Motley Fool’s Mowrey celebrates post conversion and launch of new products
May Day England in the countryside is full of people dressed up to resemble the original Motley Fool, a fool and jester, often appearing in the plays of Shakespeare, who is the only person who can speak honestly to the King.
Roll forward a few centuries and the 1990s in the US saw the creation of the Motley Fool in the financial world, designed to speak honestly to Kings and commoners alike.
Kelsey Mowrey, President, Motley Fool Asset Management, says: “At the time it was just Wall Street for investment and if you wanted to be investing you needed to have a lot of money or that was the perception. Our founders wanted to communicate and teach individuals that you can invest and it doesn’t need to be just for the rich.
“The Motley Fool, our parent company, was breaking down some of the more technical or difficult perceptions of investing for the everyday person and helping to educate them to make the world smarter, happier and richer for all.”
Motley Fool Asset Management (MFAM), an affiliated adviser, was spun off for people who wanted stock selection and research done for them and it launched its first mutual fund in 2008.
That model changed in December 2021 when the firm converted its mutual funds into ETFs and became a full ETF shop, with about USD1 billion in ETFs from converted mutual funds (and total AUM of USD1.5 billion).
Mowrey explains that the process of conversion was not smooth. “It was certainly bumpy as we were one of the first to convert, which mean it was not just the first for us but also for all of our partners, so we were really learning and taking step backs throughout the process. It was a learning curve for all of us together.
“It took a long time working on this through the back-office channels, trying to make sure all the mechanics were in place so that share class consolidation and conversion could go through so everything was in motion at the same time for it to happen which was a lot of work but fairly smooth once the mechanics were worked out.”
Motley Fool Asset Management, given its affiliation to The Motley Fool, inevitably had a large direct shareholder base, with many shareholders owning their shares directly and not through brokerage accounts.
That shareholder group was harder to get onto the conversion path, Mowrey explains. There were at the outset some 6-7,000 long term direct shareholders. “This process was a lot trickier, and we had to learn and pivot as we went with them.
“One of the biggest hurdles was that although we have worked with all of the brokers it doesn’t translate to the end rep. So when our shareholders rang in, the brokerage firms had never heard of a conversion before and it took a lot of messaging to resolve, that we created based off the feedback that we were getting.”
The drivers behind converting were simple: lower fees, tax efficiency and ease of entry, which fits with the Motley Fool’s original purpose. “There is no minimum barrier in ETFs,” Mowrey says.
“We have a great shareholder base which has been incredibly patient with positive feedback and the key is to provide the help. You need to meet people where they are – it’s not a one size fits all in communication. We are talking about people’s money, so we want to treat everyone in the way they hope to be treated and need to be treated.”
There remain 1600 direct shareholders who are being helped through the conversion process. Assets sit at around USD1.5 billion firm-wide, post the launch of their new ETF products, also in December last year.
Motley Fool Asset Management’s ETF line-up now incorporates the Fool Capital Efficiency 100 Index and Fool Next Index.
Both ETFs were designed to be convenient, cost-effective vehicles for individuals who wanted exposure to stock recommendations made by Motley Fool analysts.
The ‘recommendation universe’ includes all companies domiciled in the United States that are either active recommendations of a newsletter published by The Motley Fool (“TMF”) or are among the 150 highest rated US companies in TMF’s analyst opinion database.
The firm clearly has a large retail base but is enjoying new interest from financial advisers and institutional world. “The sweet spot for us now are people who know us from our parent company,” Mowrey says.
“Now we are fully integrated into the ETF industry which is a growing and innovative space for growing and innovative companies, so we are always exploring new possibilities - it feels like we have a brand new product suite and are building ourselves out in this new space.”