Separately Managed Accounts (SMAs) Q&A Event

TOM GARDNER: Hi. Im Tom Gardner, co-founder and CEO of The Motley Fool and your Motley Fool ONE advisor excited to spend some time, together, talking about the revolutionary new autopilot service thats coming to Motley Fool ONE separately managed accounts.
Now, two quick orders of business before I introduce the panel and we start to answer your questions. The first is that due to how much time it takes and effort it takes to manage separately managed accounts, we can only offer this service in Motley Fool ONE. We know how many people are excited. Theres been a lot of requests for more information on separately managed accounts here over the last week. I do want to remind you that should you choose to join Motley Fool ONE, you can enjoy the service and SMAs and everything that were offering and if its not right for you at any point in the first year, you just tell us and we refund you in full. Now, I want to introduce the panel. All the way down to the left is Alex Pape, director of product management and Motley Fool Wealth Management. Robert Brokamp, our senior VP of financial planning and of Motley Fool Wealth Management. And our president, Nick Crow, of Motley Fool Wealth Management. Its important to say were changing the name of this solution you may have heard about from Motley Fool Financial Planning to Motley Fool Wealth Management because now theres so much more going on inside of this service and solution in Motley Fool ONE and Motley Fool Wealth Management. Youre going to get opportunities to talk to financial planners [about] separately managed accounts and so much more. Lets get right into the questions that weve gotten, Nick. The first one is just obvious. What are separately managed accounts and how will they work?

Tom Gardner, Nick Crow, CFA, Robert Brokamp, CFP, and Alex Pape, CFA discuss SMAs in this exclusive event.
TOM GARDNER: And Robert, what will these investments be based upon? ROBERT BROKAMP: Theyll be based on a few of the Motley Fools real money portfolios Everlasting Portfolio, Million Dollar Portfolio, Pro and Supernova. TOM GARDNER: And Alex, when is this all going to start? ALEX PAPE: We will be launching separately managed accounts in April. TOM GARDNER: And we have a number of questions with a little more specificity to them, so Im just going to go to them from people that have been spending some time with us in the Member Lobby. One of them is options. Are options going to be available? Can they set up a separately managed account thats going to use options? ALEX PAPE: Yes. Well be using options strategies as theyre used in Motley Fool Pro so that we have an SMA based on the Pro strategy and well be following those strategies. TOM GARDNER: Another question is, Does the separately managed account get me whats happening in Supernova? Is it going to be that exact portfolio? Am I going to be buying when the recommendation comes out? When does the SMA purchase versus when I get the information in the newsletter service? ALEX PAPE: As soon as the portfolios make their recommendations so as soon as Supernova releases a recommendation for a new trade this SMA can make it as soon as they want to. They might make it immediately. They might wait until a better time. But its immediately available to them.

NICK CROW: Separately managed accounts is our members brokerage account at Interactive Brokers that were managing on their behalf.

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TOM GARDNER: And then the actual portfolio will be set up to model the portfolio in that service. In other words, if Google is a 3% position in one of the services, the SMA will then modify the existing holdings to meet that. NICK CROW: Right. Were building model portfolios based on those services, so in that example of Google at 3%, we would match that 3% in our model portfolio and then transact on a members behalf to match that up. TOM GARDNER: Got it. One of the things I know members or prospects have been excited about and talking about is what we mentioned earlier in our conversation, Nick, and that is the ability to pick and choose particular tickers that you may not want to have.
For example, if your employer ticker or if you work at a law firm and there are a couple of restricted tickers that you cant buy or if theres a company that you simply dont want to invest in you can select those tickers in advance and make sure that theyre [not part of] the separately managed account. Even if the service even if Supernova is buying that stock your separately managed account will not hold that stock.

ALEX PAPE: That product you can fill out a profile. We learn more about your personal situation, your time horizon, your goals and needs as an investor. You also can link in, electronically, all of your financial accounts so brokerage accounts, 401(k)s, etc. And then well give you very specific advice on how your asset allocation should look and also exactly which trades we think you should make to get to a target portfolio that we construct for you. TOM GARDNER: Overall, the idea of Motley Fool Wealth Management is to give you a dashboard and a hub for all of your financial planning and investment planning for the buildout of your portfolio. A game plan with a financial planner a CFP and the opportunity to have that tailored and personalized to your situation. ALEX PAPE: Thats absolutely right. Members can use different elements of that offering or they can use all three. It just depends on how involved they want to be in their investments. TOM GARDNER: Got it. So, we have many more questions, but I want to take a quick time-out and just say that when I think about whats happening here, I want to make it very clear how this is happening.
Its through technology. Its the ability to use data the guiding answers that you give us in surveys to take a look at your portfolio with you. It allows us to scale and be much more effective in a personal way through Motley Fool Wealth Management and in so doing, to bring the cost dramatically lower than what most people are paying when theyre working with a wealth manager or a financial advisor. Lets talk about fees now. How are fees going to work? What happens in your conversation with the CFP Robert Brokamp? Are you paying by the hour? Are you paying a percentage of your assets? What happens with separately managed accounts? How does the fee structure work?

NICK CROW: Thats correct. These are separately managed accounts, so if one person doesnt want that stock for whatever reason it is because theyre at a law firm or because they just dont agree with the business practices of that firm prior to the accountopening process, if they provide us that ticker, we will not buy that stock or any derivative of that stock in their account. TOM GARDNER: Now we have Motley Fool Financial Planning taking on a new name Motley Fool Wealth Management. Alex, I just want everyone to be able to understand. Whats the difference? Why have we changed the name? What is included in Motley Fool Wealth Management for a Motley Fool ONE member? ALEX PAPE: Were changing the name because were broadening the scope of what Motley Fool Financial Planning offers. Motley Fool Wealth Management, the new product, will have three offerings. One will be separately managed accounts, one will be access to in-house CFPs, including Robert Brokamp, and the third will be we have an online platform to deliver personalized advice to people who want advice on what to change in their portfolio instead of having to handle it all. TOM GARDNER: How does that personalized advice work? What type of information is it taking in and what is it giving out?
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ALEX PAPE: Bro, what do you cost? ROBERT BROKAMP: I cost the flat fee of joining ONE. In other words, you can call me or talk to any of the other folks we have on staff as often as you need. No additional cost. Flat fee. No additional fee for the separately managed accounts. Were not charging any ancillary management fee. Were not charging 1% a year which would mean we would make more money as the account grows even though were not doing any extra work.

TOM GARDNER: Right. If you have a half million dollar account, and youre paying 1% to the wealth manager and 1% to get into a fund, youre paying 2% a year on a half million dollars. Youre paying $10,000 a year. Oh, by the way, when your portfolio finally doubles to a million, youre paying $20,000 a year for pretty much the same service that youve been getting.
Thats a real scale issue in financial advice and right now, with technology and with all that weve been building up over the last 21 years, we have Motley Fool Wealth Management in a place where it can provide these services for nothing more than the annual subscription fee. Just out of curiosity, theres going to be a little bit of backpatting and self-love and hugging ourselves, but how radical do you think this is? How disruptive is it to set the fee structure up in this way?

Brokers simply has the best platform for executing lots of trades in many peoples accounts at the same time. We get the best price there and we get the best executions so we get the best price our members can get the stock at. And simply its just the lowest-cost alternative.

TOM GARDNER: As a member of Motley Fool ONE with separately managed accounts with an Interactive Brokerage account am I going to Interactive Brokerage at all, myself? Am I executing anything or literally Im just depositing the money there and then Motley Fool Wealth Management and separately managed accounts begins to take actions? ALEX PAPE: As a member, you would never actually have to go to Interactive Brokers. You would have an account. You could log on. You could see exactly whats in your account at any time but you can look at all the information on our site, as well. So, your experience is held in one place. Well help you open the account. Well help you move your money over. Well help you decide if theres certain stocks you dont want to ever buy. You can even go in and see your performance and your positions on our site. If you ever wanted to, though, you could go over to IB and look at their stuff there, as well. TOM GARDNER: How often can I check up on how my portfolio is doing? NICK CROW: You can check up every day, if youd like, but well be sending out quarterly statements, too. TOM GARDNER: When you say every day, can I check at two in the afternoon and at ten thirty in the morning? Am I getting updated quotes on what my portfolios doing, or is it a once-a-day, day-end quote? NICK CROW: Its going to be once a day at first and were going to look to move to real time as quickly as we can. TOM GARDNER: Great. What about the tax implications of separately managed accounts? Should this be in an IRA? Should it be in a self-directed 401(k)? Should it be in a standard account for a Motley Fool ONE member to get the best results? ROBERT BROKAMP: At this point, its probably best to have it in an IRA because you will be moving money over. There will be some transactions and like every other strategy, there is some buying and selling. Its probably better to have it that way. It doesnt have
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NICK CROW: When we shared this with our custodian the one whos been holding the assets for separately managed accounts this was over a conference call. There was a lot of partners on the phone [and] there was like a palpable gasp on their side of that phone. When they got back to us, it was like, Really? They thought maybe we didnt understand the question, because theyre the ones that collect the fee and pass it onto us. And we said, No. You dont need to pass on a fee to us. Were not charging anything. They just couldnt believe it. Its incredibly disruptive. TOM GARDNER: So, once a Foolish investor joins Motley Fool ONE, how will they end up signing up for separately managed accounts? NICK CROW: Once they find their way over to the Motley Fool Wealth Management site, were going to help them with the accountopening process. Weve created our own form flow there. Our own profile questions. We can better understand each members financial needs. And then well take on as much of the account-opening process as possible. Once thats approved, theyre going to jump over to Interactive Brokers and have a couple of additional forms to fill out. TOM GARDNER: Interactive Brokers you mentioned. Theyre going to have to open an account with a separate brokerage if they dont already have an Interactive Brokerage account. Maybe mention, Alex, something about Interactive Brokers. Why? Why are we working with them and whats the process going to be in opening accounts? ALEX PAPE: We evaluated a lot of different brokers for this, but Interactive


to be that way for most of the options, but in my opinion, its probably the way to go.

NICK CROW: And speaking of options, for the SMA that follows the Motley Fool Pro strategies that one is only going to be available outside IRAs because of the restrictions you have on shorting and different types of options strategies. TOM GARDNER: Now what if Im a Motley Fool ONE member and I decide that I want to continue as a member, but I want to stop my separately managed account? How would that process work? ALEX PAPE: A separately managed account is simply a brokerage account that were managing on your behalf. If you tell us, we can stop managing it, and its now your brokerage account. It has all the same securities that we had in there. Its not like a mutual fund where you have to cash out or an advisory account where you have to cash out and theres tax implications. We literally just hand you back control of your account. You can do whatever youd like with it. TOM GARDNER: Now certainly as a Motley Fool ONE member, you want to know how you get your questions answered. Were absolutely committed to making sure that every question that you have [as part of Motley Fool ONE and Motley Fool Wealth Management] that our financial planning team and partnerships can solve them for you. And if its Motley Fool ONE all access pass and the Everlasting Portfolio, our member services team, our whole community, [my team and I] are ready to answer your questions.
Now, we have a lot of questions that have come in from members. Were going to try and answer a couple of them here. The first one comes from Harold. After becoming a Motley Fool ONE member, can I add money to be invested without paying transaction fees every time you make changes to my account position?

TOM GARDNER: Got it. Next question comes from P. Gopal Convince me that my funds are secure with you. NICK CROW: The funds arent with us at all. The funds are with our custodian, Interactive Brokers. TOM GARDNER: Got it. ALEX PAPE: And Interactive Brokers is the most highly capitalized broker on the Street today. TOM GARDNER: This one. Im new to the Fool, but Im very interested in the separately managed accounts. I work with a CFP today. I have a portfolio of more than $3 million. Im 62 and Im still working, but Im not happy with the returns that Ive been getting. Would this work with your advisors? What size of portfolios are you managing? Whats the fee structure and is there a fixed income component to the advice thats given? NICK CROW: A lot of questions. First, congratulations. You have a very healthy portfolio and youre still working, so an awesome Fool. Theres no additional fees. Theres no ancillary management fee as weve covered. And we have no problem, provided its suitable for his investments, of managing his entire portfolio. TOM GARDNER: What about fixed income? Is fixed income a part of Motley Fool Wealth Management? ROBERT BROKAMP: It is to the extent that you use our investment planning tool. We ask questions about your circumstances, your risk tolerance, and we do suggest appropriate asset allocation for you based on how much volatility you can stand as well as where you are along the road to retirement. At this point, fixed income is not part of the SMAs, but we do provide ideas in terms of cash as well as specific bond funds. TOM GARDNER: These are separately managed accounts that are equity-based and that have options, as well. ROBERT BROKAMP: Right.

NICK CROW: Yes, he can add money to the accounts, but he will be responsible for the transaction fees. But weve partnered in such a way that we expect to pay less than one penny per share per trade. TOM GARDNER: So one penny per share per trade. What does that end up looking like compared to other brokers? NICK CROW: Much cheaper. I mean, just much cheaper.
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TOM GARDNER: And how does Motley Fool Pro work? Not everyone is a Motley Fool Pro member right now. What happens in Motley Fool Pro and what happens with the Motley Fool Pro SMA? Whats the benefit of Motley Fool Pro? In options? NICK CROW: Oh, Motley Fool Pro is great because it wont really match up with the rest of your investments, usually, because its an absolutely return-based service. Theyre trying to hit their North Star returns. Were going to go ahead and base an SMA on that model, so build a model portfolio. Well include shorts. Well include option positions. You can generate income from options or reduce risk. It really depends TOM GARDNER: One of our members said, Gosh. This is incredible. Its almost like Jeff Fischer managing my money for free. Theres obviously a lot of enthusiasm inside of Motley Fool ONE right now for separately managed accounts. NICK CROW: Well, Jeff Fischer is not managing the account, but I worked with Jeff for five years, so well be managing the account here. Well be basing a model portfolio on Jeffs investments. TOM GARDNER: This next question comes from Jacob. Jacob asks, If I elect to go with separately managed accounts, can I pick stocks that are not on any of your lists, and can I co-direct and do any buying and selling in that account? NICK CROW: For any money that Jacob sends over to Motley Fool Wealth Management, were going to be the sole investment managers of that account. He can, of course, keep money outside of SMAs and do whatever he likes with those accounts. TOM GARDNER: Got it. Alex Pape, Robert Brokamp and Nick Crow thank you so much not just for the last [15] minutes or so, but for all the work youre doing to build out Motley Fool Wealth Management. We are absolutely committed to answering all of your questions at Motley Fool ONE and it continues in the AskTom@Fool.com email box. You can drop us a question at any point in here for the rest of this month and were on it.
But were also ready to meet up tomorrow at 3:00 p.m. East Coast time in our live interactive chat with me and my entire team talking stocks, talking our favorite Everlasting investments. Talking about the outsider companies that weve been working on together and all aspects of your financial life. Tomorrow, 3:00 p.m., East Coast time. Then keep your eyes open for your email introduction to Motley Fool ONE. On


Thursday, youll get information on the status of your application and the service will open again for the first time in six months. I couldnt be more excited about the prospects of working together on your financial and investment life and getting our whole team behind you in a transparent environment where you know how youre performing. You know the fee that youre paying. Youve got your money-back guarantee. This is all brand new in the financial world and Im absolutely certain its the way the worlds going and its the best solution for your long-term investments. Thanks so much for spending this time with us. Best of luck with your investments. Well see you tomorrow at 3:00 p.m. for our live interactive chat. Fool on!

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