The average financial advisor has taken a big hit in production and therefore net income. This trend has been well covered in Registered Rep. magazine; we’ve described the results, including staff layoffs, declining operating profit margins, cash flow emergencies which have made it difficult to meet quarterly payout disbursements to the consolidator (or rollup) firms to whom they sold stakes.
Thankfully, RIA custodians are turning that hardship into something of a marketing tool. This morning, Fidelity Institutional Wealth Services, Fido’s RIA-support unit, announced that it is reducing prices and, in some cases, waiving fees for independent advisors who custody assets with it. Schwab announced a price reduction in June.
In a press release the company said the price reductions would begin on October 1; some cuts would through 2011 and other fee waivers would last until June 30, 2010. The price reductions are good on any new money that RIAs bring to IWS. The company said in the statement that, the price cuts would “span from technology and transition costs to custody and online equity trading.” Specifically, the company described these fee cuts:
· Fidelity WealthCentral: A 10 to 35 percent price reduction on the annual service fees for the Oracle Customer Relationship Management (CRM) On-Demand application. Up to a 50 percent discount on the annual cost of Advent’s APX-hosted multi-custodial platform via ABOS for 2010 and 2011.
· Investment Products: The waiving of annual position fees for all new alternative investment accounts, annual trustee fees for all new personal trust accounts, and annual custody fees for new accounts in Fidelity’s managed account supermarket, Separate Account Network. These waivers run through June 30, 2010.
· Trading and Transitions: The elimination of commissions on electronic equity and options trades and transfer of account fees for new-to-Fidelity relationships established by advisors from October 1, 2009 through June 30, 2010. There is no limit on transfer of account fees waived.
Michael Durbin, president, Fidelity Institutional Wealth Services, says the pricing isn’t so much a marketing move as a way to demonstrate IWS’ “focus on making the strategic, long-term investments that give advisors the tools to succeed.” He also says, “Price should not be a barrier to choosing where to custody a client’s assets.”
Dennis Gallant, of GDC Research, says the price reductions just go to show how competitive the fight for RIA assets has become. “It’s horrible to move custodial assets. Will that be enough [to entice RIAs]? It will certainly attract those advisors already thinking about consolidating their custodians to save money.”