From the March 2006 issue of Investment Advisor • Subscribe!

March 1, 2006

Fidelity's Separates

Custodian rolls out an elegant SMA platform for RIAs

Fidelity Investments unveiled a new managed account platform designed to help RIAs save time and expense by streamlining the managed accounts process, and provide them with more flexibility and control. The platform, Fidelity Managed Account Resources, is an "integrated managed account platform that provides open-architecture investment capabilities as well as back-office efficiencies," says Gary Gallagher, senior VP of Fidelity Registered Investment Advisor Group (FRIAG). "We believe it's the first unified managed account capability that's delivered to registered investment advisors via an RIA-based custodian." Fidelity has partnered with Envestnet Asset Management Inc. of Chicago to develop the platform.

Advisors can choose from turnkey wrap products that contain an array of investment vehicles on which Envestnet will provide due diligence and performance reporting, or use the Fidelity Manager Resource Network, a new, separate account "supermarket" for advisors who "want to choose their own managers," according to Tom O'Shea, VP of managed accounts at FRIAG. This option "does not include due diligence or performance reporting, and therefore doesn't include the fees for that," says O'Shea.

"The average cost of an equity portfolio in the Separate Accounts Network where the RIA directly interacts with a subadvisor is 78 basis points," says O'Shea. That's partly because when the advisor deals directly with the separate account manager, there are separate contracts between each subadvisor and individual client. In addition, the subadvisor has to reconcile trading activity daily with Fidelity, he says. But when the RIA uses the Fidelity Manager Resource Network, "Envestnet will host clients' accounts on its secured system; Envestnet will reconcile those accounts with Fidelity; all the subadvisor needs to do is dial into the Envestnet trading system and trade. Envestnet contracts one time with each subadvisor, and the RIA contracts one time with Envestnet," says O'Shea. This eliminates the back-and-forth of each individual client's contract with each subadvisor, reducing the workload for subadvisors and RIAs, and "allows us to reduce [subadvisor] fees. We believe that on average we can get our subadvisors at approximately 57 basis points because

all that cost is taken out, and it streamlines the interaction--the RIA and client only need to sign one contract, one time," O'Shea says. Currently 83 managers are participating in the new platform, and Fidelity hopes to grow that number to 150 by year-end, according to O'Shea. The platform is now

a pilot program, with regular rollout

expected this spring.

The platform will help an advisor create what O'Shea calls a unified managed household proposal, to show asset allocation and modeling that aggregates all types of accounts across all members of a household in one proposal.

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