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Platform Upgrades Help Fee-Based Advice Surge

The growing popularity of fee-based advice is prompting mutual fund companies and other investment platform providers to upgrade the capabilities they offer advisers. Fidelity Investments is rolling out a product that allows registered investment advisors and broker/dealers to gain access to account information through a single entry point. National Planning Holdings, a broker/dealer network affiliated with Jackson National Life Insurance, is overhauling its fee-based platform as well.

The anticipated increase in fee business is part of the motivation for the improvements, both companies said. Though independent RIA firms have grabbed headlines with their fast growth, Fidelity sees plenty of fee-based growth ahead for banks, according to Anne Steer, an executive vice president at National Financial, the fund company's correspondent broker/dealer clearing business.

"At first, people didn't see the hybrid model" of offering both commission- and fee-based services "as such a significant opportunity, and it is," she said. "They understand that, by bringing the capabilities of both sides together, they are going to be more successful."

Registered investment advisors have about $1.4 trillion of assets under management, according to Cerulli Associates, a research firm in Boston. This total should grow 20% annually during the next five years, according to Moss Adams LLP, a consulting firm in Bellingham, Wash.

Fidelity in early June rolled out its program, HybridOne, and hired Pershing LLC executive Ronald Fiske, Jr. to run it. Between the broker/dealer and registered advisor businesses, Fidelity has more than $1 trillion of assets under custody. It serves 3,400 RIA firms and 330 broker/dealer firms with 85,000 brokers and advisors. In addition to tighter integration between the broker and RIA workstations, HybridOne offers a range of investment products, including managed accounts, alternative investments and capital markets trading services. It also gives access to Fidelity's practice management platform.

But the program is a work in progress. Among Fiske's responsibilities will be overseeing the program's build-out, said Scott Dell'Orfano, an executive vice president in Fidelity's institutional wealth services unit.

This will include developing unified account statements as well as risk management tools for advisors who run fee-based businesses with a separate custodial relationship, he said.

Fidelity sees HybridOne as a way to win a significant amount of business rather than as a defensive play, Steer said. "We see it as an enormous growth opportunity," she said, adding that the hybrid model is catching on even faster than the pure fee-only model.

Fidelity research shows that most brokers and advisers now manage some combination of commission and fee business. A recent sign of the RIA distribution channel's growth came from JPMorgan Funds, which this month created a new executive position that is focused on the channel. The business, whose parent is JPMorgan Chase & Co. in New York, named Steve Lundquist, the national sales manager of JPMorgan Funds' wirehouse division, to the post

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