Assets Under Management
Assets Under Management (AUM) refers to the total market value of assets that a financial institution, such as a bank or investment firm, manages on behalf of clients. These assets can include stocks, bonds, real estate, and other investments.
Example #1
An example of Assets Under Management is when an individual hires a financial advisor to manage a portfolio of $500,000 in various investments on their behalf. The financial advisor's firm then includes this $500,000 in their total AUM.
Misuse
Misuse of AUM can occur when financial institutions misrepresent the actual value of assets they manage to attract more clients or appear more successful than they are. This misrepresentation can harm consumers who trust the institution based on false information.
Benefits
One benefit of monitoring AUM is that it provides transparency and accountability. By tracking AUM, clients can assess the performance and stability of the financial institution managing their assets. This can help consumers make informed decisions and protect their investments.
Conclusion
Understanding AUM is essential for consumers entrusting their assets to financial institutions. By being aware of the AUM metric, individuals can gauge the credibility and reliability of the managing institution, leading to more informed choices and better protection of their wealth.