Fidelity unveils program to help advisers unload unwanted clients

Custodian partners with FirstPoint Financial to facilitate referrals of unprofitable customers

Apr 8, 2015 @ 6:30 am

By Alessandra Malito

Fidelity's Clearing and Custody division is teaming up with registered advisory firm FirstPoint Financial to make it easier for advisers who custody assets on its platform to offload unwanted clients.

FirstPoint Financial, a subsidiary of RIA firm Mariner Holdings Inc., will help advisers review individual clients to determine whether those clients are a good match for their practice. If they are not, the adviser may refer those clients to FirstPoint in return for an ongoing referral fee.

Advisers who refer clients to FirstPoint will receive 35 basis points on the annual revenue earned by those clients assets. That's more than the 25 basis points FirstPoint pays to non-Fidelity advisers for making similar referrals.

“We have observed from practice management that one of the top three issues advisers say is 'I don't know how to serve this client efficiently,'” said David Canter, executive vice president of practice management and consulting at Fidelity Clearing and Custody.

One type of client likely to be referred to FirstPoint is millennials, Mr. Canter said.

“These investors may have all the prospects of being millionaires of tomorrow but they're not rich yet,” he added. “They may not fit within the typical spectrum of an advisory firm's clientele, so these emerging and mass affluent investors could be really ideal to be referred from an adviser to FirstPoint.”

A 2014 Millionaire Outlook study by Fidelity found that 76% of financial advisers focus their business on clients who are 49 years or older, or those with $1 million or more in assets to invest. And 45% of advisers said they have no plans to focus on emerging and mass affluent investors over the next five years.

Yet investors between the ages of 21 and 49 who have assets of $50,000 to $250,000 are well-positioned to become millionaires.

"There is this very natural and understandable draw for advisers to move to where the money is and a lot of times that is with people who are a little bit older," Andreas Scott, a financial adviser at Total Wealth Advisors in Minneapolis, Minnesota, said. "The whole service model has been tailored to people who are boomer-aged and older and have liquid assets. That really has left out the millennial market."

And there's a disconnect between advisers and these millennial clients said Alan Moore, co-founder of XY Planning Network, which focuses on pairing financial advisers with young investors.

"They just don't care," Mr. Moore said of advisers who strictly work with older investors. "There are so many young people who need an adviser, but getting them to care is beyond challenging."

Marty Bicknell, chief executive of Mariner Holdings, said many advisory firms are already referring away millennials. The deal with Fidelity, he said, will allow those them to earn revenue in the process.

“Those clients that are below the minimum, what do they do with them? They typically refer them away,” Marty Bicknell, chief executive of Mariner Holdings, said. “This gives advisory firms the ability to have incremental revenue stream from something they're already doing.”

No money will change hands between Fidelity, which merged their clearing and custody units into one in February, and FirstPoint in this partnership.

“What FirstPoint is helping to do is democratize advice,” Mr. Canter said. “It's really democratizing it for investors of all asset sizes.”


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