An executive at Fidelity Investments says the Boston company is attracting new business as brokers and financial advisers from banks, large wire houses, and regional broker-dealers consider going independent.
Sandra Metraux, an executive vice president of marketing for Fidelity's custodial arm, National Financial, said in an interview Wednesday that in the first nine months of this year its integrated brokerage solutions business attracted 59 registered investment advisers that collectively managed $9 billion of assets.
It attracted less than half that much in assets from "breakaway brokers" during all of last year, she said.
Ms. Metraux said that recent economic conditions have "intensified a long-term trend" for advisers and brokers to either start their own advisory firm or join a smaller independent company.
About 160 brokers contacted National Financial in the third quarter for information on how to start or associate with an independent broker-dealer, she said.
In the third quarter of 2007, National Financial received 30 such inquiries.
"The only thing that is different now is, more people are pursuing brokers and advisers," she said. "Everyone knows that loyal clients are loyal to their adviser, not the company the adviser works for. The best way to win business is to hire brokers with a large book of business and get them onto your platform."
A survey by Fidelity said that brokers believe 60% of their clients, on average, would follow them if they were to go independent or join a new firm, and 31% of the brokers said they would expect three-quarters or more of their clients to follow.
The survey, which was conducted by Harris Interactive on behalf of Fidelity and National Financial from Sept. 29 to Oct. 8, questioned 127 financial advisers at national wire houses, regional brokerages, insurance broker-dealers, or bank broker-dealers. About 36% of the brokers have recently considered either starting their own firm or joining an independent broker-dealer or registered investment adviser firm, the survey said.
And 34% of the brokers indicated that they have been offered a sign-on bonus to switch firms. Moreover, 27% of all brokers expected to be offered an incentive to switch firms within the next month.
Fidelity's survey indicated that 46% of brokers at wire houses and regional firms had been offered a signing bonus to leave their current employer in the preceding month.
Despite an environment in which 69% of brokers reported that their firms have been affected by market volatility, with the impacts ranging from mergers and acquisitions to large-scale writeoffs, 61% said they believe that investor confidence in their firm's health is the same as or greater than a year earlier.
Analysts said that advisers are interested in independence to gain more control of their business and — as the market turmoil has sunk some of the largest wire houses — the best advisers are choosing to move into independent channels.
"Market conditions and consolidation [are] forcing advisers and brokers to make some tough decisions," said Burton Greenwald, an analyst at BJ Greenwald & Associates in Philadelphia. "They are overwhelmingly considering at least the possibility of starting their own business. As advisers, they believe that they can be more profitable if they are out on their own rather than just a cog at a larger firm."
"The benefits of being with a big firm are no longer outweighing the potential of being independent," he said.
Ms. Metraux said that financial advisers are "leaving firms where the brand value has decreased. They want to go independent and associate themselves with someone like Fidelity that is more stable."
Fidelity and National Financial offer a range of investment products and services for advisers, including asset custody, asset management, transition support, and trading support. For brokers that want to establish a broker-dealer, National Financial offers trading processing, work station technology, investment products, and support services, and it can help transfer a book of business to an independent RIA or broker-dealer.
Fidelity's institutional wealth services business held more than $335 billion of assets under custody for more than 3,500 clients at Sept. 30.
In June, Fidelity introduced HybridOne to offer investment services to advisers that were interested in tools for both registered investment advisers and broker-dealers.
Ms. Metraux said the program is too new to have produced hard data on assets that it has developed but that the company is talking to a lot of interested brokers. She said more than 500 brokers have expressed interest in learning more about the program.
"We are the industry leader in the RIA and the broker-dealer space," she said. "If you look at those businesses together, there is a lot of potential for growth. No one else has the level of aggregate assets that we have to work with both RIAs and broker-dealers."
Fidelity is drawing new business despite having announced last week that it would lay off 2.9% of its 44,000 employees this month. Fidelity also announced that it would do a second round of layoffs in the first quarter whose details are to be completed during the next few weeks.
Steve Austin, a spokesman for Fidelity, said he could not say whether the job cuts would touch National Financial because Fidelity has not disclosed which of its businesses are affected.
Ms. Metraux said she is confident that Fidelity and National Financial can continue to develop new business with advisers and broker-dealers.
"Our numbers continue to grow," she said. "We are in contact with a lot of people, and we are having a lot of conversations. We see the momentum continuing to build and see Fidelity and National Financial growing."
"People want to know they will be with a firm that will be here in five years, 10 years, and 20 years," she said.
