Fidelity Investments' clearing arm has launched a managed account platform designed to help develop assets through third parties, including banks.
John Fitzpatrick, the head of the managed account platform team at the clearing unit, National Financial, said the program - Managed Account Solutions - is designed to help broker-dealers expand their fee-based revenue by working more closely with affluent investors.
Because it is available only to clearing customers, the platform would also draw clearing business to National Financial, he said.
The platform, which was originally announced in April but launched nationally last week, is already helping Fidelity increase its bank penetration, Mr. Fitzpatrick said. "Small and midsize banks are going to be able to leverage this," he said, "but there are some capabilities that larger banks are interested in as well."
All banks that are National Financial clearing customers have the platform available to them. Steve Austin, a Fidelity spokesman, said 33 of the nation's 50 largest banks use third-party providers for clearing, and National Financial handles clearing for 20 of the 33, he said. The Fidelity subsidiary has 43 bank clearing customers, in all.
Mr. Fitzpatrick said National Financial's market share should rise with the new platform.
"A variety of segments have expressed interest in this platform," he said, "including banks, independents, [and] full-service and regional firms."
Since being introduced in April, the managed account platform is being offered to National Financial's 350 clients, which collectively have more than 65,000 brokers. Mr. Fitzpatrick said many clients have expressed interest in the platform, and the pipeline of potential clients "includes a good number of banks."
"To use the platform, you have to do your clearing with National Financial, but because of the product a number of banks have expressed interest in clearing with us," he said. "It has become such a compelling offering that it is drawing new customers to us."
The product may amplify National Financial's business model, Mr. Fitzpatrick said.
"This is almost a different paradigm for National Financial," he said. "People used to come to us just for clearing. This brings more banks to us, and more banks will now do their clearing with us because of it."
Analysts say banks that want to gather investment assets must offer managed accounts. The Money Management Institute said in November that the assets held in managed accounts had grown 20.7% in the third quarter, to $645.6 billion. And banks' share of these assets grew to 7%, from 6.7% at Sept. 30, 2004, according to the report from the Washington trade association.
"We have reached the point where managed accounts is no longer a hot new option, it is a necessity," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "Everyone needs to offer managed accounts, in order to have a competitive offering."
Mr. Fitzpatrick said his company's program is flexible enough that National Financial can create a platform for each bank that lets it put proprietary products alongside selected third-party managed accounts.
The bank client also gets the flexibility to decide which products different brokers can sell.
"This gives banks a huge degree of control in how they deploy the products from one rep to another," he said. "The technology does it for them."
Managed Account Solutions is designed to be integrated into Fidelity's Streetscape broker software so that broker-dealers can handle all of a customer's investments through one workstation.
To take the next step, to unified managed accounts, Fidelity Managed Account Resources is being developed by the Boston mutual fund giant with Chicago-based Envestnet Asset Management Inc. It is to be the first open architecture, unified managed account platform delivered by a custodian focused on registered investment advisers.
This program would let Fidelity's more than 3,000 registered investment adviser clients create a unified managed account on an integrated platform that supplies a range of investment choices combined with operations resources such as performance reporting and model management tools.
The program is being pilot tested, and Fidelity said it expects to introduce it this spring.
"We want to offer a true unified managed account," Mr. Fitzpatrick said. "We want to offer an account with several [product sets] so that advisers can offer account management of all investments through one platform."
