Fidelity brings unified managed accts to RIAs

Thomas Coyle

7 February 2006

Advisor-, brokerage-support units upgrade managed account offerings. Last week Fidelity Investments launched a unified managed account platform for registered investment advisors who work with the firmï¿½s custody- and brokerage-service agency, Fidelity Registered Investment Advisor Group. At the same time Fidelity unveiled a distinct separately managed account platform for distribution through National Financial, the Boston-based fund provider brokerage-service provider.

The new platform will give ï¿½RIAs the ability to use-and pay for-only those resources they need to support their business model,ï¿½ William Carey, president of Fidelity Registered Investment Advisor Group, says in a press release. ï¿½In addition, as an integrated UMA, our program will give RIAs the benefit of a single contract across multiple investment managers, helping to reduce the amount of paperwork, legal, regulatory and administrative complexity.ï¿½

Not for everyone

SMAs are single-account, single-style portfolios of investor-owned securities with investment minimums ranging from $50,000 to $250,000, ballpark. UMAs provide different ï¿½ and in theory complementary ï¿½ security styles and asset classes in a single account. A mid-step between the two, the multiple-discipline account , provides different styles of a single asset class in a single account.

Fidelityï¿½s ï¿½Managed Account Resourcesï¿½ UMA, available to its 3,000 or so RIA clients, is in fact Envestnet Asset Managementï¿½s UMA platform. Fidelity calls it ï¿½the first open architecture platform delivered by an RIA-focused custodian.ï¿½

RIA service agency Schwab Institutional, whose eight-year-old SMA platform is one of the biggest non-wirehouse distributors in the business, has yet to offer UMAs. Going back about a year, Schwab said its advisor clients simply werenï¿½t that interested.

In the world of investments the definition of ï¿½open architectureï¿½ is notoriously fluid. Some use the term to designate platforms with no proprietary offerings at all; for others it means a combination of third-party and proprietary investment products ï¿½ with distribution often heavily weighted toward in-house offerings.

In addition to Chicago-based Envestnetï¿½s UMAs, Fidelity gives RIAs access to SMAs through ï¿½a range of third-party turnkey asset management providersï¿½ ï¿½ most of whom, incidentally, prefer to be called ï¿½third-party investment platform providers.ï¿½

Say, that looks like...

But access to several third-party providers isnï¿½t new to Fidelityï¿½s advisors. It goes back to Fidelity's Separate Account Network, an SMA program for RIAs that debuted early in 2003. The Separate Account Network has about $5 billion in assets and an average account size of about $1 million.

Distinct from its UMA offering, Fidelityï¿½s Managed Account Resources offers single-style SMAs in two flavors. Thereï¿½s a dual-contract program that includes due diligence and performance reporting, and a single-contract program for RIAs who perform their own due diligence that provides direct access to managers at pre-set fees and, it seems, lower account minimums.

The first option is similar to Schwab Institutionalï¿½s ï¿½Managed Account Accessï¿½ platform; the second looks like Schwab Institutionalï¿½s ï¿½Managed Account Marketplace.ï¿½

Fidelity is the second biggest RIA service agency after Schwab Institutional. It serves about 3,000 advisors with client assets in the neighborhood of $175 billion.

The National Financial SMA platform gives introducing broker-dealers and their associated reps access to four fee-based consulting programs: mutual-fund wrap, traditional SMA, MDA and rep as portfolio manager.

National Financial provides brokerage services to about 350 retail broker-dealers and investments firms with, all told, about 65,000 reps. ï¿½FWR