Fidelity’s advice offerings are not as broad as Charles Schwab’s. For instance, Fidelity does not advise on individual stocks. It does offer Lehman Brothers’ research, however, for self-directed investors. For retail clients who want their money managed by Fidelity, the product they get is Portfolio Advisory Services or Private Portfolio Service, which have about $30 billion under management. Both are mutual fund wrap programs. The main difference between PAS and PPS is that PPS will take a client’s existing stock holdings and slowly convert them to funds or manage them alongside a fund portfolio, while PAS only manages fund portfolios. PPS is thus sold to individuals seeking tax-sensitive management. In addition, PPS has a higher minimum of $300,000, versus $50,000 for PAS.
PAS “is a convenient, economical way to help ensure that your portfolio of $50,000 or more is actively managed for the long term by our experienced professionals,” says the PAS brochure. “After identifying the most appropriate model portfolio for you, they’ll make ongoing investment decisions using the time-tested investing disciplines for which we are renowned–objectivity, balance, and a long-term perspective.”
The advisory fee Fidelity charges for PAS ranges from 1.1% for less than $200,000, 1% for the first $200,000, 0.8% on the next $100,000, 0.7% for the next $200,000, 0.5% for the next $500,000, 0.4% for the next $1 million, and 0.25% for the next $1 million. The average fee charged by PAS is 0.85%, according to Fidelity spokeswoman Jennifer Engle. “The branch rep is the quarterback of the overall relationship and a PAS specialist is brought into the conversation to help develop the actual investment portfolio that PAS will recommend and then manage on an ongoing basis,” says Sarah Libbey, a senior vice president responsible for PAS. The PAS specialist and branch representative would present the recommendation together. The PAS specialist is usually on the phone, since they are all based in one of two locations in the U.S.
In comparison, not only does Schwab offer advice on individual stocks, but it also provides consultations on stock options and in-person financial planning. Schwab’s retail advice services, especially with U.S. Trust behind them, do seem to be more of a direct competitive threat to advisors than Fidelity’s less muscular advice suite. However, a big difference between Schwab and Fidelity is that Schwab’s advisor referral program is much more visible, both on Schwab.com and in the firm’s marketing materials. When you click on “advised investing” from Schwab’s home page, “Schwab Advisor Network” is easy to learn about, and a Web page devoted to SAN provides full details about this offering.–Andrew Gluck