First Ascent Asset Management is a newcomer in the ETF strategist space, building two series of portfolios for advisors: one using only ETFs, the other combining ETFs with actively managed mutual funds.
What’s unique about the firm is its flat-fee structure—advisors pay an annual flat $500 fee for any portfolio. The one-year-old asset manager, which is marrying the best that fintech has to offer for all its back-office needs with good old long-term-minded portfolio construction, is led by industry veteran Scott MacKillop.
Here he shares what lessons the first year in business has taught, and where the opportunities lie ahead. First Ascent has $50 million in assets under management.
ETF.com: Price is your big differentiator as a firm. How does your flat-fee pricing compare to an ETF strategist that charges, say, 0.25%?
Scott MacKillop: It depends on the size of the account. A $100,000 account for $500 is a 0.50% charge [$50 per $10,000 invested]. At $200,000, it's 0.25%.
Now, our flat-fee pricing is for all accounts that are $100,000 or more. We realize the $500 pricing for smaller accounts can be burdensome, so we charge 0.50% below $100,000. A $25,000 account, for example, would pay 0.50%.
ETF.com: It would seem, in this business model, the only way you make money is if you manage to gain significant scale?
MacKillop: Absolutely. We estimate it’ll take us somewhere in the neighborhood of 2,500 accounts to get to a good, sustainable business model. Some of our businesses is still not at the $500-per-account level.
For example, we have a subadvisory relationship to manage some proprietary portfolios for Envestnet, and that's on a basis-point basis. We have other relationships where people want to bring us larger asset quantities, and they want those managed on a basis-point basis. We’re trying to meet the client where they are.