The growing popularity of fee-based advice is prompting mutual fund companies and other investment platform providers to upgrade the capabilities they offer advisers at banks and elsewhere.
National Planning Holdings, a broker/dealer network that is an affiliate of
The anticipated increase in fee business at banks is part of the motivation for the improvements, both companies said. Though independent RIA firms have grabbed headlines with their fast growth, Fidelity sees plenty of fee-based growth ahead for banks, according to Anne Steer, an executive vice president at National Financial, the fund company's correspondent broker/dealer clearing business.
"At first, people didn't see the hybrid model as such a significant opportunity for banks, and it is," she said. "They understand that, by bringing the capabilities of both sides together, they are going to be more successful."
Among the believers in the hybrid model is First Tennessee Bank in Memphis, which introduced its own RIA platform in early June.
Letting customers choose between paying up-front commissions and paying annual fees based on the assets their adviser manages should help nudge revenue growth upward, Rhomes Aur, the bank's executive vice president of wealth management, said in a recent interview. First Tennessee is a unit of First Horizon National Corp.
Registered investment advisers have about $1.4 trillion of assets under management, according to
National Planning Holdings, whose third-party broker/dealers Invest Financial Corp. and Investment Centers of America Inc. have strong positions in the community bank market, started beta testing a major upgrade of its platform on July 1, said Jim Livingston, the network's president and chief executive officer.
The upgrade includes a tool to let advisers rebalance portfolios and execute trades across a broad spectrum of clients, he said. Livingston expects bank-based advisers to follow their independent counterparts by gradually shifting to fee-based business.
"Having a fee-based clientele allows them to say that, 'We're neutral,' " he said. "I think that is a compelling story, and they are going to go there."
Enhanced adviser platforms should help ease what can be a difficult transition for investment reps, Livingston said. National Planning has more than 3,000 investment reps.
Fidelity in early June rolled out its program, HybridOne, and hired Pershing LLC executive Ronald Fiske Jr. to run it. Between the broker/dealer and registered adviser businesses, Fidelity has more than $1 trillion of assets under custody. It serves 3,400 RIA firms and 330 broker/dealer firms with 85,000 brokers and advisers, according to the company.
In addition to tighter integration between the broker and RIA workstations, HybridOne offers a range of investment products, including managed accounts, alternative investments, and capital markets trading services. It also gives access to Fidelity's practice management platform.
But the program is a work in progress. Among Fiske's responsibilities will be overseeing the program's build-out, said Scott Dell'Orfano, an executive vice president in Fidelity's institutional wealth services unit.
This will include developing unified account statements as well as risk management tools for advisers who run fee-based business with a separate custodial relationship, he said.
Fidelity sees HybridOne as a way to win new a significant amount of business rather than as a defensive play, Steer said. "We see it as an enormous growth opportunity," she said, adding that the hybrid model is catching on even faster than the pure fee-only model.
Fidelity research shows that most brokers and advisers now manage some combination of commission and fee business. A recent sign of the RIA distribution channel's growth came from JPMorgan Funds, which this month created a new executive position that is focused on the channel.
The business, whose parent is JPMorgan Chase & Co. in New York, named Steve Lundquist, the national sales manager of JPMorgan Funds' wirehouse division, to the post
