The One-Flat-Fee-Fits-All ETF Strategist

July 13, 2017 To an investor whose account size is small, $500 isn't exactly cheap—you can go to a robo advisor for less. What's your unique value proposition in terms of portfolio offerings?

MacKillop: There are two things. First, the portfolios are unique in that we're trying to combine active and passive management styles in one of the series of portfolios. That's pretty unusual in our industry. Most people fall on one side of the religious divide or the other. We’re combining the two.

We also build our portfolios in a somewhat different way. We're trying to stay focused on the costs associated with our portfolios, both the internal expenses and the trading costs, so we hold relatively few positions, and we trade them relatively infrequently. We have very low expenses.

Second, it’s the service side. We're focused on providing a high level of service. For example, a lot of robo advisors will only take cash for accounts; they won't transfer assets over and help with the liquidation process. We'll take accounts in whatever form they come. If we need to, we'll help them with a tax transition strategy, and work with them over time to bring the accounts over in the most efficient way possible. In the ETF strategist space, fee compression is squeezing profit margins. It's not an easy space in which to grow and make money. Why did you decide to start this business?

MacKillop: I've been in the business of providing outsourced portfolios to financial advisors for over 25 years. And I saw a number of areas where I thought we could do this better and more efficiently than it's been done in the past.

One of the problems you have with a lot of the traditional asset management firms is they have very significant technology infrastructures. They built up portfolio accounting systems, trading systems, billing systems and performance reporting systems.

These days you could outsource all of that and save a tremendous amount of money. We outsource our back office entirely to Orion. That gives us a huge cost advantage.

A lot of the firms use a traditional wholesaler approach to try to promote their products. That's very expensive. Putting highly paid individuals on airplanes and sending them out to visit with financial advisors one-on-one is expensive. We've built a different model, and use primarily our website and videos to communicate with advisors.

Our office space in Denver doesn't look anything like a normal asset management firm. We're in a co-working facility with lots of tech companies. All of those things were designed to help save money.


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