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Form ADV Part 1A Item 5F(2)(a) · Answer type: currency · Item 5F - Regulatory Assets Under Management
Item 5F(2)(a) is the firm's discretionary regulatory assets under management (RAUM) in U.S. dollars. This shows the portion of regulatory AUM where the adviser has authority to make investment decisions and execute trades without getting client approval for each individual transaction.
Discretionary management means the adviser can buy, sell, or hold securities based on their judgment and the client's investment objectives, without calling for permission each time. The client grants this authority through a discretionary agreement, typically setting broad guidelines and restrictions while allowing day-to-day trading decisions.
This contrasts with non-discretionary arrangements where the adviser must recommend trades and wait for client approval before executing them. In non-discretionary relationships, the client retains final decision authority over individual transactions, even when the adviser provides ongoing portfolio supervision.
5F(2)(a) represents one half of the regulatory AUM split. The other half is 5F(2)(b) non-discretionary RAUM. Together, they add up to 5F(2)(c) total RAUM.
Many investment advisers prefer discretionary arrangements because they can respond quickly to market conditions, rebalance portfolios efficiently, and implement investment strategies without delays from client communication. Clients often prefer discretionary management for convenience and professional responsiveness.
Some advisers operate purely discretionary, showing all RAUM in 5F(2)(a) with zero in non-discretionary. Others mix both models, using discretionary management for investment portfolios while offering non-discretionary advice for other accounts or services.
The discretionary vs non-discretionary distinction appears only in regulatory AUM figures, not in other Form ADV client counts or compensation arrangements. The same firm might serve both types of clients or convert accounts between the two models over time.
5F(2)(a) - Discretionary regulatory assets under management (currency).
This is one field in Item 5F, "Regulatory Assets Under Management." The firm reports the dollar value of assets under discretionary management authority as of its Form ADV reporting date.
Discretionary RAUM shows how much of the firm's regulatory assets operate under trading authority without per-transaction client approval. Higher discretionary percentages often indicate streamlined investment management where advisers can act quickly on opportunities or market conditions.
If you prefer active management with quick responses to market changes, look for firms with substantial discretionary RAUM. If you want to approve each trade personally, focus on firms with meaningful non-discretionary assets or ask about converting discretionary accounts to advisory-only arrangements.
A large 5F(2)(a) does not tell you the investment approach, trading frequency, or performance quality. Some discretionary advisers trade rarely and focus on long-term holdings, while others use the authority for active strategies. Some discretionary managers outperform while others lag benchmarks.
The figure also does not indicate minimum account sizes, fee structures, or client service levels. Those details appear elsewhere on Form ADV and in the firm's client agreements and Brochure materials.
Discretionary authority does not mean unlimited control. Clients typically set investment parameters, restrictions, and objectives that guide the adviser's discretionary decisions. The authority applies to trading implementation, not to fundamental changes in investment goals or account usage.
The value is a dollar amount in regulatory AUM as of the Form ADV reporting date. For example, 75000000 represents $75,000,000 in discretionary RAUM.
On the firm's Best Investors ADV panel, find Item 5F and look for the discretionary row labeled 5F(2)(a). Compare this figure to 5F(2)(b) non-discretionary RAUM to see the firm's management mix. The two should add up to 5F(2)(c) total RAUM.
If 5F(2)(a) is much larger than 5F(2)(b), the firm primarily operates with discretionary trading authority. If both figures are substantial, the firm serves both discretionary and non-discretionary clients.
Also check 5F(2)(d) discretionary account count to understand the number of accounts represented by the discretionary dollar figure. Dividing dollars by accounts gives rough average account size for context.
When evaluating firms, ask about their discretionary vs non-discretionary offerings, minimum account requirements for each model, and whether they allow clients to switch between approaches based on changing preferences.