What is the Threat of Substitutes?


Further elaborating on Porter’s Five Forces, I’ll define each of the forces in a separate post. I defined Barriers to Entry before, below I’ll define Threat of Substitutes.


For every industry, the sellers have to deal with the Threat of Substitutes, which is the risk that an alternative product will take away all of the original product’s demand. A substitute is a good that can replace the original product in the customer’s consumption.


Substitutes for shoes include sandals, slippers, etc. Now shoes possess advantages over those substitutes, which means they can’t perfectly replace shoes in people’s buying habits. The Threat of Substitutes is thereby low.

Substitutes for soda include juice, water, etc. Soda can be perfectly replaced by those substitutes in people’s buying habits. The Threat of Substitutes is high.

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.

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Questions for the comments

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

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