Motley Fool One is opening up its membership next week, and they are also introducing an intriguing new feature, exclusive to their members: Separately Managed Accounts (SMA’s).
From their FAQ:
“A separately managed account is an account at Interactive Brokers in which Motley Fool Financial Planning does the investing for you, following the strategies of the Motley Fool real-money portfolio service(s) that you choose, including Motley Fool Pro, Million Dollar Portfolio, Supernova: Odyssey 1, Supernova: Phoenix 1, and Fool One‘s Everlasting Portfolio.”
So basically, you open up an Interactive Brokers account, transfer in money and/or existing equities, choose one or more of the premium services to follow, and they will execute the exact trades on your behalf, based on percent allocations to match your portfolio size. Other than standard trade commissions, there will be no additional fees beyond the Motley Fool One membership. And only equities that are part of those services can he held in the account, as I understand it (so if you own a Uranium penny stock that your Uncle recommended, you can’t hold that here).
Members and potential members have been requesting this feature for a long time apparently, either because they don’t have the time to manage their own accounts (or don’t want to spend the time) or lack the comfort level or conviction to execute their own trades, and would rather have the Motley Fool facilitate all the transactions on their behalf.
Possible Game Changer for the Motley Fool
What’s interesting about this feature is that I think this opens up a potentially vast new market for the Motley Fool. Previously, Motley Fool One was best fit for fans of the Motley Fool and/or people who wanted to spend a lot of time researching and managing their own investments. Members had access to a ton of content, and but you had to filter through the information and trades that were of interest to you. So unless you were a general Motley Fool fan, Motley Fool One was not a very efficient way to manage your investments. Many people were paying money to a financial advisor to manage their investments in addition to their Motley Fool memberships.
Now with these SMA’s, the service will appeal to a much larger audience of people who can compare the cost of a Motley Fool One membership to the fees they are paying their own financial advisors. With typical SMA fees running at about 1.5% or more of assets under management (i.e. portfolio size), anyone with a portfolio of around 250,000 suddenly has a probably lower cost alternative (assuming a Motley Fool One membership cost of approximately $2500/year). Suddenly the cost of Motley Fool One can be not in addition to their Financial Advisor fees, but instead of them. The access to everything else Motley Fool One offers would just be icing on the cake, and the service would still be cost effective even if those members didn’t avail themselves of any of it.
So this could be very good for the Motley Fool bottom line, and also a good deal for members who want to take advantage.
Let me know in the comments if this feature is something that would be of interest to you.