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Fidelity Screens SMAs For Financial Advisers


Fidelity Investments has launched several new services for advisers: a separate accounts screening program, custody and recordkeeping for alternative investments and charitable management for private foundations.

Separate accounts are a hot area for high-end investors, with assets in the industry flat at the end of 2002 despite a dramatic decline in the stock market. Alternative investments are also attracting increasing interest as the bear market drags on. And Fidelity's new charitable management services will draw advisers involved in longer-term planning, especially since few custody firms have yet to offer wealth distribution services.

According to Fidelity, about 15% of two million high-net-worth households in the United States currently have ongoing charitable commitments, and that percentage is growing.

Officially launched March 30 after a five-month pilot program, the unbundled Separate Accounts Network, or SAN, is a less-expensive alternative to Fidelity's current bundled separate accounts program, operated through Frank Russell.

SAN cuts out much of the legwork associated with evaluating and selecting money managers. The new network gives advisers electronic access to a database of pension-quality data, statistics and analysis on 100 pre-approved institutional money managers. These managers are categorized by investment specialty and measured against a category benchmark.

The network also provides access to some 250 investment products and simplifies tedious recordkeeping issues. For example, SAN sends all trade confirmations quarterly in one statement, instead of piecemeal as they occur, and allows managers to handle proxy voting on the stock owned, instead of placing this burden on the RIA or the client.

Fidelity gathered $2.5 billion to $3 billion in assets during the trial phase of the network, and expects this to grow as wealthy individuals continue to move into separate accounts, and as advisers from rival separate accounts programs transfer assets to Fidelity.

Fidelity couldn't comment on how much growth in assets it expects this year, but one adviser said Charles Schwab would be on the losing end of this equation. Dick Vosburg, a registered investment adviser with Legacy Wealth Management, based in Memphis, Tenn., manages $2 million in assets through both SAN and Charles Schwab's Connection separate accounts program. He said SAN costs 20% less. "For a client who is going to have a separate account manager, the difference is all about cost," Vosburg said.

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