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What Is AUM, and What's a 'Good' AUM for an Independent Financial Advisor?

Last Updated: April 24, 2026

"What is AUM?" is a common question for new advisors. It refers to assets under management and affects pricing, revenue, and firm valuation.

The follow-up question, "What is a good AUM for a financial advisor?" doesn't have a single answer. It depends on your fee model, margins, client mix, and the life you want your firm to support. Here's a clear, practical guide.

What is AUM?

Assets under management (AUM) is the market value of client assets you manage on a discretionary or non-discretionary basis, depending on your contracts and custodian setup. In regulatory filings, you'll report Regulatory Assets Under Management (RAUM) on Form ADV. RAUM includes securities portfolios for which you provide continuous and regular supervisory or management services, as defined by the SEC. It excludes assets where you do not provide ongoing management, such as a one-time plan without ongoing monitoring.

For details, see the SEC's Form ADV instructions: SEC Form ADV.

Advisors also track other asset categories internally:

  • Billable AUM: Assets that you charge an ongoing fee on. This is what powers recurring revenue under the AUM model.
  • Assets Under Advisement (AUA): Held-away or other assets you advise on but do not directly manage or trade. These may be billed under a separate percentage-based AUA schedule, often lower than AUM rates, or via flat/subscription fees.

It helps to distinguish RAUM, billable AUM, and AUA. Your pricing, disclosures, and KPIs may rely on different definitions.

How AUM connects to revenue

Most RIAs that use AUM billing set a tiered fee, often around 1% on the first $1 million with breakpoints above that. The simple math is: AUM x blended fee rate = gross revenue from AUM.

Example: 60 households averaging $500,000 each equals $30 million AUM. At a 1.0% blended fee, that's $300,000 in annual gross revenue. Subtract operating expenses, such as software, compliance, staff, insurance, and marketing, to estimate owner income before personal taxes.

Industry studies show wide ranges, but some helpful anchors:

  • Schwab's RIA studies benchmark compensation by role and document that margins tend to improve as firms scale.
  • Recent Kitces Research shows that AUM remains the dominant pricing model: 92% of advisors incorporate AUM fees in some way, and 86% use AUM as their primary pricing method, up from 82% in 2022.
  • XYPN Benchmarking Study data shows that AUM becomes more common as fee-for-service firms mature. In 2024, 49% of Launching firms, 76% of Building firms, and 94% of Scaling firms offered AUM pricing.

Quick scenario math

Scenario AUM Blended fee Gross revenue Expense ratio Estimated owner pay (pre-tax)
Solo, lean ops $30M 1.00% $300,000 40% $180,000
Growing solo, more support $50M 1.00% $500,000 45% $275,000
Hybrid model (AUM + subscription) $20M AUM + $100k subs 0.85% on AUM $270,000 42% $156,600

Note: These are directional examples. Your numbers vary by pricing, client size, service depth, and overhead.

So, what is a "good" AUM for a financial advisor?

A "good" AUM is the level that funds your goals with healthy margins and reasonable capacity. For many solo RIAs, that can be anywhere from $25 million to $75 million, depending on blended fees, service model, and staffing. Firms with large average client sizes may need fewer households and less total AUM to reach the same income. Planning-first or subscription models may need less AUM because non-AUM fees carry the load.

Bottom line: A good AUM target is the one that supports your desired take-home pay at sustainable client loads and margins.

Back into AUM from your income goal

You can use this framework:

  1. Set the owner pay target. Example: $200,000 pre-tax.
  2. Pick an expense ratio. Many solo RIAs run 35–50% once steady. Example: 45%.
  3. Solve for the required revenue. Revenue = Target pay / (1 − expense ratio). $200,000 / 0.55 = $363,636.
  4. Translate to AUM. AUM needed = Revenue / blended fee. At 1.0%, about $36.4 million. At 0.80%, about $45.5 million.
  5. Adjust for non-AUM fees. If you expect $100,000 from planning/subscriptions, reduce the revenue you need from AUM accordingly, then convert that AUM-sourced revenue to an AUM figure using your blended fee.

Directional AUM ranges by stage (solo, fee-only)

These ranges assume a planning-centric service with margins of 40–60% over time. Use them as guardrails, not hard targets.

  • Years 0–2: $0–$20 million AUM or 30–60 ongoing households across mixed fee models. Cash flow is often a blend of planning fees, subscriptions, and early AUM.
  • Years 2–4: $20–$40 million AUM with a clearer niche and onboarding process. Many owners land between $120,000 and $200,000 take-home when pricing and scope are healthy.
  • Years 4+ (steady solo): $30–$75 million AUM, 70–120 ongoing households, depending on revenue per client and support. Take-home often falls in the $150,000–$350,000+ range with good margins.

If you plan to stay subscription-first or hourly, your "good" AUM could be modest or even near zero. Your focus shifts to revenue per client, close rate, and recurring planning fees.

When AUM isn't the right North Star

AUM is one lever. It is not the only one. Fee-for-service and planning-centric advisors often manage lower AUM and still meet income targets. In these firms, the better metrics are:

  • Revenue per client by segment or tier
  • Recurring revenue ratio as the percent of revenue you expect each year
  • Households per advisor to understand capacity
  • Time per client per year to measure service efficiency
  • Operating margin to track profitability after expenses
  • Client retention and referral rate to evaluate growth quality

Kitces' public fee research is useful here because it shows that AUM fees increasingly cover more than portfolio management. In the article, Kitces reports that, on average, advisors attribute 59% of a client's AUM fee to investment management and the remaining 41% to financial planning and other advisory services. For advisors who bundle financial planning into their AUM fee, the investment-management share drops to 54%, with 46% attributed to planning and other advisory work. That matters because it reinforces a practical point for planning-centric advisors: the client value conversation should not stop at investment management.

For broad industry pay context, the BLS reports a median wage of $102,140 per year for Personal Financial Advisors as of May 2024 (BLS).

What AUM fee schedules usually look like

AUM pricing is often described as a simple percentage of assets, but most firms do not charge one flat percentage across every client size. Kitces' article explains that AUM fee schedules typically fall into three categories:

  • Graduated structures: Fees are calculated as a blended rate across multiple tiers.
  • Cliff structures: Once a portfolio reaches the next pricing tier, the new rate applies to the entire portfolio.
  • Flat structures: A single rate is applied to the entire portfolio, regardless of size.

This is one reason a larger portfolio does not always mean a proportionally larger fee. For example: a $2 million portfolio at a 100 basis point advisory fee would pay $20,000. A $4 million client might pay closer to 80 basis points, or $32,000. In that example, assets doubled, but the fee increased by 40%, not 100%.

Graduated fee schedules are the most common approach. According to Kitces' research, 58% of advisory firms use graduated fee structures. That matters for forecasting because your average or blended fee may decline as client assets rise, even as total revenue per client increases.

How alternative fees can reduce the pressure on AUM

Many firms use AUM alongside other charging methods. According to Kitces, 72% of advisory firms use more than one charging method, such as combining AUM fees with project-based, hourly, or retainer fees. This can help advisors serve clients who need planning but do not yet have enough assets to support a traditional AUM-only relationship.

Unbundling can also make your value clearer. Instead of treating the AUM fee as if it only covers investment management, firms may separate investment management, financial planning, and other advisory services into distinct fees. Kitces notes that, across nearly all client segments, total fees charged by bundled and unbundled advisors tend to be nearly identical. In practice, that means unbundling is not always about charging less; it can also be a way to show clients exactly what they are paying for.

For XYPN-style fee-for-service advisors, this is especially important. AUM may be part of the model, but it does not have to carry the entire business. Planning fees, subscriptions, project fees, and retainers can all help align pricing with the complexity and value of the advice being delivered.

Practical ways to grow AUM without burning out

  • Clarify your niche. Advisors who serve a specific segment, such as equity-comp employees, physicians, or business owners, can attract larger, right-fit households faster. Learn more about choosing a niche for your financial planning firm.
  • Right-size pricing and scope. If you deliver tax planning, equity comp modeling, or retirement income guardrails, align fees with the complexity of each service. Avoid silent scope creep.
  • Make meeting time count. Standardize onboarding, meeting prep, and follow-up. Use a CRM, planning software, and a rebalancer to protect focus time.
  • Offer a path for held-away assets. Provide advice on 401(k)s and other held-away accounts using compliant review tools. Over time, some clients may consolidate assets with you.
  • Build a steady pipeline. Publish one helpful piece a week, ask for reviews, and nurture centers of influence. Consistency compounds. It also reduces price pushback.
  • Add leverage early. A paraplanner or virtual assistant can add 20–30 hours back to your month. That usually pays for itself in growth and retention.

Frequently asked questions

Is higher AUM always better?

No. Higher AUM with thin pricing or bloated overhead does not help your take-home pay. Focus on margins, service quality, and capacity.

What about breakpoints and blended rates?

Most fee schedules decline with size. Your "blended rate" is the effective rate across tiers. Know your average so you can forecast accurately.

Do I need AUM if I run a subscription or hourly model?

No. Many fee-only firms thrive without significant AUM. Track revenue per client, recurring revenue, and profitability instead. Read more about AUM in a fee-only world.

Conclusion

AUM is useful, but it is only one part of the picture. A "good" AUM is the level that funds your target income at healthy margins while keeping your client load sustainable. Start with your pay goal, back into revenue, and decide how much of that revenue should come from AUM vs. planning or subscription fees.

The bigger takeaway is that AUM remains widely used, but it is evolving. Many advisors still use AUM as the core pricing model, but the fee often supports planning, advice, and relationship management in addition to investment management. For planning-centric firms, especially those serving clients who do not fit the traditional high-AUM mold, the best pricing model may be a blend of AUM and non-AUM fees that reflects the real value and scope of the relationship.

Track the right KPIs, build systems that protect your time, and make sure your pricing reflects the advice you actually deliver. For a deeper look at how top advisors are growing, explore XYPN's annual benchmarking study takeaways.

Key sources and further reading

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