Robos & the Scott-Bot Battle

Note from the Publisher:  I’m pretty proud of my “Scott-Bot” creation, but more excited that the gentlemen featured in the following piece has found a simple, innovative way to battle robos, at least for now.  SOMETIMES a little guy can win, even when there’s a giant tidal wave of change already occurring in an industry.  We’ll keep our fingers crossed for him, and see how this unfolds.

“The fee structure of the investment management industry—a percentage of assets under management—has been around for so long, and is so ubiquitous, that it almost goes unnoticed. Arguments can be made over whether the percentage is too high, or we can be amazed when some fund shops push it down low, but the fact that it is always a percentage of total assets is rarely questioned.  

But just as financial advisors are beginning to experiment with different pricing models, such as hourly retainers or flat fees, one long-time investment strategist is challenging the price orthodoxy in the investment space.

Denver-based Scott MacKillop, former president of Frontier Asset Management, recently launched a new venture, First Ascent Asset Management. The pitch? He provides customized portfolio management services to advisors and charges 50 basis points for accounts up to $300,000, but then keeps the fee at a flat $1,500 for any amount larger than that. The investment management fee for a $1 million account, for example, would work out to the equivalent of 15 basis points, and for a $2 million account, 7.5 basis points. And so on.”

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