Assets Under Advisory are assets for which the firm receives an advisory fee, but does not provide continuous and regular supervisory or management services for an account. Since they do not meet the definition of AUM, they are excluded from external and internal reporting.
Below are listed examples of advisory services:
- Provide market timing recommendations (i.e., to buy or sell) but have no ongoing management or trading responsibilities;
- Provide only impersonal investment advice (e.g., market newsletters) to clients;
- Make an initial asset allocation, without continuous and regular monitoring and reallocation; or
- Provide advice on an intermittent or periodic basis (such as upon client request), in response to a market request, or on a specific date (e.g., the account is reviewed and adjusted quarterly). Example, target hedge ratios
- Provide “model portfolios” to client (client may or may not utilize the model)
Common arrangements associated with advisory services:
- SSGA is not legally bound to investment management and risk associated with it. No execution risk on SSGA, execution risk is on client
- Form of compensation:
- Compensation is based upon the time spent with a client during a client visit and/or
- Fixed fee is received, not correlated with value of portfolio assets
Source : SSGA AUM Reporting Policy