October 25, 2010

Fidelity Investments Offers Family Office Services to RIA Firms

RIA's ultra-high-net-worth clients can get 'sophisticated resources' previously reserved for wealthy families

Fidelity Investments will now provide registered investment advisors (RIAs) that serve ultra-high-net-worth clients (UHNW) with access to the “sophisticated resources” family office clients receive on Fidelity Family Office Services’ platform, according to an announcement on Monday.

RIAs serving wealthy clients with $50 million in assets to invest will be able to get family office support for Reporting and Administration Services, and Insights and Connections, according to the announcement. They will also have access to Investment Services, a multi-custodian platform, and a “dedicated relationship management team and analyst/trader, an open architecture reporting system,” and “partnership services and general ledger export services.”

How Is a Family Office Different From an RIA Firm?

A single-family office will have clients from one wealthy family, while many RIA firms will have hundreds of clients, says Scott Dell’Orfano, EVP, sales and relationship management, Fidelity Institutional Wealth Services. Some clients will have a “liquidity event—sell or liquidate a business,” creating an UHNW situation, he explained in an interview. Perhaps a wealthy client with a relatively small portion of their assets with the RIA will bring over all, or a larger portion, of their other assets. Maybe the RIA serving an UHNW client is dealing with multiple custodians. Any of these events could trigger the need for the types of support services that Fidelity is offering for RIAs with UHNW clients.

 This is “a big opportunity to leverage the services of the Family Office business out to the RIA” world, said Dell’Orfano. An UHNW investor may have “32 accounts...and 10 different trusts.”

Reporting for the UHNW Is Challenging

Reporting for UHNW clients can be particularly challenging, and part of Fidelity’s expanded offering to RIAs includes “sophisticated” reporting capabilities that can account for a family’s “planes, multiple homes, multiple trusts and limited partnerships,” and other illiquid alternative assets that are held outside of accounts custodied at Fidelity, Dell’Orfano noted.

Fidelity Family Office Services currently has “120 family office clients with just over $20 billion in assets,” said Dell’Orfano. Most of those clients are not registered investment advisors, he explained. Fidelity Institutional Wealth Services “serves 3,000 RIAs,” he added.

In addition to Investment Services, the release outlines three other “family office” services that will be available to RIAs serving UHNW clients:

Dedicated Client Service, with arelationship management team” that includes “a relationship manager, client service manager, platform support specialist and investment analyst/trader.”

Reporting and Administrative Services, withan integrated portfolio reporting and trading platform that provides a comprehensive view of family wealth, including marketables and alternative assets,” and “trust, partnership accounting, private foundation services and general ledger export services.”

Insights and Connections, a peer network for sharing “best practices,” and offers education and research services on “governance, risk, operational efficiencies.” 

Fidelity says that three RIA firms have already begun to use the Family Offices Services, with another 50 in talks with Fidelity about the new offering.

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