What Are Regulatory Assets Under Management (RAUM)?

Regulatory assets under management (RAUM) represent the total market value of investments that a financial institution manages for its clients, calculated according to guidelines set by the Securities and Exchange Commission (SEC). RAUM can indicate much about a firm’s size, scope and regulatory standing. It’s also important to note that RAUM and AUM are calculated differently. Here’s what you need to know about RAUM and your firm.

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RAUM Basics

The financial industry uses assets under management (AUM) to refer to the value of the assets that institutions manage for their clients. Numbers for AUM are often provided in marketing materials distributed by mutual funds, financial advisors and investment managers.

While different firms may understand AUM differently when using it for internal and marketing purposes, the SEC more narrowly defines RAUM for regulatory and disclosure purposes. Under the SEC’s rules, RAUM only includes assets meeting certain criteria, such as the following:

• Accounts must consist of 50% or more securities to qualify.
• Cash and cash equivalents like certificates of deposit (CDs) can count toward the 50% threshold.
• Advisors must also provide continuous and regular supervisory or management services for accounts to be included. This involves either having trading discretion or responsibility for overseeing investments in alignment with clients’ needs and goals.

The agency requires investment advisors managing over $110 million in assets to publicly disclose their RAUM. Firms with $25 million to $110 million under management must register with states and provide RAUM data to regulators. Unlike firms’ standard AUM calculations, RAUM requires valuations of qualifying assets within 90 days of regulatory filings.

Financial advisors and other financial firms have to disclose their RAUM annually via Form ADV. This regulator-required form contains a range of information about your firm that investors will find useful, including fees, client types, services, investing approach and any conflicts of interest.

While AUM and RAUM are related, they are not identical. Below is a quick comparison of how the two differ.

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RAUM vs. AUM: Key Differences Explained

While assets under management and regulatory assets under management are often used interchangeably in casual conversation, they have important distinctions.

In short, AUM offers a broader snapshot of your firm’s client relationships and overall business scale, while RAUM reflects the specific portion of assets that fall under regulatory oversight and active investment management.

A RAUM Example

To see how RAUM is calculated, consider a financial advisor who manages $10 million in total client assets across 500 accounts. The $10 million includes $7 million in various stocks and bonds, $2 million in cash deposits and $1 million in collectibles. The advisor actively manages the securities on an ongoing basis, while clients directly handle cash allocations. 

Although the advisor’s AUM equals $10 million, its RAUM would only comprise the $7 million in stocks and bonds that are receiving continuous investment oversight. The advisor wouldn’t count cash reserves not actively supervised toward its regulatory total, nor would it count collectibles since they are not securities.

How RAUM Affects an Advisor’s Regulatory Obligations

Remember, an advisory firm’s RAUM not only reflects the size of assets under active management, but also determines key regulatory requirements.

SEC vs. State Registration Thresholds

• Advisors with $110 million or more in RAUM must register with the and comply with federal regulatory standards.
• Advisors managing between $25 million and $110 million typically register with state regulators, unless an exemption applies.
• Firms managing less than $25 million generally remain under state jurisdiction, unless they qualify for SEC registration based on other criteria (such as advising registered investment companies).

Additional Reporting and Compliance

As RAUM increases, so do reporting obligations:

• All SEC-registered firms must disclose their RAUM annually through Form ADV. This includes providing detailed information on client types, fee structures, disciplinary history and conflicts of interest.
• Larger firms may also trigger additional regulatory scrutiny or audits, especially when crossing new RAUM milestones or expanding into different client segments.
• Advisors with growing RAUM should maintain robust compliance programs to manage fiduciary duties, advertising practices and disclosure requirements.

Why RAUM Matters to Investors

When researching financial advisory firms, individual investors should review disclosures around services offered, fee structure, types of clients served and disciplinary history. Firms’ Form ADVs containing this information also note their RAUM totals. RAUM is not the same as assets under management but, like AUM, a higher RAUM suggests an institution has won the trust of more clients over time.

However, clients must weigh RAUM alongside qualitatively assessing an advisor’s experience, specialties, transparency and customer service approach. For example, a firm with a smaller book focuses more on servicing individual clients than attracting high-net-worth investors with seven-figure portfolios. Investors should feel empowered to ask advisors directly about differences between their RAUM and AUM.

Bottom Line

RAUM provides standardized insight into the amount of assets that financial institutions manage. The SEC requires firms to follow a specific procedure to calculate RAUM as the value of the securities they actively managed. This information is provided in the Form ADV that all advisors and other financial firms must file with regulators. RAUM can give investors an idea of how large a firm is and help them compare one firm to another. Investors shouldn’t view RAUM figures in isolation when selecting advisory services, however. Combining RAUM data with qualitative factors allows determining the ideal firm fitting your investment needs and philosophy.

Tips for Growing Your Advisory Business

• Finding new clients to work with can take up a significant part of your day if you’re spending time making cold calls, sending emails to prospects or marketing your business on social media. If you’d like to free up hours in your day while still maintaining visibility online, using a lead generation tool might be the answer. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
• If you’d like to strike out on your own and start an RIA firm, there’s some significant planning that goes into it. You’ll need to register with the proper regulatory authorities if you haven’t done so and obtain any necessary certifications or licenses. You’ll also need to think about how you’re going to fund your new business, which may include bootstrapping from savings, seeking investors or taking out a loan. And when you’re ready to start hiring advisors to grow your team, you may seek out a recruiting firm to work with.

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