What is a Barrier to Entry?


A barrier to entry as the name indicates is whatever factors that are in place that prevent some companies from entering an industry. The most common barrier to entry is cost. As mentioned in an earlier post, a company will continue to do business only as long as marginal cost exceeds marginal benefit. It is possible for an entry cost to be so high that no business occurs at all. The barrier will keep out some companies and let others though. Competition is thus lowered. Therefore, assuming all else is held equal, price goes up and quality goes down.


To make a widget, it requires raw materials. It takes 50 dollars of raw materials to make one widget. That 50 dollars is a potential barrier to entry. Let’s say there’s two people. Person A has only 1 dollar in their bank account, and person B has 60 dollars in their bank account. That 50 dollar materials fee (in order to buy the materials needed for the first widget) will keep person A out of the widget making business but person B will be able to enter the business.

Fee Structure

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

Did my explanation make sense? Do you agree or disagree with what I said?

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