AUM fee
A fee structure where an advisor charges a percentage of assets managed — typically 0.5% to 1.5% annually.
Example
“The 1% AUM fee cost $8,000 annually on her $800,000 portfolio — more than she realized.”
Memory Tip
AUM FEE — percentage of your portfolio paid annually. Compounds against your wealth.
Why It Matters
AUM fees directly impact your investment returns since they are charged annually regardless of market performance. Understanding this fee structure helps you compare different financial advisors and determine whether you are getting value for the percentage of your assets you are paying.
Common Misconception
Many people assume that AUM fees are only charged when their investments gain value, but advisors typically charge this percentage on the total value of assets under management every year, whether markets go up or down. This means you pay the fee even during years when your portfolio loses money.
In Practice
If you have 500,000 dollars invested with an advisor charging a 1 percent AUM fee, you would pay 5,000 dollars annually in advisory fees. If your portfolio grows to 600,000 dollars the next year, your fee increases to 6,000 dollars, even though the advisor did not do additional work for that extra asset growth.
Etymology
From Assets Under Management — the fee scales with the portfolio size.
Common Misspellings
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See Also
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