The Real Arithmetic of Managing Money: Rethinking the Total Cost of Ownership Without Losing Control

Jack Bogle once warned investors about “the tyranny of compounding costs”—fees, trading friction, and taxes that quietly chip away at long-term returns. What’s often overlooked is that the same math applies to the advisory firms that serve those investors.

That brings us to a concept every advisor should be thinking about: Total Cost of Ownership (TCO).

TCO includes not just the visible costs clients pay (like fund expense ratios), but the operational and opportunity costs borne by the advisory firm—staff time, software, compliance, and inefficiencies in managing portfolios. Taken together, these may exceed 2% annually in hidden drag, potentially impacting firm profitability and client outcomes.

At Modelist, we aim to help advisors reduce the total cost of ownership for both sides—without giving up control. Our custom models are designed to enhance operational scale, preserve your investment philosophy, and protect firm margins.

The Hidden Cost of Managing Portfolios In-House

Managing investments internally can feel like control—but it may come at a price:

• Time spent by senior advisors and investment committee members

• Salaries for analysts or trading staff

• Subscriptions for research and rebalancing tools

• Compliance and documentation requirements

• Tax inefficiencies from generic or outdated models

These costs don’t show up on a client invoice—but they quietly erode profitability and limit capacity. Here’s where you can insert a table showing a breakdown of typical internal costs vs. outsourced options:

The Evolution of Outsourcing

While many advisors turn to TAMPs or OCIO platforms, these often come with trade-offs: lack of flexibility, proprietary fund requirements, and layered fees. Some managers may appear to offer services “for free,” but recoup those costs via higher-fee proprietary funds.

Modelist provides a better path: we build fully customized, transparent models that aim to reflect your philosophy, not a manager’s product shelf. You stay in control of every decision—from asset allocation to tax strategy—while gaining the efficiency and scalability of a high-end investment team.

Who Pays? Both Do.

Clients pay expense ratios. Advisors absorb the cost of managing portfolios. That’s the shared burden of ownership.

Modelist seeks to reduce both sides of that equation:

• For clients: Potentially lower-cost investments, better tax management, and increased personalization.

• For advisors: Less time spent managing models, more margin, and greater scalability.

Tax Management: Integrated, Not Tacked On

Taxes are often the largest invisible cost for HNW and taxable clients. At Modelist, tax optimization is an integral part of the process—not sold as an upsell:

• Tax-aware rebalancing across UMAs and UMHs

• Direct indexing strategies for loss harvesting in concentrated positions

• Customized municipal bond SMAs

• Legacy asset and practice acquisition transitions

UMA & UMH: Platforms That Support Precision

UMA (Unified Managed Account): Consolidates multiple investment models into one account for efficiency, sleeve-level reporting, and streamlined trading.

UMH (Unified Managed Household): Coordinates across multiple accounts to optimize asset location, tax strategy, and goal alignment.

We design portfolios to work within both structures—and when executed through these platforms, advisors can bill clients directly just like a traditional SMA, keeping economics aligned and minimizing unnecessary layers.

The Compounding Advantage of Getting It Right

Nobody has solved investing. What matters is building a process that’s scalable, evidence-based, and tax-efficient. That’s what Modelist strives hard to deliver:

• Lower costs for your clients and your firm

• Better implementation and tax management

• More time for you to focus on client relationships

Final Thoughts

The math of investing is unforgiving: compounding costs hurt returns—just as much for firms as for clients.

Modelist gives you a way designed to reduce the total cost of ownership, without giving up the control or customization that makes your firm unique. You stay in the driver’s seat. We provide the engine.

Because managing money should help you build value—not just carry costs.

---

Make the most of these insights using Modelist. We create customized investment models for the fiduciary financial advisor. Get in touch with us at hello@modelist.me for a personal consultation.

Modelist Inc. is a registered investment adviser. This content is intended for informational and educational purposes only and should not be construed as personalized investment advice or a recommendation to buy or sell any security. All investments involve risk, including the loss of principal.  Past performance is not indicative of future performance. Modelist does not guarantee performance outcomes or cost reductions. Any strategies discussed are illustrative in nature and may not be suitable for all investors or advisors. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Registration with a regulatory authority does not imply a certain level of skill or training.