Compared to flat fees or retainer fees, asset-based fees are calculated as a percentage of the total assets under advisement or assets under management (AUA or AUM).  Different percentages may be applied to different types of assets included in AUA or AUM.  These fees may be compensation exclusively for investment services provided for AUA or AUM, or they may be compensation for a combination of investment and other services.  Asset-based fee percentages typically decline as the amount of AUA or AUM increases.

Asset-based fees paid to an investment advisor or manager are usually in addition to fees and expenses charged by any mutual funds, exchange-traded funds, and master limited partnerships in which assets are invested.  Asset-based fees charged for AUA may be in addition to any asset-based fees that are charged by the firms that manage those assets in separate accounts, limited partnerships, or limited liability companies.

Expenses for brokerage, custody, or account-related accounting, reporting, and legal services are usually not covered by asset-based fees.  They may be covered by brokerage expenses – derived from proceeds of transactions – or deducted directly from the accounts that are being advised or managed.