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Fidelity FMAX, the Missing Link?

With Fidelity Managed Account Xchange, or FMAX, Fidelity chases after Merrill Lynch in bridging the gap between financial planning and investment management.

Fidelity Managed Account Xchange (FMAX) product—what one analyst characterized as potentially the missing link between planning and investment management—is now being deployed and will soon be available more broadly, according to the financial services firm. The planning-to-clearing platform, which comes with embedded consultative services, is designed for a range of financial advisors, from registered investment advisors to broker/dealer firms to family offices.

FMAX has “deep integrations” with financial planning software eMoney Advisor (a subsidiary of Fidelity) and Envestnet’s managed accounts components, effectively tying together financial planning; the portfolio proposal and evaluation process; portfolio construction; analytics and brokerage; and custody and clearing, according to Gary Gallagher, head of investment and managed solutions for Fidelity Institutional. The project was first announced in June 2019 and was “co-created” with input from several firms that work closely with Fidelity. 

Advisors using the “open architecture” advisory platform can utilize “thousands” of investment strategies and can access the platform from Wealthscape, Fidelity’s combined brokerage and RIA technology platform, Gallagher said.

Users needing assistance with the service can take advantage of a unified support offering from Fidelity. All they need to do is place a call and Fidelity will be able to guide them to the right solution without juggling the advisor between service providers, according to Gallagher.

The pricing varies based on which services an advisory firm decides to use and is charged as a basis point fee, according to Nicole Abbott, a spokesperson for the firm. “We’re discussing [pricing] in more detail with our clients,” she said, noting that platform configuration would affect the cost of the service.

Advisor support is one of the chief differentiators of FMAX, according to Gallagher. Not only will advisors be able to get service from a single point of contact, but they’ll also be able to access independent research and consulting.

While the vision of FMAX is certainly enticing, what the tool actually looks like and how it works is largely unknown. Fidelity has briefed select analysts on the tool but has not given technology demonstrations. Meanwhile, the beta advisors who utilized the platform and weighed in on its features came from approximately 10 firms, according to Abbott.

Meanwhile, “dozens of firms” have received demos of the platform, but Fidelity declined to make any of those reviewers available. “We don’t have any advisors to discuss the platform at this point,” Abbott said.

If actual usage lives up to the descriptions provided in briefings, FMAX would be a game changer, said Dennis Gallant, senior analyst for Aite Group's wealth management unit. The consulting services offered, for example, are a significant value-add for advisors, he said, even if they're not exclusive to FMAX users.

“Now I've got this investment management resource that provides rich support,” said Gallant, of FMAX. “It's a layer of servicing going above what’s traditionally come from a custody or clearing provider.”

The technological capabilities of FMAX should allow advisors to bridge the gap between financial planning and investment management, within one tool. In building FMAX, Fidelity joins Merrill Lynch, with its Client Engagement Workstation, as one of the pioneers in bundling and linking financial planning to investment management, within a single platform, Gallant said.

It also makes mass customization, something advisors have always craved, more accessible.

Advisors should be able to move beyond plain-vanilla investment management, at a price that’s more affordable than bringing on new staff and better differentiated from automated advice platforms, or so-called robos, said Gallant. Plus, advisors will be able to “talk shop” with Fidelity consultants, which should help advisors feel more confident in their investment decisions and better defend their play-calling.

Prior to FMAX, an advisor may have turned to an office of supervisory jurisdiction or aggregator to get some of the services now available from Fidelity, he added.

“It’s not an easy process to do,” Gallant explained. “Merrill closed that gap and Fidelity is looking to do that same thing.”

But for the industry at large, it’s a critical step in making financial planning more widespread because it links planning directly to asset management and advisor fees.

Fidelity and Merrill may soon be joined by other providers bridging those same disconnects between planning and investment management, noted Gallant. Orion is moving in that direction, having acquired Advizr financial planning and investment management capabilities. Goldman Sachs, leveraging its United Capital and Folio Financial acquisitions, could be close on the heels of Fidelity and Merrill. Envestnet, with its MoneyGuide financial planning, has options for providing similar functionality for advisors.

“It’s good for financial advisors, overall,” concluded Gallant. With advisors looking to strengthen the quality of investment management they provide, Fidelity is providing a service that enhances capabilities without adding to overhead.

“When you start linking the planning process into the investment management process, it allows the advisors to talk planning and follow through into the investment management,” Gallant said. “It’s been the holy grail for a number of years to build those two walls together.”

Editor’s note: Many questions yet remain on this developing story, and it will be updated as details become available. While the Merrill Lynch Client Engagement Workstation makes for an interesting comparison, it was built in house, at the firm, and makes linkages between systems and units within the larger firm. FMAX makes similar linkages of systems and units within Fidelity or wholly owned subsidiaries, including eMoney, yet purports to extend to managed account offerings beyond, such as those of Envestnet. This means integrations of some type and had not yet discussed these developments with the firm by press time.

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