A Fidelity Investments platform for brokers leaving their jobs at full-service firms could help bolster the ranks of independent brokers, observers say.
The Fidelity WealthCentral online wealth management platform and brokerage workstation primarily targets registered investment advisers who leave full-service brokerage firms to set up their own shops but want to keep using a full-service platform.
Alois Pirker, a senior analyst with the research firm Aite Group, said such technology could encourage a large number of brokers at bank-owned firms and elsewhere to go independent.
WealthCentral packages portfolio management, financial planning, and customer relationship management. It features Advent Software's Advent Portfolio Exchange software, Emerging Information Systems Inc.'s NaviPlan Central, and Oracle's Siebel Customer Relationship Management's On Demand tool.
Since all of WealthCentral's core applications are compatible, advisers can enter a client's information into their system once and it will be updated and reconciled across the platform automatically.
Mr. Pirker said many breakaway brokers focus on fee-based advisory relationships rather than commission-based sales. Fewer brokers are going independent with the market and economy slumping, but they should break away in greater numbers once conditions improve, he said.
Analysts said they expect more financial advisers to go independent as Bank of America Corp. completes its deal to buy of Merrill Lynch (set to close Jan. 1) and as advisers from A.G. Edwards, which Wachovia Corp. bought in June 2007, consider their next move with Wachovia's sale to Wells Fargo & Co. also slated to close on Jan. 1.
"This is a tumultuous time in the markets and advisers from Merrill, A.G. Edwards, and beyond are weighing their options," said Burton Greenwald of BJ Greenwald & Associates in Philadelphia. "Becoming independent gives them more options. Banks are worried about losing these advisers, their customers, and their assets."
Typically, Mr. Greenwald said, banks are able to retain 75% to 80% of advisers after a merger or acquisition, but that number "could be considerably lower in this market environment."
Fidelity and Charles Schwab Corp. have been among the custodians vying to increase their assets under custody by working with more breakaways, Mr. Pirker said.
"Amongst big custodians, there hasn't been anybody who has really offered an integrated solution before now," he said of WealthCentral.
Ed O'Brien, a senior vice president at Fidelity Institutional Wealth Services, who heads technology for the registered investment advisory custody unit, said WealthCentral is also notable because it is Web-based. This means, among other things, that it is more affordable for advisers than other platforms.
A lower-end firm with 100 accounts and four or five advisers can pay as little as $8,200 a year for WealthCentral, Mr. O'Brien said.
Michael Smith, a general partner at Streettalk Advisors, a Houston firm that became fully independent in March and participated in WealthCentral's pilot program, said independent registered investment advisory firms find it frustrating to spend so much time on administrative tasks, and Fidelity's product could help ease that frustration, he said.
"We've never had a method in which we can quantify how much in assets we've raised from one point in time to another without reading endless spreadsheets," Mr. Smith said. "We are able to pull that number from the new technology."
Another WealthCentral tool organizes and keeps track of prospects as they turn into clients, Mr. Smith said.
"At high volume, we have had a lot of information slip through the cracks, and this should increase our efficiency," he said.
Streettalk was so eager to have an integrated platform that it contacted Fidelity each week during the development of WealthCentral asking to be included in the pilot program, Mr. Smith said.
Mr. O'Brien said 18 firms participated in the pilot program. Fidelity began marketing the platform on Nov. 17 and expects to roll it out to the rest of its registered investment advisory clients, numbering 3,500, next year and in 2010. It expects seven more firms to sign up before the month is out.
One of WealthCentral's selling points is that it simplifies advisers' technology management. Because it is online, advisers do not have to purchase software, and the bundling means that advisers do not have to negotiate with multiple vendors, and online support and training is built into the service, he said.
Even though the markets and the economy are in bad shape, Fidelity believes that WealthCentral's potential to save advisers time and money will help spur widespread adoption of the platform, Mr. O'Brien said.
"A lot of advisers see their fee-based revenues declining, and they are looking at their high-fixed-cost base," he said.
According to a Fidelity survey conducted in September, registered investment advisers with integrated core technology applications made 36% higher revenue per professional and 30% higher profits per owner compared with firms that have not integrated their technology.