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Thursday, November 19, 2009

Fidelity Helps Almost 170 Brokers Go Independent

Reported by Neil Anderson, Managing Editor

Fidelity Institutional Wealth Services is amping up its efforts to help advisors go independent. On Thursday the Boston-based fund firm revealed that it has helped almost 170 advisors go independent so far this year, including Stillwater Capital Advisors (a Wayne, Pennsylvania-based RIA that now custodies with Fido and boasts about $325 million in assets). FIWS also unveiled its Financial Advisor Economic Estimator to help wirehouse advisors analyze, in depth, the pros and cons of going independent.

Michael Durbin
Fidelity Institutional Wealth Services
"Making the decision about whether to go independent can be tough," stated Michael Durbin, president of FIWS. "Our resources can then help brokers evaluate their options."

FIWS works with RIAs as well as trust companies and TPAs, and boasts over $370 billion in assets and about 3,500 clients.

Company Press Release

BOSTON, November 19, 2009 -- Fidelity Investments®(Fidelity) today announced that with increasing numbers of brokers contemplating a shift to independence, the firm has expanded its Transition Solutions program, which enables brokers to learn more about the top independent business models employed today and the strategic and financial implications of each.

Working with experienced Fidelity transition consultants, brokers can access a new customizable tool to help them analyze the economics of three common independent models -- starting an independent registered investment advisor (RIA) firm, partnering with a third-party (e.g., rollup or acquiring a firm) or joining an independent broker/dealer. Additionally, brokers have access to insights and best practices on going independent through a new white paper entitled, Options for Independence.

"Making the decision about whether to go independent can be tough," said Michael Durbin, president, Fidelity Institutional Wealth Services. "Every situation is unique, so we work with each individual broker or team to understand their goals and concerns. Our resources can then help brokers evaluate their options, putting them in a better position to make the right decisions for their businesses and their clients."

Estimator Helps Brokers Analyze the Economics of Independence

The Financial Advisor Economic Estimator tool allows wirehouse brokers, working with a Fidelity business consultant, to input specific information about their current practices, from annual production and current payouts to deferred compensation and office location. Specific values for more than 50 expense items across nine different categories, such as salary, legal fees, registration and insurance, are included in the analysis.

The Fidelity tool then produces a detailed and customized financial report that includes annual estimates over a 10-year period of the costs, taxes and payouts associated with three common independent business models compared to the wirehouse model. The report also shows estimated pre- and post-tax operating income, equity value of the firm and the tax consequences of taking a forgivable loan. Regardless of the independent model a broker is evaluating, Fidelity's resources can demonstrate the potential economic benefits of independence.

"Having gone through a transition and established an RIA myself, I know the importance of accurately forecasting the potential financial impact of a move," said Andrew Samalin, principal of Samalin Investment Counsel. "Fidelity's tool combined with a one-on-one consultation can offer brokers the right combination of information and education on which to build a solid foundation for their decisions."

In addition to the comprehensive tool, Fidelity offers brokers a simplified online version through which they can get a high-level overview of the annual financial estimates for the independent models compared to a wirehouse by simply entering their current assets and production levels. This version is designed to help brokers determine if they should proceed with a more detailed financial analysis with a Fidelity consultant.

New Report Provides Brokers Insights on Independent Models

Fidelity's new white paper, titled Options for Independence, is designed to help brokers better understand the common independent advisory models and assess which one may best fit their business style and objectives.

Based on in-depth interviews with advisors, the report presents three important reasons for considering independence -- financial flexibility, client trust, and autonomy and control. Fidelity then conducts side-by-side comparisons of the models to provide a detailed look at the business and economic differences and similarities. The white paper also identifies several best practices for making a successful transition, such as retaining legal support and identifying a custodian.

Finally, the new report offers key learnings from advisors who recently have moved to the independent model about how to help maximize the number of clients that transition to the new practice. These include:

  • Be realistic about which clients will transition. Brokers will be pleasantly surprised by some, and disappointed by others. The major contributing factors to the portability of clients include the average account size, client tenure and whether the business is based on fees or commissions.

  • Evaluate the use of proprietary investment products and make sure they are portable. Also consider the tax or expense implications of liquidation for clients.

  • Do detailed analyses to understand the financial picture if 20% of a broker's clients don't move, 30% don't move -- or even more. Brokers need to be prepared for a worst-case scenario and know what that means for their revenue flow.

  • Realize there will be a ramp-up period. Not every client will come over at once and a quarterly billing cycle may result in some short-term cash flow issues until recurring revenue begins to come in consistently.

  • Do everything possible to ensure a smooth transfer of assets. This includes having a very organized transfer spreadsheet to share with the new custodian. Getting assets on board as quickly as possible is critical for meeting the timeframe for breaking even.

    Fidelity Helps Nearly 170 Brokers Transition to Independence

    Through the third quarter of this year, Fidelity has helped nearly 170 individual and broker teams go independent, whether starting an RIA, joining an existing RIA on Fidelity's platform or joining a National Financial broker/dealer client.

    Among the broker teams Fidelity helped transition to independence in the first nine months of 2009 was Wayne, Pa.-based Stillwater Capital Advisors. Formally known as The Swope Group, Stillwater Capital Advisors is an independent registered investment advisor that selected Fidelity to custody its $325 million in assets under management.

    Among the broker teams Fidelity helped transition to independence in the first nine months of 2009 was Wayne, Pa.-based Stillwater Capital Advisors. Formally known as The Swope Group, Stillwater Capital Advisors is an independent registered investment advisor that selected Fidelity to custody its $325 million in assets under management.

    About Fidelity Institutional Wealth Services

    Fidelity Institutional Wealth Services is a leading provider of trading, custody and brokerage services to Registered Investment Advisors, Trust Institutions and Third Party Administrators. The company is able to leverage the capital, resources and expertise of the Fidelity organization, one of the world's largest financial services companies, on behalf of its clients. This includes access to a comprehensive set of products and services, innovative investment tools and research, an integrated brokerage and trust platform, and dedicated client service professionals -- all designed to help its clients thrive by growing their businesses, more effectively meeting customer needs, and enhancing operational efficiency and profitability. Fidelity Institutional Wealth Services custodies over $370 billion in assets on behalf of 3,500 clients, as of September 30, 2009. For more information about Fidelity's services, please visit http://fiws.fidelity.com/index.shtml.

    About Fidelity

    Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of nearly $3.1 trillion, including managed assets of more than $1.4 trillion as of October 31, 2009. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to over 20 million individuals and institutions as well as through 5,000 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, the largest mutual fund supermarket, a leading online brokerage firm and one of the largest providers of custody and clearing services to financial professionals. For more information about Fidelity Investments, visit Fidelity.com.


    Samalin Investment Counsel and Stillwater Capital Advisors are independent companies, unaffiliated with Fidelity Investments.

    Trademarks and service marks appearing herein are the property of FMR LLC

    Fidelity Institutional Wealth Services and National Financial are Fidelity Investments companies.

    Clearing, custody or other brokerage services may be provided by National Financial Services LLC, or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 

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