Barrier to Entry (Part 3)

Based mainly on performance and cost requirements, I perceive a high barrier to entry into the asset management (AM) arena whereas James Osborne of Bason Asset Management largely disagrees citing the ease of passing a licensing exam.

Osborne mentioned “holding oneself out as an IAR” whereas I discussed barrier to entry as an IA. He is talking about working as an employee of an IA firm and I am talking about establishing the IA firm.

Trump cards are available to melt away any barrier. For example, becoming an IAR may be even easier in the case of someone who has befriended an IA principal. Friendship can shortcut résumé and interview requirements. With regard to the IA, AUM and/or a strong ability to sell can shortcut the cost/performance barrier by minimizing expenses (as a %).

After all my exploration into hedge funds, IAs, and TPAMs, I have often been amazed that getting into AM could be as easy as spending the money to set up an entity. To me, this is a gamble I will not take because I fail to see the road to assets. Access to enough HNW individuals is all I really need to launch this business.

Requiring a more advanced credential like an MBA or CFA might be the only way to satisfy Osborne. I would argue that even these credentials do not focus on investing performance, which would be necessary to satisfy me. The MBA curriculum at some of the best business schools has one trading course and a second available as an elective.

Another explanation for our differing perceptions of barrier to entry could be the discussion of separate sub-industries. I think raising assets and the business of [minding] investing [performance] (e.g. first paragraph here) can (should?) be mutually exclusive as advisers in the former sub-industry often outsource to the latter.

I get the impression that most professional investing incorporates a plain-vanilla,* plug-and-play approach offered by many robo-advisers and large firms. These firms have marketing muscle and/or economies of scale capable of choking out new startups like me considering a higher fee structure to make efforts worthwhile. Once again, enough sales/marketing panache and/or the right connections would enable me to trump the barrier.

* I perceive the unfortunate consequence to this “dumbing down” of available options for non-accredited investors to be a
   lack of meaningful outperformance.