Technology review: Fidelity's WealthCentral is solid and smart but still has seams

Brooke’s Note: Fidelity Investments famously spends about $2 billion annually on technology. The willingness of the privately held company to spend like the devil now and ask questions about return on investment later helps explain why it’s no coincidence that it’s top dog in relatively disparate segments of the financial services business. Its success ranges from market leadership in 401(k)s and discount brokerage to mutual funds and brokerage clearing. Fidelity WealthCentral is the company’s manifestation of this long-term-technology-investing approach in the RIA world. Here’s my early analysis and Heather Underwood picks up the writing with the look under the hood.

For a young technology system, Fidelity’s WealthCentral has a lot of bragging rights. But it still needs to prove itself to a world of financial advisors— including its own RIA clients.

Converts wanted

Fidelity Institutional Wealth Services beat its top competitors off the line in the race to launch a plug-and-play ecosystem by launching WealthCentral in 2008. Some 600 advisors already use the system including 300 breakaway brokers who came to Fidelity. See: Fidelity wins converts to WealthCentral, but most of its advisors have yet to make the switch

Somewhat less promising is the fact that Fidelity is substantially behind its own projections for conversions of its 3,300 RIAs with $410 billion of assets — a process projected in 2008 to be completed by the end of 2010.

Another question mark is why many of the firms using the platform have not opted to pay for the various applications from “best-of-breed” providers. The platform’s integration with that list, including Advent Software’s APX, EISI’s Naviplan, CRM from Oracle and rebalancing software from Northfield, was designed to truly separate WealthCentral from its competitors.

In fact, Fidelity’s latest big breakaway, Sapient Private Wealth Management, fits into the this semi-cautious category of advisors eagerly using basic platform and call-me-later about the fancy applications.

“What we know we really like,” says Greg Erwin, co-founder and partner of Sapient Private Wealth Management, which manages $500 million from Eugene, Ore. . “It’s simple. It’s robust. And it’s helping us to achieve greater efficiencies.”

As far as tacking on Advent, Oracle or EISI goes, he says that he and his partners will “continue to expand the dialogue” but that they’re concentrating on getting off the ground as an independent RIA.

One brain

The idea about why Sapient and other firms would choose WealthCentral with the add-ons was that these software applications would all essentially share one brain. One portion of the system knew would flow through the rest. Schwab Intelligent Integration —still mostly on the drawing board — is being developed to accomplish this objective and RIAs hope to get a progress report at IMPACT 2010 in a couple of weeks.

At Fidelity, too, the one-brain promise remains somewhat of a work in progress, it appears.

When Fidelity recently added Black Diamond Performance Reporting to the line-up of WealthCentral applications available as highly integrated partners, it said that the Jacksonville, Fla.-provider would have bi-directional flow – and be the first application achieve this. The revelation suggests that the other applications are in more of a cobbled-together state for now.

RIABiz has interviewed advisors who are pleased with WealthCentral and others who still prefer its older predecessor, AdvisorChannel. Opinions on technology are famously all over the place.

With third party opinions and data on conversions presenting such murky view of the technology, we have decided to have a look for ourselves to give the potential user a head start. We understand how big a decision going with an integrated platform is, because it means making a choice that involves getting into bed with both a custodian and several technology providers in a fell swoop.

Looking under the hood

Ed O’Brien, senior vice president of Fidelity Institutional Wealth Services, and Tim Morello, vice president of Fidelity Institutional Wealth Services, gave the RIABiz team a demo of Fidelity’s core custody platform a few weeks ago

Emphasizing ease-of-use and integration, O’Brien and Morello walked through several typical advisor workflows.

The system’s speed and flexibility were immediately apparent. Morello searched for an account, clicked on a drop-down menu to place an order ticket, which brought up a new window, placed the order and closed the window. From the “tools” menu, Morello clicked on “Portfolio Management” and a new window containing Advent’s portfolio management platform appeared, already signed-in and ready to go.

After the rapid demonstration of several more workflows, I started to wonder what we were going to do with the rest of the allotted demo time.

“The value of integration is reducing work and streamlining workflows for the advisor and not having the advisor worry about how the integration happens,” says Morello. The “techie” details are well hidden and Morello flowed from one product to another in a workflow that “just worked.”

Recent Black Diamond integration

Among the companies on the list of integrated vendors are Advent, Oracle, EISI’s NaviPlan, and Northfield Information Services. Because WealthCentral was developed as an open platform from the start in 2008, I was surprised the list of integrated vendors wasn’t longer. But Fidelity’s recent integration of Black Diamond illustrates how difficult the process of making software flow seamlessly into a technology platform is.

“Deep integration requires a multi-year commitment to develop, maintain, support and enhance the integrations,” said the company in a prepared statement. It cited evolving customer needs, new regulations (i.e. cost basis), new technology standards and constant technology releases by both Fidelity and third party providers.

According to Morello, over 80 firms are using Black Diamond Performance Reporting and Fidelity today, which made a compelling case for WealthCentral’s recent integration with the product. (See Brooke’s recent article on Black Diamond’s integration with WealthCentral)

Data flows bidirectionally from Black Diamond to WealthCentral to keep data current and allow rebalances and up-to-date reports. This bidirectional data flow requires custom development time to gain data consistency across platforms. For anyone familiar with OOP (object-oriented programming), successful data consistency requires that “objects” agree across platforms and are recognized by all integrated applications. This allows data to flow from Black Diamond to WealthCentral to all other integrated applications, keeping everything in sync.

Single sign on allows advisors to
quickly access other applications such as
Black Diamond reporting

Workflow

A single sign-on system allows advisors to easily transition between these products without logging in multiple times and assures data synchronization between products. Fidelity uses the XML-based protocol SAML 2.0 (security assertion markup language) to exchange authentication data between applications. WealthCentral’s single sign on system makes contextual linking between applications possible.

The “contextual linking” or “deep linking” between Fidelity and products for CRM, reporting, portfolio management, etc. offers navigation flexibility so that advisors can click on a link in one window to open another application, instead of manually opening the application via the desktop or startup menu. Clicking on a link within WealthCentral will most often open a new window for the integrated product (CRM, portfolio management, etc.) from which an advisor can continue their work. Here’s where the “context” part comes in — the link takes the user to the corresponding place in app #2 based on what they were looking at in app #1.

Contextual links can compared with the well-known web “hyperlinks” that take users from one page to another; RIABiz regularly uses hyperlinks to connect relevant articles, for example. However, WealthCentral’s contextual linking scheme accounts for different data structures across platforms and inconsistencies in data references, which makes contextual linking for each third-party platform a custom development effort for the WealthCentral team.

Contextual linking between applications offers smooth
transitions and efficient workflows

WealthCentral uses an alert messaging system to let advisors kick off a task (i.e. a large rebalance or report generation) and continue working across products until the task is completed. Task completion is indicated to the advisor via the top navigation bar on the WealthCentral page; multi-tasking made easy.

Price

The core of the WealthCentral custody platform is free for advisors using Fidelity. The core components include the portfolio modeling and rebalancing tools, which 300 firms are currently using for rebalancing over other commercial products; the rebalancing competition continues. (See Heather’s reviews on iRebal, RedBlack, and Tamarac rebalancing products.)

WealthCentral offers, at no extra cost,
portfolio modeling and rebalancing tools

The integrated components for CRM and financial planning are priced per user and the portfolio accounting and reporting tools are priced per account or AUM.

Price will vary, but an average firm with 4-6 users using all of the component products can expect an annual fee somewhere in the ballpark of $20,000, according to the company.

Moving webward

“Migration to the web is critical,” says Morello, but WealthCentral is sensitive to desktop application users by providing simple import and export capabilities (e.g., to quickly get data in and out of a program like Excel).

WealthCentral’s web based interface was clean, easily navigable, aesthetically appealing, and well organized for advisor efficiency. The three-tab navigation categorized into “clients”, “groups”, and “accounts” is simple and offers advisors multiple ways to search for information.

As some frequent Google users may have noticed, “Google Instant” has been implemented to let users see a continually updating list of possible queries and results based on what they have typed in the search box. WealthCentral has implemented a similar feature to search for accounts based on account number, client name, or account group from the same search box. This helps reduce errors when typing account numbers or searching for a client with a common last name (i.e., advisors can pick which client they want out of multiple clients with the same name.)

Currently WealthCentral only supports Internet Explorer, but is working on compatibility with Firefox.

Looking ahead

“The natural progression is to improve the open platform in two ways; one is making the integration we have more robust and adding features and two is adding more tools and selection in these different areas, in different components,” says O’Brien.

The current goal for WealthCentral is to take inefficiencies out of the workflows and to add choice. “At the end of the day, the whole notion of having integration is essential to advisors,” says O’Brien.

The holy grail of integration is all data everywhere flowing in and out of various systems seamlessly with perfect security, perfect synchronization, and perfect simplicity. WealthCentral isn’t there yet, in part because of its short list of integrated partners, but also because it doesn’t provide all the capabilities and choices an advisor wants in one product. Though that goal might be impossible, it’s a good one to work toward.