In a move clearly aimed at luring breakaway brokers,
Fidelity Investments is about to take the wraps off a program intended for brokers who are dually registered as investment advisers.
The Boston-based company estimates that every year, 150 to 200 brokers, each with more than $100 million in assets, join the ranks of registered investment advisers. That in turn translates into $15 billion to $20 billion in assets a year that are up for grabs, said John W. "Jack" Callahan, president of Fidelity Institutional Wealth Services.
"It's one of our biggest initiatives," he said. "We're going to try to be strong on both sides."
Currently, dually registered advisers at Fidelity must navigate between two distinct trading platforms, depending on whether the transaction involves a fee or a commission. Fidelity's commission-based platform is offered through National Financial Services LLC of Boston, while its fee-based platform is run by Fidelity Institutional Wealth Services.
About one-third of the 3,500 registered investment advisers on Fidelity's fee-based platform are dually registered, Mr. Callahan said.
SEAMLESS
Fidelity's so-called hybrid platform, which has been on the drawing board for more than a year, will allow advisers to work seamlessly between fee- and commission-based transactions. For example, advisers will be able to access information about their fee- and commission-based clients with a single logon.
"There will be product parity across the platforms," said Anne Steer, executive vice president at National Financial. "Irrespective of where the assets sit on the broker-dealer side, they can look at the business holistically. They will be able to transact business on both platforms seamlessly."
The company plans to unveil highlights of the platform later this week at an annual gathering of its top advisers in Tucson, Ariz. A more formal announcement is slated for next month.
Fidelity intends to have the platform up and running before the end of the year.
At the end of March, National Financial had $671 billion in assets under administration and Fidelity Institutional Wealth Services had nearly $350 billion.
Dually registered advisers are overseen by both the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. of New York and Washington.
At the end of last year, 35%, or 4,988, of all investment advisory firms in the United States were dually registered, according to Cerulli Associates Inc. of Boston. Those firms held about $432.6 billion in assets, Cerulli said.
"The hybrid environment already covers a significant portion of our client bases," Ms. Steer said.
While being dually registered allows advisers to offer more products to clients, it poses challenges in reporting information to clients and regulators.
"Advisers will use [the platform] if it gives them a competitive advantage," said Ivory Johnson, a dually registered adviser and director of financial planning at Scarborough Capital Management Inc. of Annapolis, Md., which manages $1 billion in assets. "The fewer screens we have to use, the easier it is for us."
Currently, dually registered advisers at Fidelity must work on two separate platforms.
"It can be disjointed to the adviser or registered rep," said Scott Dell'Orfano, executive vice president of Fidelity Institutional Wealth Services. "The new platform will make portable functionality. It will be easily accessible and have joint functionality."
An integrated platform will mean more time for clients, said Richard Van Der Noord, founder of Van Der Noord Financial Advisors Inc. of Greenville, S.C., which has nearly $50 million in assets.
"That is the utopian position and it doesn't exist yet — to have one platform that will hold, report and service mutual funds, variable annuities, limited partnerships, separate accounts, individual stocks and bonds, and your debit card, and generate one statement," said Mr. Van Der Noord, who is dually registered.
"We hired a programming firm to come out and design our own re-porting software," he added.
Fidelity is not the first to launch a hybrid platform.
Charles Schwab & Co. Inc. of San Francisco launched a hybrid platform in March 2007 with Cambridge Investment Research Inc. of Fairfield, Iowa.
E-mail Sue Asci at [email protected].
