A Very Low Fixed Cost Equals High Gross Profits
Robo-Advisor solutions from custodians or independent providers charge clients an ongoing basis point fee for each and every dollar; this fee is typically 25 to 35 basis points. This is the fee level whether the Robo-Advisor option is direct to the consumer (retail) or to you, the advisor (wholesale).
With the wholesale option, before, you, the advisor receives a dime, the vendor gets paid first and always.
With Avenue, your cost is fixed at $6,000 per year regardless of AUM.
As the chart below illustrates, once your service reaches breakeven, every dollar thereafter is gross profit.
Set the Fees and Own the Revenues
You will expand your markets with a Robo-Advisor solution. However, to make economic sense, your fees must give you an attractive profit margin and also be competitive.
Unlike Avenue, other Robo-Advisor vendors’ cost to you is a cost to your client. In other words, if your Robo-Advisor’s costs are, say, 25 basis points, then before you can earn any revenue you must charge your client more. You would have to charge your client 50 basis points just to earn for yourself what you would pay the Robo-Advisor vendor.
Since Avenue is a fixed $6,000 annual cost, you have complete freedom to set the fees you want. And, each client’s fees are 100% your revenues.