What regulatory assets under management means, and what it does not

The biggest number on most firm pages is regulatory assets under management, usually shortened to RAUM. It's tempting to treat it like a scoreboard. It's more useful to think of it as a description: it tells you what kind of practice you're looking at, not whether it's any good.

What counts

Form ADV Item 5.F asks for the current market value of the securities portfolios the firm provides "continuous and regular supervisory or management services" for. In practice, that includes:

• portfolios the firm manages with discretion, where it decides what to buy and sell;
• portfolios it manages without discretion but for which it has ongoing responsibility to recommend specific investments and arranges the trades you approve;
• the full value of those portfolios, including cash;
• the firm's own and family accounts, accounts it manages for free, and accounts of clients outside the United States, when managed the same way.

It leaves out assets the firm only consults on, plans around, or advises on once. The figure is valued within the 90 days before the firm's annual filing, so by the next annual filing it can be more than a year old, typically up to about 15 months.

Discretionary and non-discretionary

Item 5.F splits the total in two, and AdvisorCensus shows both. Discretionary means the firm makes trading decisions within limits you've agreed to. Non-discretionary means you approve each trade. A firm that's nearly all discretionary manages portfolios directly. A large non-discretionary share is common for consultants and firms that advise retirement plans.

Why the website number is often bigger

Marketing materials often quote "assets under advisement," which can include planning-only relationships, held-away 401(k)s the firm looks at but doesn't manage, and sometimes affiliated companies. That number can be several times RAUM. It isn't wrong, just different. RAUM is defined by rule, filed under penalty, and comparable across firms, which makes it the one to trust when two numbers don't match.

Reading it alongside the rest of the filing

• Whom the firm serves. Item 5.D breaks clients and assets down by type. $2 billion with no individual clients is an institutional manager. $150 million spread across 300 households is a retail practice.
• Assets per adviser. Divide RAUM by the number of employees performing advisory functions (Item 5.B) for a rough sense of the firm's model: a few large relationships each, or many smaller ones.
• Registration. RAUM decides SEC or state registration; the line is $100 million, with a buffer. See SEC, state, and exempt registration.

Checking a firm on AdvisorCensus

Every firm page shows the filed figure, its date, and the discretionary split as a bar, next to a breakdown of the clients the firm serves. List pages group firms into bands (under $25 million up to over $5 billion) that you can filter by.