Custodians who serve independent RIA firms appear to be escalating a technology arms race. The most visible front in this battle is integrating third-party applications. As custodians battle for the hearts and minds of advisors in the years ahead, Fidelity possesses a weapon that no other firm can currently match: The Fidelity Center for Applied Technology, known as FCAT.

Established in 1999, FCAT is a central group within Fidelity charged with evaluating technologies for the firm. That's a tall order, as Fidelity spends approximately $2 billion per year on technology, and many company insiders view its technological edge as the foundation of its success.

FCAT is not an academic center designing new technology. Instead, its mission is to evaluate the landscape and decide which new tools will affect and be most useful to Fidelity and all its customers in the near future-within 18 months to three years. "FCAT serves more as a funnel than as a pipe," says Sean M. Belka, director of FCAT and a senior vice president at Fidelity.

In that role, it is an important ally for advisors as they expand their businesses in an age of fast-moving technology tools. Although not devoted to advisors, the group provides direct input into almost every decision affecting advisor-related technology. In addition, FCAT research for other Fidelity business lines usually produces intelligence that can later be applied to advisor services. For example, when FCAT develops retail technology that speeds up the responsiveness of another line of business-say, for example, same technology could work for advisors.

FCAT in 2008 was at the core of the process to develop and launch Wealth Central, Fidelity's integrated workstation for advisors that combines its back-office advisor platform with customer relationship management (CRM), portfolio management systems (PMS) and rebalancing software by handpicked third parties. Pershing followed suit with Nextx360, and Schwab, TD Ameritrade, Shareholder Services Group, Trade PMR and Trust Co. of America are all now pursuing their own aggressive integration strategies.

This is only the beginning of the technology arms race among custodians. It's an arms race that will run over many years, but promises to result in a full range of new tools that will be essential for advisors to run their businesses.



When FCAT opened its doors in 1999 during the dot-com bubble, a web innovation seemed to show up every day. There were new Internet service providers, companies building the web infrastructure, content providers and of course the e-retailers. Entrepreneurs were constantly launching new technology firms. As 2000 approached, the fear that the Y2K bug would crash computers around the world was also on people's minds. Fidelity decided to establish FCAT to evaluate all these options.

The same year, Fidelity formed its eBusiness unit to design and develop online products and services. The company was also introducing the first check deposit and touch screen kiosks in its investment centers. Within a year of FCAT's opening, Fidelity introduced Internet-ready phone access for their customers. The following year, Fidelity's National Financial division launched Streetscape, an online brokerage technology platform that offers investment professionals market data, news, research and trading functionality.

Today, FCAT has been deeply involved in developing the look of the new, improved Streetscape, which is being tested with a small group of brokerages. "FCAT helps us stay ahead of technology trends," says Ron DePoalo, chief information officer at Fidelity Institutional, which provides services to RIAs and other financial intermediaries. "They help us anticipate the devices our clients will use so that we can develop tools for those devices. They are also instrumental in helping us deliver a better client experience on the web."

FCAT's clear mission-staying ahead of the curve on new technology by looking out no more than three years-is more than enough to keep it busy. Fidelity's goal is to determine which technologies are likely to impact it or its customers and to maximize its return on its technology investment at any given time.

Their technologists ask whether a new technology is realistic, how well it will scale, and what is the time frame for adapting it widely. FCAT serves many masters. Technology FCAT is testing could enhance Fidelity's internal systems and its private equity operation or improve the experience of customers and RIAs, broker-dealers and family offices. For example, because of significant research, is now four times as fast as Yahoo Finance and three times as fast as Google Finance when delivering financial information, reports Al Lee, an FCAT scientist.



On the RIA front, integrated workstations have been the hottest battle in the custodian technology wars. According to Belka, FCAT is now focusing on three technology innovations that could open up new fronts: cloud computing, mobile computing and social media.

* Cloud computing. Cloud computing is the use of a web service to perform functions that were traditionally done with software installed on an individual computer. For financial services, cloud computing raises complicated issues of security and privacy. Cheap cloud storage may not be suitable for confidential financial records, but useful for other content that does not contain private, identifiable data, such as educational videos and mutual fund fact sheets for retail clients, 401(k) plan participants, RIAs or broker-dealer reps.

FCAT is currently running a number of pilot projects to answer those questions. More broadly, FCAT is researching how Fidelity might be able to utilize cloud computing to improve performance and lower costs. FCAT is initially taking a micro view; looking at and choosing providers isn't the upfront goal.

* Mobile computing. FCAT is involved in a number of initiatives on the mobile computing front. The group contributed to the development of Fidelity's applications for both the iPhone, and more recently, the iPad, deciding which features were most suited to each device. For example, the iPad's larger screen, among other factors, led FCAT to develop an app capable of richer content, including video. By the time you read this, Fidelity retail clients should also have access to applications for both Android phones and Android tablets.

It is widely expected that Fidelity will soon introduce mobility apps for advisors as well. DePoalo says that Fidelity is in the "early stages" of developing these apps. "Financial advisors are telling us that they want mobility applications, and we expect this demand to grow," he says. "We will continue to supply advisors with the technology tools they need."

* Social media. Although Fidelity has been doing a great deal of research, the tangible results with social media have been modest. Through Fidelity Labs (, a test site that allows Fidelity to experiment with new ideas, the firm has launched a Facebook beta and a Twitter beta.

According to Belka, Fidelity looks at social media on a business-by-business basis. FCAT is actively looking at the implications for Fidelity, if, for example, search sites and social media sites converge. Right now, regulatory and liability issues are holding back advisors' presence on social media sites, but that could change.



Not all technologies that FCAT examines pass muster with its staff. Fidelity looked at the applicability of Interactive TV back in 1999 and 2000. They concluded that the technology itself was intriguing, but ahead of its time-and they were right. HDTV was not widely available in the United States, and there was too little bandwidth available to most households, hence Fidelity chose not to pursue any Interactive TV initiatives. Much has changed since then, and Fidelity is once again evaluating various interactive TV opportunities, including non-consumer applications such as virtual workgroup collaborations.

Belka is also optimistic about video conferencing, which he does not see as being strictly related to mobile devices. Although consumers and businesses have had access to video conferencing at the desktop or in the conference room for some time, Belka believes this is just the tip of the iceberg.

Video conferencing will become more popular as better, cheaper apps and more bandwidth drive down the price of video calls. Already the consumer versions of Skype, Google Talk and Yahoo Messenger can add video cheaply. Now front-facing cameras on smartphones and tablets, plus better software and the rollout of 4G networks, are making person-to-person video conferencing available to everyone.

Expect to have one-on-one video chats with clients in coming years. Belka believes that video calls can produce deeper, richer conversations with clients; facial expressions and body language make a big difference. They can also be combined with computer tools presenting data, such as whiteboards and presentations.

Does this mean that video class will replace traditional telephone calls? Belka doesn't think so, but he does believe video calls will become more common, as advisors develop new ways to communicate with their clients.



Over the last several years, technology has become more important in choosing a custodial firm. RIAs striving to improve profit margins and efficiency need the best tools; custodians know that the more successful their advisors are, the more assets they will bring, so the shared interest is strong. The sheer magnitude of technology required by independents will mean they'll require help from custodial firms. These larger firms have the technological expertise, the financial strength and the scale that is necessary to deliver world-class technology to independent RIA firms at a reasonable cost.

Until now, advisors have been largely left to their own devices, with custodians doing little to streamline integration. Custodians and clearing firms provided advisors with technology to access their own back offices. But even that was limited, and it is only over the last several years that independents have been able to open new accounts, initiate automated customer account transfers and perform cashiering tasks electronically, without hands-on intervention from a service employee at the custodian or clearinghouse.

With the launch of Fidelity's WealthCentral for advisors in 2008, competition to provide integrated solutions has heated up. All of the major custodians as well as some of the smaller ones are now working to integrate various proprietary and third-party applications with their respective back offices. In the future, advisors will look for a custodian that offers the broadest range of high-quality services with secure infrastructure at a competitive price. Advisors will ask: Are all the services in a single platform? Do all the pieces work seamlessly together in an intuitive manner? Is the price appropriate? Is the infrastructure secure?

After a slow start, more than 700 advisors now use the Fidelity WealthCentral platform with many more in the pipeline. Fidelity is beginning to beta test the new and improved Streetscape platform to a small group of independent broker-dealer firms.

"The new Streetscape is a dynamite product," says Wilson Williams, president and CEO of the Williams Financial Group in Dallas. Williams, whose advisory firm is scheduled to begin using the new version of Streetscape soon, likes that Fidelity understands "the importance of using one powerful technology platform to service both the independent fee business and the brokerage side of the business."

The new version, he says, is more powerful and easier to use. "The first thing advisors do in the morning is turn on the computer and look at their workstation. They view news, management tools, positions and research," Williams says. "Ease of use is essential, and that's exactly what the new Streetscape provides. It makes access to the information within Streetscape seamless. It also includes excellent graphics, which makes it easy to share information with clients."

FCAT was instrumental in helping to design the new look, feel and functionality of Streetscape. For example, information that once required four-page views is consolidated on one page, which viewers rated more attractive and understandable. Streetscape has card-view elements similar to Apple's, quick quotes that pop up from the bottom of the screen and type ahead searches like Google's. In addition, the interface provides desktop style functionality, such as drag-and-drop columns and collapsible tables.



Usability has long been one of Fidelity's technology strengths. FCAT has usability labs, but Fidelity's usability studies predate FCAT. Fidelity had a usability lab way back in 1993, and from time to time, Fidelity brings both consumers and advisors into the lab and performs usability tests to see how they interact with Fidelity products.

Many of the findings are proprietary, but the company did share a few nuggets of wisdom:

* When using financial websites, some customers like to receive financial information by video, but many do not. So Fidelity also makes transcripts available for those who prefer to read. Even those who are receptive to video want to have the choice of turning the video on. Auto play video does not work well, Fidelity found.

* Most web traffic on Fidelity sites occurs during the day. Presumably, many of these customers are at work, so they do not have access to sound on their computer.

* There are subtle differences between the way consumers and advisors interact with their software tools. Consumers are willing to put up with more clicks to make sure the task is done correctly. Advisors want as few clicks as possible, putting a premium on streamlined workflow and usability.



By now it should be clear that FCAT has been instrumental in many of Fidelity's technological innovations over the last 10 years. Looking ahead to the future, it is likely that FCAT's role with regard to advisor technology will continue to expand.

"I believe that we have the best technology platform in the business," DePoalo says. "We have delivered an integrated solution, and we have the resources to leverage Fidelity's $2 billion per year technology budget in order to continue to provide the technology solutions that Fidelity Institutional clients require."

As technology continues to play an increasingly important role in the success of advisors, and as custodians and broker-dealers compete on the quality of their technologies, the ability to anticipate advisors' future needs and to innovate rapidly will become ever more important. None of Fidelity's competitors appear to have a facility similar to FCAT. If that is in fact the case, FCAT may give Fidelity an edge as it seeks to anticipate and satisfy the needs of its advisors in the coming years.


Joel P. Bruckenstein, CFP, is an international expert in applied technology and co-producer of the annual T3 Technology Conference for financial advisors. For more, visit

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