Fidelity Investments launched Options for Independence on Wednesday, its latest tool in that perpetual competition among asset custodians to win business from breakaway brokers.
The new program consists of four targeted tools to help wirehouse brokers figure out which option is best as they teeter toward becoming registered investment advisers.
“For advisers who have worked under the wirehouse umbrella for a while, going independent is very daunting,” said Sanjiv Mirchandani, president of National Financial, Fidelity Investment’s clearing firm. “They can start their own RIA, join an existing firm or a strategic acquirer—not to mention handling compliance and what the start-up costs will be.”
The first piece of the program, Options for Independence: The Evolving Landscape, is a white paper that provides in-depth analyses of the different independent models that exist for RIAs today. It also takes a thorough look at business and economic environments, like being a totally independent business owner or working as an employee in an RIA firm.
The Business Model Consultation piece offers an adviser one-on-one time with an expert, who can present an aerial overview of the different RIA business models. Another component Considerations Before Joining a Firm, which identifies eight risk factors for brokers to consider before joining an established RIA or independent broker-dealer. Finally, Considerations Before Becoming an RIA lays out the 12 factors for brokers to consider before starting an RIA, such as understanding the financial implications of establishing a firm and building a brand.
“The environment for breaking away has become a lot better in the last couple of years,” said Alois Pirker, research director of wealth management for Boston-based Aite Group. Similar to brokerage firms that found ways to compete more effectively for financial advisers, asset custodians are beefing up their offerings to advisers, with a broadening array of education tools and consultative services to make the process easier.
A significant amount of wirehouse advisors continue to be on the edge of switching channels, according to recent research released by Aite Group. In its April 2010 report, “New Realities in Wealth Management: Has the Dust Settled?” Aite Group found that 15% of 402 wirehouse advisors surveyed said they had no desire to break away. However, 20% said there is a 50% chance or greater of their leaving within the next two years.
Fidelity wants to catch them when they do. Year to date, Fidelity has helped 120 teams of financial advisers make the leap. They represent total assets of $8 billion. Compared with the same period last year, which represents an average AUM increase of 26% per team. Also, five teams had more than of $500 million in AUM, which suggests Fidelity Investments is beginning to attract financial advisers with wealthier client bases, Mirchandani said.
Donna Mitchell writes for Financial Planning.