Fidelity Investments today is launching a service designed to help investment advisers who use the firm's custody services attract more business from wealthy clients by giving them access to its single-family-office services.
The firm's Family Office Services unit handles individual families with $100 million or more in assets. It serves 120 families with an average of $160 million at Fidelity, said Edward Orazem, the unit's president.
But Fidelity thinks it can land more big fish from its roster of retail registered investment advisers, who typically serve the lower-tier “mass affluent” market.
The firm is targeting the service to families with $50 million or more in assets.
“Our RIAs are in front of bigger and bigger clients, and in nine out of 10 cases, they do just fine,” said Michael Durbin, president of Fidelity Institutional Wealth Services.
But with access to family office services, those RIAs will be able to capture business from ultrawealthy clients, he said.
Other custodians offer services similar to multifamily offices, but “no one is dedicated to a single-family-office service, which is a different animal,” Mr. Durbin said.
The ultrawealthy want “something unique, private and customized that only a single-family office can give,” Mr. Orazem said.
A key piece of the service is a reporting system that tracks family members' individual-ownership interests in partnerships, he said.
Family units can have easily 20 or more family members, trusts, foundations and other entities with multiple investment partnerships — often alternative investments, Mr. Orazem said.
“The ownership interests and tax aspects get very complicated,” he said.
“Some owners drop out, others come in, and that requires full partnership accounting. That's a service we provide, like the back-end accounting at a mutual fund,” Mr. Orazem said.
Single-family-office clients also want custom reporting, which Fidelity can provide, he said. In addition, Fidelity is offering families a dedicated relationship management team and an investment analyst/trader.
The analyst/trader will provide access to Fidelity's capital markets services, Mr. Orazem said.
“A lot of these families are not equipped to deal with a trading desk and like to have a generalist to help them execute” transactions, he said.
“I'm not sure what they'll be doing, but Fidelity is very well-respected” in the family office space, said Angelo Robles, founder of the Family Office Association LLC. “They do everything first-class.”
Fidelity's Family Office Services business is about five years old and is staffed with 41 professionals, Mr. Orazem said. More staff members will be added to handle more families, he said.
“If [Fidelity is] doing this for 120 families already, [there] really shouldn't be incremental cost to add another 20 or so families to the mix,” said Lane Carrick, chief executive of Sovereign Wealth Management Inc., which manages about $500 million, some of it for wealthy families using a multifamily-office model.
“But I don't know how meaningful it will be, because the typical RIA [is] not touching the $100 million-plus families,” said Mr. Carrick, who included himself in that characterization. He uses the custody services of The
Charles Schwab Corp.
Fidelity executives think that the $50 million minimum should help attract a meaningful number of new clients.
“We'll be very flexible” with that minimum, Mr. Orazem said. “The real distinction is whether [families] have a real need” for the services.
“The biggest single opportunity is for the RIA that has a $100 million client but only $10 million” of the client's assets, Mr. Orazem said.
About 50 RIA firms have expressed an interest in the offering, Fidelity officials said.
In addition to Fidelity's family office services, advisers' ultrahigh-net-worth clients will be able to attend private events designed to network with family offices and share best practices, Fidelity officials said.
E-mail Dan Jamieson at [email protected].
