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February 01, 2005 at 02:00 AM
If you’re an advisor with Fidelity Registered Investment Advisor Group (FRIAG), you already know the news. If you’re not, you may or may not have heard: Jay Lanigan, president of the Fidelity unit, is leaving. In fact, by the time you read this, he will have left. His last day has been announced as January 21. And while the circumstances of his departure are murky, it’s just possible that it spells a turning point in the financial advisory community.
With Fidelity being its usual tight-lipped, party-line self–no press release was issued on Lanigan’s leaving, but company PR folks are happy to tell us that he left to pursue other interests–the circumstances of his leaving give rise to some interesting questions. Judging by the timing of the “announcement,” such as it was, Lanigan reached his “decision” to leave around January 7, or perhaps a few days earlier. For a person in Lanigan’s position, and considering he had 25 years with Fidelity, including 14 years with FRIAG, two weeks notice seems a bit short, don’t you think? Could it be that his decision was perhaps influenced by someone else?
What’s more, since he took the helm of FRIAG in 2003, the firm’s custodied assets and affiliated advisors have both almost doubled to $125 billion and 2,500 RIAs, respectively. It’s true that when you start small, growth figures can appear fantastic, but those are pretty heady numbers by anyone’s standards. So, particularly in light of the lack of any helpful information from Fidelity itself, one has to ask what sort of corporate malfeasance has Mr. Lanigan been involved in?
None at all is what I’m hearing. In fact, the word on the street, from sources close to Fidelity and advisors who know Lanigan, is that while rapid, his departure was almost amicable. The buzz is that despite those stellar growth numbers, his boss at Fidelity Brokerage Group, president Ellyn McColgan, has her sights set quite a bit higher: challenging Schwab’s dominance of the RIA market, by boosting assets above $300 billion. She just didn’t think that Lanigan’s scrappy, boot-strapping style was strategic enough to get FRIAG there. Or at least to get there fast enough. So Lanigan’s out, and Fidelity’s looking for someone who can get the bigger job done.
That may finally mean some good news out of Boston for financial advisors. Don’t get me wrong, I’ve always been very impressed by the Schwab executives I’ve met. Schwab as a company has been on the cutting edge time and again: Schwab’s OneSource singlehandedly forced the financial services industry to open mutual fund platforms; Schwab Institutional made fee-only advice economically viable; the Schwab Advisor Network referral program has helped grow many practices, and the list goes on. Yet in my view, Schwab’s virtual unchallenged dominance of the RIA custody market has led to arrogance on the part of the San Francisco giant, and unease among many advisors who feel they are at Schwab’s mercy without any viable alternatives. It’s not a new story: a monopoly is rarely good for the growth or the health of an industry.
So, for almost 15 years now, I’ve held out great hope that one of Schwab’s competitors–Fidelity or TD Waterhouse have been the most likely favorites–would step up to the plate. When TD Waterhouse bought Jack White Financial, I hoped the Wall Street firm, backed with Toronto- Dominion Bank’s financial might, would make a giant out of Jack White’s advisor-friendly approach. Instead, TD Waterhouse seems content to pick at the smaller scraps Schwab doesn’t want. As far as I can tell, a substantial portion of Waterhouse’s assets come from advisors who derive psychological comfort from diversifying some small portion of their clients’ assets away from Schwab.
Then there’s Fidelity. The Manchester United of mutual fund companies, with over $2 trillion in assets and cash flow that must approach $10 billion a year, who could deny that Fidelity has the resources to dominate the advisor market anytime it wants? The only plausible explanation for why it hasn’t must be that it hasn’t really wanted to. Until now. Maybe, just maybe, if the rumors hold some grain of truth, McColgan, the brass at 82 Devonshire, and the Johnson family have finally decided that it’s time to make a play in the independent advisor marketplace.
If it’s real, FRIAG’s wake-up call couldn’t have come at a more propitious time for advisors. While assets under management and the numbers of clients are on the rise, the challenges independent advisors face today are enormous. Yet a firm like Fidelity certainly has the resources to smooth the bumps in the road, if used effectively. Here are a few modest suggestions of what FRIAG might do to quickly become a megaplayer in the advisory world (most of which I’ve mentioned to FRIAG execs at one time or another):
