Are RIAs losing an advocate at Fidelity -- or gaining a technology champion?

Experts offered mixed opinions after Fidelity announced its decision to merge its investment advisor and broker-dealer businesses under Sanjiv Mirchandani, while moving Michael Durbin over to launch the new Fidelity Wealth Technologies division.

"This new structure reflects market reality and will allow Fidelity to more seamlessly serve clients," says Chip Roame, managing partner of consulting firm Tiburon Strategic Advisors.

Yet the move had the potential to put Fidelity's relationships with independent advisors at risk, Roame adds.

He suggests that advisors be alert to any changes in client service with their relationship managers, and that Fidelity keep close tabs on those relationships as well. "RIAs losing their dedicated advocate in Durbin should be watched," he explained.

Michael Durbin, currently serving independent advisors as president of Fidelity Institutional Wealth Services, will become president of the new division, created to speed new technological solutions to the financial services sector, according to Tuesday's announcement.

Meanwhile, the custodial unit will now merge with the custodian's clearing services to form Fidelity Clearing and Custody, headed by Mirchandani.


The decision to merge the units reflects the overlapping needs of Fidelity's clients, who include   investment advisors, retirement plan administrators, broker dealers and banks, says Mirchandani, currently the president of Fidelity's B-D, National Financial.

"Our clients have distinct needs, but they also have a lot of needs in common," he says. "What's increasingly important to all these clients," he adds, "is going to be our ability to deliver a great new technological experience."

Fidelity's decision to merge two large divisions comes as many independent B-D advisors are embracing the RIA model. "Practice patterns are evolving and the old business structures of clearing brokers and custodians are blending," Roame says.
And one big RIA executive (and Fidelity client) praised the decision. "I think putting the institutional wealth services and brokerage together is a good idea," says Russ Hill, chairman of Halbert Hargrove Global Advisors in Long Beach, Calif. -- the No. 11 firm on Financial Planning's annual RIA Leaders issue.

"They already had merged most of the technology," adds Hill, who notes he has served for about 15 years on Fidelity's Advisor Council, which includes about two dozen of the approximately 2,800 firms that custody with Fidelity.


If the reorganization does pose a threat to advisors, Hill says, it's likely to come farther down the line, and emerge from Fidelity's new technology effort. The new Wealth Technologies unit was formed to "drive and deliver digital solutions across the Fidelity enterprise and throughout the financial advice industry," the Fidelity announcement says.

"The mission is pretty straightforward," Durbin says. "We are going to endeavor to source and deploy technologies that we think are reflective of curerent needs or anticpated needs in financial services. We are going to look across the segments and models and client types … whether they are existing within Fidelity or elsewhere."

One key part of the new division is financial planning tool eMoney Advisor, which Fidelity acquired earlier this year. And Hill thinks it ultimately could morph into something resembling a robo advisor play -- not unlike, perhaps, Schwab's planned online advisory platform, which that company plans to offer both to advisors and to consumers directly.

"Everything that Fidelity does for us could turn into something they do to us," says Hill. "I don't think that's their intention, but you have to think of these things."

Fidelity spokeswoman Erica Birke counters that the eMoney acquisition was in fact driven by suggestions from its Advisor Council. "This is not about Fidelity competing with advisors," she says. "The acquisition was made at the behest of our advisor clients."

Birke also says that eMoney's open platform architecture, allowing it to work with multiple custodians at once, will remain in place. As an owner of the firm, she says, Fidelity has "a vested interest in making sure that they continue on that course."

Birke was also eager to reassure RIAs that they still had a "dedicated advocate" in Bob Oros, executive vice president of sales and relationship management at Fidelity Institutional Wealth Services. "Remember, our strong orientation around the segments remains in place," Birke says.


Tuesday's announcement appears to be the culmination of five years of internal shifts, in which the company has "aligned" several core functions -- including client experience team, the product group and the platform technology team -- across the clearing and custody businesses.

Since reorganizing its team around several core client segments in 2013 -- banks and B-Ds under National Financial and RIAs, asset managers, strategic acquirers and retirement advisors and record keepers under Fidelity Institutional Wealth Services -- assets under administration in the clearing and custody business have grown by nearly 30% and client loyalty metrics have improved, Fidelity says.

One last thing to change, Birke says, may be the divisions' brand names. While National Financial, will continue to appear on client statements, the same may not be true for the investment advisor brand.

"I would say we will eventually phase out Fidelity Institutional Wealth Services," Birke says, but adds, we are still determining the brand name."

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