Fidelity, Pershing, Schwab, TD in a tech 'arms race'

Companies continue to spend on systems despite the weak economic conditions

Apr 21, 2009 @ 12:01 am

By Davis D. Janowski

Despite budget cuts across the financial industry, Fidelity Institutional Wealth Services, Pershing LLC, Schwab Institutional and TD Ameritrade Institutional are spending money to upgrade technology.

Spending is increasing, on average, 1.5% to 2% this year said Sean Cunniff, research director for brokerage and wealth management at Needham, Mass.-based TowerGroup. That is a modest amount, perhaps, but noteworthy because firms are cutting costs in most other areas.

However, to lure breakaway brokers, custodians consider the expenditures necessary.

"Wirehouses do provide their advisers with great tools, and when an adviser goes independent, they expect nothing less from their custodian. In fact, my research shows that platform capabilities and ease of use may be the largest determinants of custodian selection," said Robert Ellis, a senior vice president and head of the wealth management practice with Celent Communications LLC, a consulting firm in Boston.

"Clearly, the major custodians concur and are ramping up their systems in a sort of arms race," he said.

Fidelity is among the farthest along, said Alois Pirker, a senior wealth management analyst at Aite Group LLC of Boston. As an example, he singled Fidelity Institutional Wealth Services' WealthCentral platform.

"In terms of integrating their systems, they are very progressive, and [they] are really pushing hard to improve advisory efficiency," Mr. Pirker said.

Boston-based Fidelity spent $50 million and two years building its Institutional Wealth Services platform.

The latest upgrade of WealthCentral combines software from four vendors into a single platform that provides advisers with many of the same tools that wirehouses offer their brokers.

For instance, Fidelity offers Siebel customer relationship management software from Redwood City, Calif.-based Oracle Corp., and Naviplan financial planning software from Emerging Information Systems Inc. of Winnipeg, Manitoba.

In addition, clients have access to Advent APX from Advent Software Inc. of San Francisco for portfolio management and accounting. The platform's trading technology was built in-house, based in large part on Fidelity's Advisor CHANNEL system.

A 25-firm pilot test ended last month, and Fidelity plans to roll out the platform to its 3,500 registered investment advisers through 2010. There are 50 firms using the platform, said Edward O'Brien, a senior vice president of Fidelity Institutional Wealth Services.

A web-based portfolio modeling and re-balancing tool that is designed to allow advisers to apply rule- and risk-based factors in identifying, measuring and controlling portfolio risk will be introduced in April for a two-month pilot, he said.

The system allows advisers to combine multiple portfolio models into individual investment strategies and to support accounts that hold assets at several custodians. Other features include risk-based reporting and tax-based portfolio re-balancing. To build the tool, Fidelity worked with Northfield Information Services Inc. of Boston.

Fidelity also is rolling out an e-signature system this summer, said Mr. O'Brien, adding that it will shorten the account-opening process to three days, from as many as seven.

TD Ameritrade Institutional of Jersey City, N.J., has begun rolling out an updated version of its Veo adviser platform to 2,000 advisers. The process is expected to be completed by June.

Around 300 advisers are participating in a beta test of the platform, which will include simplified order entry, an in-depth balance history and an improved ability for advisers to customize the site for their use, said Jon Patullo, director of technology platform management at TD Ameritrade.

"We've also consolidated what represented about 13 screens in the previous version to one," he said.

While certain facets of the redesigned platform, such as a new integration with Advent, come at an additional cost, access to most of the system is free to clients.

TD Ameritrade has established a partnership with Interactive Advisory Software LLC of Marietta, Ga., and Orion Advisor Services LLC in Omaha, Neb., to provide advisers access to the tools of the two firms at a reduced cost.

Solution 360į, from Interactive Advisory Software, combines portfolio management, financial planning, customer relationship management, back-office services, client access portals and re-balancing modules in a single database.

Orion Advisor Services provides fee-based advisers with comprehensive back-office systems, such as database reconciliation, performance and cost basis reporting, statement generation and delivery, and billing services.

In the past year, Schwab PortfolioServices of Overland Park, Kan., has built a service center in Raleigh, N.C., and replaced its infrastructure. Business increased 20%, and 134 new clients were added, said Dan Skiles, vice president of technology for Schwab.

A recent innovation was the Technology Scorecard, which helps advisers judge how effectively they are using the firm's technology. Schwab will enhance its website this year and plans to provide an updated version of its portfolio management and accounting application, PortfolioCenter.

Pershing Advisor Solutions LLC of Jersey City, N.J., this summer plans to introduce the next generation of NetExchange, an online account management solution.

The platform will allow financial advisers and RIAs to view holdings based on relationships between accounts, not just by the account name. Also, users will be able to access fee-based accounts as well as commission-based accounts.

Pershing also plans to develop an integrated customer relationship management system or it will partner with multiple third-party providers.

E-mail Davis D. Janowski at


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