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Fidelity Goes After Independent Advisers


Fidelity Investments' institutional wealth management arm is ratcheting up its pursuit of financial advisers and wealth managers who want to run their own shops.

"Practice management is growing in importance, especially to support the breakaway broker market. It makes life easier for them," said Gail Graham, an executive vice president of Fidelity Institutional Wealth Services. "This market and business is growing very quickly."

Sean Cunniff, a research director for TowerGroup, an independent research firm owned by MasterCard, said Fidelity is starting to gain on Charles Schwab Corp. in this market.

Fidelity has "been out there for a while with a practice management program, but it has substantially ramped up its efforts in this area over the past two years," Cunniff said.

In targeting breakaway brokers-those starting their own registered investment advisory firms instead of working for a larger bank or broker/dealer-the idea is to get wealth managers to put their clients' assets on the Fidelity platform, Cunniff said.

Registered investment advisors need a place to trade, and Fidelity and others are competing for their business, Cunniff said.

"It's hard to tell one [registered investment advisor] from the other," he said. "Most of them offer value-added products because they want to make life easier for the advisers so they can operate more efficiently, grow the business, and sell the business."

Cunniff said Fidelity can also help with presentations, client events and compliance, among other details, to help registered investment advisors improve their profitability.

He said the Boston company will often refer a third-party marketing firm to advisers who are not good at building a brand for themselves, and Fidelity can help advisers with the basics-producing brochures, for instance.

"In terms of Fidelity Institutional Wealth Services' marketing, it's a really big part of what they offer. They've had a lot of success with it," Cunniff said.

TD Ameritrade has a Solutions Consulting group and has offered a practice management program in partnership with CEG Worldwide. The partnership is third in market share behind Schwab -which calls its program GrowthPoint -and Fidelity.

Pershing LLC of Jersey City, N.J., a unit of Bank of New York Mellon Corp., calls its program Practice Management; it includes consulting, education, marketing, training and "value alliances," or discounts to third-party providers.

Pershing is well behind the others in market share, Cunniff said.

The programs do not earn income or accumulate assets on their own, he said. They are value-added services designed to strengthen relationships with registered investment advisors on their platforms in this very competitive space.

"The basic services of clearing and custody are a commodity, and these programs are a way to distinguish your offering from the competition," Cunniff said. "The idea is that by helping the RIA expand and grow, more assets will flow to these firms' custody platforms."

Graham noted "the line between" banks and brokers "is getting fuzzier all the time," with more and more brokers operating on bank platforms.

Fidelity runs advertisements for its HybridOne program for dually registered advisers, she said.

Many of those brokers who "break away" have a combination of a fee- and a commission-based business, so the program can be appealing to them, she said.

Graham said Fidelity Institutional Wealth Services-formerly the Fidelity Registered Investment Advisory Group -has talked to a handful of breakaway brokers about using its practice management services and has spoken to a number of others about other services the company offers.

Graham estimated the registered investment advisor market is growing 20% a year.

According to the Cerulli Intermediary Markets 2008 report, registered investment advisory assets under management had compound annual growth of about 16%, to $1.7 trillion, from 2004 to 2007. Because of that, Fidelity Institutional Wealth Services has been putting more resources into the practice management program, with help from its parent company, which has $1.1 trillion of assets under management.

"Fidelity puts a large emphasis on its people. Our people are the best in the business," Graham said.

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