In his new role atop
Fidelity Investments' custodian business, Charles Goldman is trying to revamp its service culture while keeping up troop morale amid constrained budgets.
At the same time, he hopes to win custody of alternative assets from his former employer, The
Charles Schwab Corp., without adding too much risk to Fidelity's balance sheet.
"Service is at the core of the differentiation [from other custodians] and is the basis of how we are going to compete," Mr. Goldman said.
He joined Boston-based Fidelity in January after his reign over San Francisco-based Schwab's industry-leading registered investment adviser custody platform ended last November.
Mr. Goldman did not give details of how he is realigning service for advisers at Fidelity Institutional Wealth Services, but he said it is well-understood that Fidelity has led in technology. Michael Clark, president of Fidelity Institutional Products, made the same point when he announced in November that he was hiring Mr. Goldman to import some of Schwab's culture.
To reduce the market share gap with his former employer, which Mr. Goldman said has about twice as many assets on its RIA platform as Fidelity, Mr. Goldman is re-segmenting service teams by geography and client size.
The aim is to develop a more personal relationship between Fidelity and its clients; many top advisers said they enjoy such a connection with their Schwab representatives.
Mr. Goldman and Michael Durbin, a former Morgan Stanley executive who joined in March to run the day-to-day RIA business, are expected to hold more regional conferences for advisers, allocate more personnel to work with larger clients and offer some new practice "solutions" that Mr. Goldman said he can facilitate because he also oversees National Financial Services LLC, Fidelity's clearing arm for broker-dealers.
Mr. Goldman, who holds the new title of president of institutional platforms, said he can ensure, for example, that RIAs will be able to piggyback easily on Fidelity Capital Markets' enhanced international trading capabilities, a service that this year will permit them to buy foreign securities for clients in local currencies.
National Financial, he added, already offers "great" service to its brokerage clients, while Fidelity's RIA unit has "much more opportunity to go from good to great."
Some Fidelity clients that operate brokerage and RIA businesses, meanwhile, have complained of infighting for control of their accounts that make it hard for them to get good service.
"If I get any time with Goldman, I would tell him to kill one group and have them all work together," said the president of a hybrid firm managing more than $3 billion in assets, who asked not to be identified.
Mr. Goldman, a former consultant who joined Schwab in 2001 to help lead a cost-cutting effort, doesn't underplay the challenges of building market share through improved service at a time when advisers and Fidelity itself are battling falling markets and a sick economy.
"Like everyone in financial services, we are looking to be more efficient," he said of Fidelity, which is absorbing the effects of thousands of employee layoffs and overhauling many of its back-office systems. "It's about process, about everyday blocking and tackling, about management and focus."
But as a private company, Fidelity has the luxury of being able to invest more freely than publicly traded competitors in areas of growth, Mr. Goldman said, citing the firm's new web-based Wealth Central suite of services for advisers (see TechUpdate, Page 3).
Fidelity's principal custody competitors — Schwab Advisor Services and the custody platforms of TD Ameritrade Holding Corp. and The Bank of New York Mellon Corp.'s Pershing LLC division — are affiliated with publicly traded companies.
As much as he'd like Fidelity to prosper at the expense of competitors, Mr. Goldman is realistic about the opportunity to thrive at their expense. Schwab's recent decision to end custody of hedge funds and other alternative investments, un-characteristically announced without consulting first with its top clients, is unlikely to create a major transfer of assets to Fidelity or rivals. That's because all are worried about likely new regulatory scrutiny of alternatives in the wake of scandals involving Bernard Madoff and others.
"Alternatives will remain an important part of our custody platform, and we're going to do what we can to help advisers," Mr. Goldman said. "But we are reviewing our asset acceptance processes and procedures to make sure that we are doing the right thing for the company as well as for advisers and investors."
An executive at TD Ameritrade of Omaha, Neb., said his firm, too, is reviewing acceptance standards. A Schwab spokesman said the firm plans to outsource alternatives custody to a subcustodian by yearend and next week is sending out requests for information. The goal is to create an interface that will allow advisers to download data from the subcustodian onto a consolidated customer statement.
Mr. Goldman also said that Fidelity isn't expecting an onrush of advisers to join its RIA platform from big brokerage firms anytime soon. "Like everything else going on in financial services, things there are frozen up," he said. "Advisers in wirehouses are concerned about going to clients after a year of unbelievably horrible returns and talking to them about moving. It's a hard conversation right now."
RIAs too are devastated by what the market has done to their clients as well as to their own personal net worth, Mr. Goldman said. His response is to encourage them to do what he's been doing — "keep talking to clients about asset allocation, diversification and planning, and keep working."
Nobody has the answer to why portfolios are down 35%, Mr. Goldman said, "but it's very clear that they have to keep talking to help clients work through this."
E-mail Jed Horowitz at [email protected].
