There’s been some cage-rattling in the wirehouses in recent weeks: Bank of America replaced Merrill Lynch’s Sallie Krawcheck with a banking executive, and the banking parent of UBS Wealth Management Americas struggled with the arrest of a London trader who allegedly cost the institution $2.3 billion and the CEO his job. But these stories aren’t sending large-asset advisors out in droves down the independence highway, says one of the folks who like to benefit from such trends: Michael Durbin (right), president of Fidelity Investment’s RIA unit, Institutional Wealth Services.
“They’re not huge consumers of the management architecture around them,” Durbin said this morning during a visit to Registered Rep.’s offices in New York. “While they may not like all the headlines and management changes, and we may try to take advantage of some of that…it doesn’t really impact them because they’re not big consumers of that kind of support anyway.” It doesn’t help the wirehouse cause that stock incentives and other company equity they can offer as retention incentives are not cherished by top advisors, Durbin added.
This provides a key selling point when Fidelity presents its case for the benefits of independence to potential breakaways, he says. “If we talk to one of those teams, more often than not they will say, ‘Yeah, the firm’s the firm, and so-and-so comes and goes, it doesn’t really affect me.’ So our pitch is, ‘Well, then you’re sort of operating independently already, aren’t you? …Are you building long-term value? Why not get out and legitimize it, and really build a business in your image that can build some long-term equity value off of your sweat equity?’ And that’s the pitch that’s resonated.”
Fidelity signed up fewer breakaways in the first half of this year, Durbin said, but the average asset size was up about 40 percent. That dovetails with similar trends reported by Charles Schwab this year. Bigger teams are moving now because of a broader range of services they can obtain through custodians, Durbin says: separate account management, alternative investments, margin lending, trading in individual fixed income and equity securities, and more cash alternatives to money market funds.
One change that he’s noticed: about 60 percent of the advisors who sign up with Fidelity join either an existing RIA or a broker dealer, while the rest start their own firm. That ratio was reversed three years ago. Durbin says one reason is that RIA aggregators these days are offering more attractive equity options for breakaways while providing the back-office support that the advisors need to get their business running.
Meanwhile, Fidelity’s own tech offerings are growing apace. WealthCentral, its web-based platform for RIAs, reached a watershed yesterday when it officially had more clients on board—about 1,600—than its legacy AdvisorChannel platform, Durbin said. (Institutional Wealth Services has about 3,000 RIA clients, plus another 500 among third-party administrators, the bank trust marketplace, and other channels.) Some advisors who are launching independent practices like WealthCentral’s mix of proprietary and third-party software services in such areas as performance reporting, client relationship management, rebalancing and trading, Durbin says.
This week Fidelity announced that WealthCentral has integrated new software products from Envestnet Vantage Performance Reporting, Morningstar Office, Redtail, Salesforce.com, and AppCrown; it also added new document and workflow management functions through XTRAC Solutions and Redtail. Are there other software products that advisors can expect to use through WealthCentral in the future? There will be, Durbin said, if advisors clamor to Fidelity in large enough numbers for them.