Online broker-dealer wants to make itself attractive to fee-based advisors. brokersXpress, the institutional arm of online broker-dealer optionsXpress, has selected US Fiduciary's separately managed account platform to support brokers who want to pull in more fee-based business.

The US Fiduciary platform gives brokers and registered investment advisors (RIAs) who trade and clear securities through Chicago-based brokersXpress access to SMAs, mutual-fund and ETF portfolios, hedge fund-of-funds and unified managed accounts (UMAs) that can include individual securities, SMA portfolios, mutual funds, exchange-traded funds (ETFs) and, where appropriate, direct-participation hedge funds.

A way in for novices

brokersXpress CEO Barry Metzger says he and his colleagues hit on US Fiduciary's platform as a way to make his firm -- which he describes as "very transaction oriented" -- more attractive to fee-based advisors "at other companies" and to help advisors already aboard take a more consultative approach with their high-net-worth clients.

"A lot of the model-portfolios providers take a cookie-cutter approach," says Metzger, who used to a run a fee-based book with Morgan Stanley. But the way US Fiduciary lets advisors combine SMAs with mutual funds and ETFs in a UMA allows for better customization and provides "an avenue for advisors [who aren't] used to fee-based business," he says.

SMAs are single-account, single-style portfolios of investor-owned securities with investment minimums that generally range from $50,000 to $250,000. UMAs combine complementary security styles and asset classes from various investment vehicles in a single account.

Proponents of the UMA say they streamline reporting and performance measurement and provide reasonably broad allocations at lower investment minimums than are generally possible with similarly broad allocations across single-style accounts.

"The UMA is a way to get 10 or 11 asset classes [at a minimum as low as] $250,000," says Metzger.

And Metzger has no problem giving additional reasons his firm picked two-year-old US Fiduciary over a pack of rival SMA-platform providers to support its move into fee-based advisory.

For one thing, Metzger has known US Fiduciary's president Elliot Weissbluth "for a long time" -- which he says gives him a general sense of confidence in the Houston-based wealth-management platform provider. "I know Elliot, and I know [US Fiduciary has] really done a lot things right."

Additional oversight

Chief among Metzger's points in favor of US Fiduciary's investment platform is CRA RogersCasey participation. Darien, Conn.-based RogersCasey, an institutional investment consultant, augments US Fiduciary's in-house due diligence and provides educational and marketing support to advisors. "The fact that they have a third-party entity like RogersCasey providing oversight is a huge selling point," says Metzger. "I can market that."

Weissbluth was RogersCasey's director of marketing before he joined US Fiduciary late in 2004.

US Fiduciary also draws on research from niche consultants Frontier Asset Management and Greenrock Research.

The second thing Metzger likes about US Fiduciary's platform is its roster of managers. "They have your NWQs, your Lazards, your Madisons," he says. "They have all the managers an advisor from a wirehouse would have [access to]."

US Fiduciary's SMA platform featured about 40 managers in the summer of 2005.

Another point in favor of US Fiduciary's investment platform is its technology, including an "easy, click-through" web-based proposal generator, according to Metzger.

Finally, Metzger says he was impressed by US Fiduciary's ability to get the platform plugged into brokersXpress quickly. "We wanted to get this going in two months," he says. "This was a product we had to have, and we wanted to have it before the end of the year."

The brokersXpress win comes at a transition point for US Fiduciary. A few months ago, the firm decided to concentrate more on supporting high-end advisors directly than on funneling investment products through retail channels. But that won't stop the firm from providing its platform to retail distributors "to the extent it fits with our approach to wealth management" says Weissbluth.

US Fidicuary has advisory affiliates in Houston, Chicago, Philadelphia, Palm Beach, Fla., Traverse, Mich., Princeton, N.J., and a hedge-fund affiliate in New York. In addition to brokersXpress, US Fiduciary also provides and wealth-management support to advisors at Chicago-based New Century Bank and at Palo Alto, Calif.-based Addison Avenue Financial Partners.

brokersXpress, which launched in 2004, supports about 150 brokers and about 50 RIAs. -FWR

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