdvisementÂ
Some of the major challenges faced by the Assets under advisements are mentioned below.
- AUA leads to the overdependence of clients on their advisors for making investment decisions.
- Sometimes the expectations of clients are unrealistic. Managing risks involved in investments along with client expectations can be challenging.
- Proper diversification for a client’s portfolio can be challenging and must be managed carefully based on the client’s risk tolerance and investment goals.
- AUA does not provide insights into investment performance or risk management techniques which can lead to situations where AUA is high but returns and risk management is poor.
- Ensuring data accuracy in AUA can be a complex task with a wide range of market fluctuations, client withdrawals, and new client acquisitions.
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Assets Under Advisement FAQs
What are the assets under advisement?
Assets under advertisement refer to the assets on which investment advisors can give informed investment advice and guidance without having the control to make investment decisions on their own.
How is AUA calculated?
AUA is calculated by adding up the total value of assets managed by the financial advisors such as stocks, bonds, mutual funds, equities, etc.
What are some factors that affect AUA?
Some of the factors which affect AUA are market fluctuations, economic conditions, client withdrawals, and new client acquisitions.
Is there any difference between AUA and AUM?
Yes, AUA includes all assets on which advisors give advice on behalf of their clients. However, in AUM, only those assets are included, which advisors have full control over.
