Scott MacKillop plans to “Vanguard” the managed account space.
Until now, it’s been easier to find low-cost advice than it is to find low-cost asset management says MacKillop, who plans to change that with the launch of his new firm, Denver-based First Ascent Asset Management.
“I wanted to see if we could do things a little differently, maybe a bit better than managed accounts have been done before,” MacKillop says. “We wanted to build the kind of firm that an advisor would want to bring their mother into to work with us. We focused on a design that produces good results for the clients, rather than starting with a design that makes a lot of money for the people starting the firm.”
First Ascent launched earlier this year with aspirations of disrupting the managed account industry from three directions: flat fees, lower-cost investments and free financial education resources.
By introducing a flat-fee structure for its portfolios, First Ascent will offer asset allocation at fees that more closely resemble Vanguard mutual funds than those of most investment managers.
Under First Ascent’s scheme, discretionary accounts are charged 50 basis points AUM, while non-discretionary accounts are charged 25 basis points AUM. However once an account reaches a certain size, between $300,000 and $400,000, clients’ fees are capped and would never increase. First Ascent caps fees at $1,500 for discretionary accounts and at $1,000 for non-discretionary accounts.
“There are financial advisors already doing this. This seems like the way the advice and planning industry is moving,” MacKillop says. “The asset management world is still largely based on a percentage of AUM. We like the flat-fee because it’s transparent. In January, an advisor would be able to tell their clients exactly what they’ll pay for their portfolio.”
For those fees, advisors can offer clients First Ascent’s “Global Explorer Portfolios” designed for long-term investors. Using a core of low-cost index mutual funds and ETFs and satellites of actively managed mutual funds, index funds or ETFs, the portfolios are offered in varieties that appeal to clients’ different risk tolerances.
“We’re combining active and passive, which also seems to be unusual for our space,” MacKillop says. “The active-passive debate really isn’t in the client’s best interest; you can benefit from both.”
Eventually, all First Ascent accounts will be charged a flat fee regardless of their asset levels, says MacKillop.