Fidelity Investments is rolling out a service in which the firm will match high-net-worth (HNW) investors with select registered investment advisors who are Fidelity custody clients. The new service, Wealth Advisor Solutions, was first introduced in Boston, Chicago, and San Francisco, in January.
Matches are based on client needs uncovered in a detailed interview with Fidelity representatives, and the specialties of participating RIA groups. While there is no stated HNW minimum amount, “the sweet spot for the services that [investment] advisors provide to our customers is probably at the million-dollar plus level,” says Scott Dell’Orfano, executive VP at Fidelity Registered Investment Advisor Group (FRIAG). “If you think about the complex issues on the estate side or the tax side, we tend to get asked by our customers, our consumers, [who are] usually north of $1 million of investable assets. That’s when they tend to ask for more sophisticated products and customized services.” The pilot program is rolling out with eight to 10 RIA firms in each pilot locale. “As we continue to refine the referral process and the introductory of the advisory services into our client base, we’re going to continue to expand the numbers that participate and the geographic regions that we offer this in.”
Fidelity representatives use an “Investment Policy Questionnaire” that helps uncover the “types of products or services that the consumer is looking for” Dell’Orfano explains, and that information is “fed into a Web-based tool that then would actually match [them with] advisors that actually provide those services or products.” He notes that Fidelity has detailed profiles on the RIAs in the program, as well: “We know who their ideal customer looks like, and what type of products and services they specialize in, and that’s all fed into the system,” that makes the match. In the first three weeks of January, he says, there were about 150 referrals, including a “high level” of Fidelity customers but also people who walk into a branch cold and request advisory services. The participating RIA firms run the gamut from comprehensive financial planning services to those that specialize in alternative investments such as “private equity or a hedge fund.”
While the program started with 32 advisory firms in the three pilot cities, Dell’Orfano expects substantial growth by year-end, to perhaps 100 to 150 advisory firms. That said, “we want to make sure that we don’t oversaturate markets, that we have complementary firms, not competing firms.” He doesn’t think that will be a stretch, and that “given the number of high-net-worth customers that work with Fidelity directly and the need, we think, for advisor-type services, there is enormous room for other advisors to participate.”
How would advisors participate? “There is a pretty extensive qualification standard we’re holding advisors up to,” Dell’Orfano asserts. After an RIA firm is recommended, “we do a pretty heavy due diligence: We’re going to look at the number of principals they have in the firm, the types of services they provide, what their fee structure looks like; we take a look at their P&L to make sure there’s profitability of the firm, and how many years they’ve been in business to make sure it’s a sustainable organization.”
The HNW clients pay the RIA its regular advisory fees for services, while Fidelity is paid as custodian. There is no added charge to the RIA or individual to participate. Fidelity will monitor the quality of service the investors receive by surveying the HNW investors, and will continue to monitor the selected RIA firms participating in the program.