First Ascent Case Study (Part 2)

Since an ethical mission statement is not what enables First Ascent Asset Management (a TPAM) to offer such a low flat-fee structure, I am looking for another explanation.

A closer look at the website explains its low operating expenses. It claims to have outsourced technology infrastructure maintenance and back office functions, which can be 25-33% of the typical overhead. It shares a co-working facility rather than leasing a posh downtown office. It conducts most interactions over the phone, Internet, or website to spare travel expenses. It uses videos to introduce/sell itself to advisers. It doesn’t do expensive broker-dealer conferences.

The implication is its low flat fee is justified by these enhanced efficiencies but I think the comparison can be misleading without identifying the customers. First Ascent is a TPAM that caters to other IAs. Many IAs cater to retail clients. Retail clients will not always be sold through frugal means because significant competition from other IAs exists to get their business. I believe wealthier clients want to be treated well. They want a quarterly luncheon update or a physical office where they visit trusted advisors in person. First Ascent’s clients do not need all this, which is probably what spares the expenses.

Maybe First Ascent charges lower fees because it provides a lower-quality product than other TPAMs. Looking at its content on investment portfolios, I see platitudes that serve as boilerplate marketing:

     > Diversification. Global diversification can improve performance and control risk.
     > Objectivity. We put the interests of clients first. We avoid conflicts of interest.
     > Balance. We balance our understanding of history and research with real-world experience.
     > Elegant Simplicity. Leonardo Da Vinci said, “Simplicity is the ultimate sophistication.”
     > Low Cost. Controlling costs and expenses allows clients to keep more of what they earn.
     > Discipline. Our well-defined process allows us to better navigate both good and bad markets.
     > Patience. Success in investing takes time. We are willing to wait for our ideas to bear fruit.

It provides some historical content including renowned names in the space (e.g. Harry Markowitz, James Tobin, and William Sharpe): more boilerplate, basically. It mentions two portfolios that may be implemented at multiple risk levels and are available in tax-sensitive versions, which is nothing proprietary.

With regard to performance, I see absolutely nothing! Although past performance is no guarantee of future results, this is an insult to the financially savvy that can still learn much from trade statistics.

Unfortunately, First Ascent is not alone when it comes to omitting performance details. I will discuss this more next time.