Clients are permitted to deduct the AUM fee of an investment manager, according to the Internal Revenue Code. However, financial planning fees not specifically attributable to investment management or tax planning are non-deductible, treated instead as a personal expense.

With the rise of comprehensive wealth management, it is increasingly common for clients to pay a single bundled AUM fee that covers not only deductible investment management services but also non-deductible planning expenses. Technically, though, those clients should probably only be deducting a portion of the AUM fee, not the entire amount — at least where the AUM fee covers a material amount of planning services.

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