Podcast Center
Video Center
Webcasts
Resource Center
Events
April 01, 2005 at 02:00 AM
My wife, my 11-year-old son, and I walked into a Fidelity branch recently and approached the reception desk. “Hi, I’d like to speak with someone about your services,” I said. “Just wait one moment while I get someone to help you,” said the receptionist.
I went to the branch to experience firsthand how a customer seeking investment advice is pitched when visiting a Fidelity branch. We waited in the lobby for no more than a couple of minutes. A pleasant-looking man in his mid-30s–we’ll call him Bob–appeared, introduced himself, and ushered us into his office with a friendly, “So how can I help you?”
I explained that I had a financial advisor but it was time for a change. I told Bob I had a portfolio of about $650,000, plus a company retirement plan containing personal assets as well as those of my employees.
“Do you mind my asking what happened between you and your advisor?” he asked.
“It was a personal matter between us,” I said.
With that, Bob began probing to find out which of Fidelity’s solutions were right for me. He began by describing self-directed options, Fidelity’s Web-based tools, and their ability to let me pick any mutual fund I wanted. But I was not there to learn about do-it-yourself investing options. What I wanted to hear was his pitch for Fidelity’s advice products, so I quickly disposed of any notion that we were interested in managing our own money. “Bob, my wife and I are doing some construction in our home and we just went to a place to pick a door,” I said. “What kind of door you think we picked, fiberglass or wood?”
“Wood,” said Bob, wondering where I was going. “No, we chose fiberglass,” I answered. “And do you know why we’re fiberglass people? Our current door is falling off the hinges because we do nothing to maintain it. My wife and I don’t want to do anything. We’re too busy. And we’re too busy to do anything with our portfolio.”
“Okay, I understand now, and we have just what you need,” said Bob. “We can work with you by picking mutual funds–both Fidelity funds and non-Fidelity–and help you allocate your assets properly.”
Over the next 20 minutes, Bob told us that Fidelity would manage my portfolio for 1% annually. They would rebalance my portfolio and send me reports. And they would manage my downside risk with alacrity because they have the research and institutional power of Fidelity behind their advice. “Anyone can make money when the market is going up,” Bob explained. “But it’s when the market is going down that we will help you the most.”
I asked about planning. The advisor I had been doing business with had linked my investments to my goals–college funding and retirement. Would Fidelity do the same? “You’ll meet with a regional representative who will help you with all of that and help you manage your portfolio,” Bob said. The regional representative would not actually write my financial plan, however. He would send it to the “corporate office.” While the regional rep would handle the technical work on my investments and plan, Bob would be my “quarterback” and main contact.
When I expressed an interest in individual stocks, Bob explained that Fidelity had a relationship with Lehman Brothers. Lehman would pick a portfolio of stocks for me, he said. But after a couple of questions, I learned that I could not put a portion of my portfolio in funds managed by Fidelity, and another portion in stocks managed by Lehman, and have all of it run as one portfolio. “It would probably be best if you did one or the other, have it all in stocks or all in funds,” Bob suggested. I was not interested in that, and after I left the branch it occurred to me that Bob never once told me about AdvisorAccess, Fidelity’s program for referrals to independent advisors. Never once did Bob ask if I’d be interested in meeting one of the local advisors Fidelity has signed up to participate in that program.
Jennifer Engle, a Fidelity spokesperson, said the branch rep may just have been responding to my story. “You mentioned you had a personal difference with your advisor,” she said. “It’s possible the rep deliberately did not make a referral on his first conversation with you. He was listening to your needs and trying to respond appropriately.”
That may be so. But Bob never asked me if I might still be interested in working with another advisor–even though the portfolio I told him I had far exceeded the AdvisorAccess minimum of $500,000. If he was trained to do what Fidelity would have advisors believe–sell RIA services along with Fidelity solutions–I would never have known it.
For the record, Fidelity is a firm that refers advisors to my company. But the issue of how Fidelity positions its own retail advice versus advisory services from its network of RIAs is a touchy one for advisors and all of the discount brokerage firms serving them. Much has been written about Charles Schwab’s advice products and its uneasy relationship with advisors, which hinges partly on its ability to balance serving RIAs while competing with them for clients. I have sometimes felt it was unfair to single out Schwab for competing with advisors, but understood why many were upset with the firm’s retail advisory offerings.
Schwab helped invent the independent advisor business by designing the first mutual fund supermarket in the early 1990s and then creating the best technology platform to support RIAs. After becoming the dominant broker providing custodial services to RIAs, it quickly became the No. 1 retail discount broker. Since then, Schwab has said that it aims to become the No. 1 advice-giver and money manager among discounters. Because of all this history, Schwab has been the focus of criticism from advisors who resent the way it has positioned itself as a competitor while building its own advisory business.
