Why AUA Computation Matters Beyond Just the Fee
Assets under Advice isn't just the number that feeds the AUA fee mode calculation — it also feeds into client threshold determination (the 300-client / ₹3 crore rule that governs when an individual IA must convert to non-individual registration), periodic SEBI reporting obligations, and net worth adequacy assessments for non-individual IAs. Getting the computation methodology wrong doesn't just misstate a fee — it can misstate whether your registration category is even correct.
What Counts as AUA
AUA is meant to capture assets on which the IA is actively providing ongoing investment advice, not merely assets the client happens to hold. This generally includes:
- Securities and mutual fund holdings the client holds based on the IA's specific recommendation, where the advisory relationship is active and ongoing
- AIF and PMS commitments brought into the advisory relationship, where the IA is providing advice on the position (as distinct from merely being aware the client holds it)
- Assets under an active advisory mandate, valued as of the computation date specified in the client agreement — typically periodic (quarterly or as agreed), not real-time
What Does NOT Count as AUA
This is where most computation errors happen:
- Assets the client holds but on which the IA has never given advice — for example, a legacy portfolio the client manages independently, disclosed to the adviser only for context
- Assets under a different, unrelated advisory or distribution relationship — including holdings placed through a mutual fund distributor arrangement, which is a fundamentally different regulatory relationship from IA advice
- Real estate, unlisted family business holdings, or other assets outside the securities/fund universe the IA has no advisory mandate over, even if discussed in a broader financial planning conversation
- Assets the client has explicitly excluded from the advisory scope in the client agreement — scope documentation matters precisely because it defines the AUA boundary
AUA vs AUM — A Distinction That Gets Blurred
AUA (Assets under Advice) and AUM (Assets under Management) are not interchangeable terms, and using them loosely creates real compliance risk. AUM implies a discretionary management mandate — the manager makes decisions and executes on the client's behalf — which is a portfolio management activity requiring PMS registration, not IA registration. An IA operates in an advisory, non-discretionary capacity: the client makes the final call. Referring to "AUM" in marketing material or client communications when the actual relationship is advisory (AUA) risks misrepresenting the nature of the engagement — and SEBI has scrutinised this kind of terminology drift in past inspections.
Valuation Methodology and Timing
SEBI expects a consistent, documented valuation methodology — typically last available NAV or closing market price as of the computation date specified in the client agreement — applied uniformly across the client base, not cherry-picked dates that happen to produce a favourable fee outcome. For AIF and PMS holdings within AUA, valuation should track the fund's own periodic NAV disclosures rather than an ad hoc adviser estimate.
Where This Feeds Into Client Threshold Determination
An individual IA's obligation to convert to non-individual registration is triggered once client count crosses 300 or aggregate AUA (across the individual's client base) crosses ₹3 crore, whichever occurs first, within a financial year — under the framework SEBI has laid out for this threshold. An IA who under- or over-counts AUA risks either triggering a conversion requirement they haven't prepared for, or failing to convert when they were legally required to, both of which surface as findings in a compliance review.
How We Help
Anuj Desai & Associates builds and audits AUA computation methodology as part of our IA compliance review work. Our scope includes:
- AUA computation framework design — defining what's in scope, valuation methodology, and computation timing for your client base
- Client agreement scope alignment — ensuring advisory scope documentation matches what's actually being counted as AUA
- Threshold monitoring — tracking your AUA and client count against the 300-client / ₹3 crore conversion trigger
- Annual compliance audit — verifying AUA computation accuracy as part of your broader IA compliance review If you're unsure whether your current AUA computation would hold up under a SEBI inspection, write to office@anujdesaiassociates.com or call +91 96194 56656 — we'll review your methodology before your next compliance cycle.