The move is the biggest effort yet to wield the combined capacities of National Financial Services and Fidelity Institutional Wealth Services as a single Fidelity weapon

July 10, 2013 — 1:09 PM UTC by Brooke Southall


Brooke’s Note: It was my good fortune to visit Fidelity’s headquarters in Boston yesterday [en route to Maine] just in advance of the news of this big restructuring of the firm’s advisor business. I sat with both Mike Durbin and Sanjiv Mirchandani to understand better what was going on here. See: Abby Johnson wins RIA respect by articulating her bold vision for Fidelity’s future at the company’s Executive Forum. It boiled down to the fact that a grander blurring of advisory lines industry wide is happening within Fidelity’s clientele and Fidelity is reacting by blurring its own lines to better serve those clients. It also reflects the fact that some of Fidelity’s biggest sources of RIA assets are not RIAs at all but rather IBDs and roll-ups, TAMPs and outsourcers (like Dynasty). What all the changes do is better avail all advisors of all of the capabilities of National Financial’s “clearing” services and Fidelity’s “custody” services — especially Streetscape and WealthCentral — whether they are a broker or advisor. From what I could tell, nobody got fired and a round of title enhancements took place. Meanwhile Advisor Channel is being retired as of July as a new world of technology steps up, with WealthCentral the big weapon.

Fidelity Institutional is taking big steps to make itself a business-to-business force in the advisory landscape — with a blizzard of changes that include the creation of a new sub-unit assigned specifically to serve proliferating mezzanine players in the industry, such as turnkey asset management programs, vendors of vendors and roll-ups. See: With big LPL backing, the Robertson Stephens brand revives to roll up advisors to the suddenly wealthy.

The division of Fidelity Investments, which provides clearing, custody and investment management products to registered investment advisors, banks, broker-dealers and family offices, today announced a series of moves aimed at deploying these transaction- and fee-related capabilities to advisors who straddle those worlds.

Notably — and with mega-customers such as HighTower Advisors LLC very much in mind — Fidelity is dedicating personnel specifically to “new categories of firms [that] have emerged to support advisors and drive growth in the industry” and tend to have regional or national footprints.

“Mike’s experience of working with a large Wall Street firm affords him a keen understanding of the needs of wirehouse advisors going independent. This latest move by Fidelity demonstrates their commitment to optimize their service and support models for firms like ours,” says Elliot Weissbluth, CEO of HighTower.

Carefully managing

“Fidelity is carefully managing the impact to current relationships, while at the same time organizing its resources to serve customers in a deeper, more effective way,” says Doug Dannemiller, principal of Dannemiller Analytics & Consulting LLC of Duxbury, Mass.

Fidelity has enjoyed good success in winning these firms like ones utilizing Dynasty Financial Partners LLC of New York or joining HighTower of Chicago.

These firms tend to have breakaways that want to continue transacting commission business as they build a big RIA and this has played to Fidelity’s strength in having a clearing company. For example, HighTower has its broker-dealer in addition to an RIA. See: After a five-month deal-making hiatus, HighTower adds a couple of advisors and hints at a busy 2013.

Fidelity is also recognizing advisors growing use of TAMPs to outsource investments. “Financial advisors are increasingly employing professional asset managers for investment management and administrative services, allowing advisors to focus on business growth and relationship building,” the company stated in its release. See: Fidelity gleans why so many 'attractive’ advisors cling to wirehouses and Cerulli’s newest RIA data shows plenty find courage.

Evans in charge

This new-categories unit is being headed by Robert Evans, who has been Fidelity’s regional senior vice president in the RIA custody unit for seven years on the West Coast and will remain in San Francisco. Evans still reports to Bob Oros, executive vice president of sales and relationship management in Fidelity’s custody business. See: Fidelity hires Bob Oros as its new RIA sales chief.

Shirl Penney, chief executive of Dynasty Financial, says that the new effort is a welcome one.

“Having one of the top players in the independent space move to enhance and further dedicate more resources to firms like Dynasty continues to validate the strength in the collective partnership between firms like ours and custodian partners. It should help to advance both our focuses to add more high quality advisors to our collective platforms.”

Other notable changes will include having all bank relationships that currently fall under both National Financial Services LLC and Fidelity Institutional put into a single group that accesses the services of both units as if they were one. The idea is that NFS and FIWS actually have a number of relationships with different divisions of the same banks — for instance, trust and wealth management. The banks have started to streamline and join these units in-house, so Fidelity is reacting by providing a service that reflects the change.

“This will allow Fidelity to provide a more integrated relationship, with deeper knowledge and expertise, to help enhance client engagement and drive adoption of efficiencies and best practices, the company said in a release. Michael Norton, currently senior vice president for client experience supporting Fidelity’s clearing clients, will lead the new unit. He has more than 28 years’ experience in the banking industry.

Gerard McGraw, president of Fidelity Institutional, is implementing the changes — after about six months of work — and is making the changes reflect clients’ changing needs and Fidelity’s desire to use its diverse capabilities in better coordination.

Going deep

“Through our ongoing dialogue with clients, we recognized that we could deliver a deeper level of engagement in the custody and clearing industry by better leveraging our scale and breadth of expertise,” McGraw said in a release. “We are a diverse company, and it’s important that we are aligned to consistently bring our clients both our broad industry perspective as well as our specific business model expertise. We are committed to delivering [to] our clients’ immediate needs, but also looking ahead to help them navigate some of the challenges and opportunities we expect they will face in the future.”

The moves follow a pattern of Fidelity’s becoming more of a provider to providers to RIAs. A recent example was Commonwealth Financial’s move into RIA custody with National Financial is serving as the subcustodian for those Commonwealth RIA assets. See: Commonwealth and Securities America get into the RIA custody business and Wells Fargo is right behind them.

“Our attitude is, the world is an absolutely enormous place so the overlaps don’t bother us at all,” says Michael Durbin, president of Fidelity Institutional Wealth Services.

National Financial Services’ clients include 250 broker-dealers serving 30,000 reps with a combined $450 billion of advised assets. Fidelity Institutional Wealth Services has 3,000 RIA firms and an additional 400 third-party administrators and banks with a combined $630 billion of assets. See: National Financial Partners buys longtime partner Fusion signaling a shift away from the 'roll-up’ model.

Analysts expect the Fidelity restructuring will affect 10% of customers.

Though Durbin and Sanjiv Mirchandani, president of National Financial, will remain the respective leaders of Fidelity’s custody and clearing units, they will have new people reporting to them in addition to Evans and Norton.

Chain of command

With financial advisors and TPAs playing an increasing role in the 401(k) market, Fidelity is dedicating a team to promote the services of 401(k) retirement plan record keepers and to engage more effectively with advisors who sell retirement plans. Meg Kelleher, currently executive vice president for sales and relationship management in Fidelity’s custody business, overseeing the trust and TPA market, will lead the group. See: Fidelity brings its 401(k) muscle to RIAs with new product.

To further strengthen its custody and clearing offering, Fidelity will integrate its technology platform groups into one team under the leadership of Edward O’Brien, currently senior vice president and head of technology for Fidelity Institutional Wealth Services and Fidelity Family Office Services, who reports to Ron DePoalo, Fidelity Institutional’s chief information officer.

Richard Hart, currently senior vice president and head of platform technology for National Financial, will also report to DePoalo and lead a team dedicated to supporting select clients with highly customized technology platform needs, as well as integrating and leveraging those solutions across Fidelity’s platforms. This centralized platform group will enable Fidelity to better deploy its significant technology expertise, while remaining focused on the three core audiences it serves in the financial advice market: home offices, advisors and their investor clients.

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Elmer Rich III said:

July 10, 2013 — 8:14 PM UTC

Interesting. Smart money moves first. Great reporting.

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