There's no doubt that the names of some of the largest firms on Wall Street no longer have the cachet with the investing public that they once did. This in turn has strengthened the appeal for many brokers of moving to greener pastures, be that another wirehouse, an established RIA firm, or even going fully independent. In late November Fidelity launched the Financial Advisor Economic Estimator, a new tool to help brokers compare different scenarios as they plot their futures. In conjunction with that release, Michael Durbin, president of Fidelity Institutional Wealth Services, sat down for a chat in early December with Managing Editor Bob Keane at Fidelity's outpost in New York's World Financial Center.
Are you seeing more brokers looking to make a change?
The actual breaks cooled into the throes of late 2008 and into the first half of 2009, because advisors were really appropriately hunkered down with their clients. So the actual breakaway activity slowed, but the conversation and the interest didn't.
Is there one of the models that more brokers are gravitating toward?
I think that traditionally the annual rite of advisors leaving a wirehouse, the recipient of most of those moves has been another wirehouse...In my view there will always be a big and vibrant wirehouse channel. They serve their clients, by and large, extremely well. I just think that there is going to be a growing portion of that population that will realize that there's not as much value being given to them day in and day out by that firm, so why not try something different?
Fidelity did pretty well with the breakaway broker segment in 2009. What's your outlook for the new year?
My own view, and it's a personal view, is that the markets will continue to challenge. It's a different kind of challenge. It's a sideways challenge now. Typically the financial services industry doesn't like zero interest rates and low volatility against the specter of inflation. That's a pretty tough confluence of macro issues going on. It will have a dampening effect, at least on people's enthusiasm, but I think that 2010 will be quite constructive in terms of breakaways and growth in the RIA channel generally and even end customers who will find their way to an RIA.
Our view is that the independent proposition is resonating with end consumers in this environment. Because of the return profiles that markets will likely offer end customers, I think there's an increasing premium being placed by end customers on a very simple way to ask: "How am I doing in the aggregate? What kinds of returns am I getting?"
In nice raging bull markets where families or individuals can parse out assets it's okay because all boats are rising. But now, every basis point on your cash and every ten basis points on your equity outperformance or underperformance matters in this environment.