Fidelity Investments has said that its registered investment advisor (RIA) custody business, Fidelity Institutional Wealth Services, and its correspondent broker/dealer business, National Financial, have jointly launched HybridOne to help meet the needs of firms and advisors that conduct both commission- and fee-based business. The hybrid market is a fast-growing segment, according to a Fidelity survey, with the majority of all brokers and advisors managing some combination of commission and fee business.
“Through HybridOne, we have taken a more holistic approach to serving the needs of dually registered firms and advisors,” explains Norman R. Malo, president and CEO of National Financial. “We have developed an objective, consultative process that engages clients to help them determine which business model is right for conducting their commission- and fee-based business.”
“With more experience serving the needs of both commission- and fee-based firms and advisors than any other provider, we are uniquely positioned to meet the evolving demands of the fast-growing hybrid market,” adds John W. “Jack” Callahan, president of Fidelity Institutional Wealth Services. “HybridOne is a major initiative for Fidelity, and we are confident that clients will find that the program’s level of product availability, integrated technology and streamlined client support will make it easy to manage the complexities inherent in a hybrid model.”
Fidelity Institutional Wealth Services and National Financial custody over $1 trillion in assets, which Fidelity says is more than any other broker/dealer clearing firm and RIA custodian. The companies provide service to some 3,400 RIA firms and 330 broker/dealer firms with 85,000 brokers and advisors.
“The hybrid market has emerged as a major trend only over the last few years,” says Callahan. “As this market grows and evolves, we are working with our dually registered clients to deliver the strongest solution in the industry by continually investing not only in the technology, investment products and services that meet the distinct needs of this segment, but also in the people and processes to ensure a superior client experience.”
One month earlier, LPL Financial said it has plans to introduce an integrated advisor solution platform, supporting independent registered investment advisors (or RIAs) and hybrid (or dually registered) financial advisors by year-end. To support this effort, the company has named Gary Gallagher, formerly of Fidelity Investments, as head of RIA services.
According to Mark Casady, LPL Financial’s CEO, the move to support RIAs is an extension of LPL’s other initiatives that have been designed to “redefine independence.” “We’ve been a leader at providing any product with unbiased selection. We’re a partner to FAs,” and LPL sees advisors as business owners. “This step gives FAs an unbiased business structure,” Casady explains. “It lets them take a new strategy and say, ‘I want to do business as my own RIA.’”
Boston- and San Diego-based LPL Financial began considering ways to further work with RIAs two years ago, and immediately put Gallagher on its list of executives who could help the firm “make it happen.” Gallagher was hired in November 2007. LPL Financial now includes some 11,800 advisors. About 10 FAs have been involved in the new RIA pilot efforts.
The broker-dealer expects up to a few hundred advisors to take advantage of this new offering in the near term. Some 8,000 already rely on LPL Financial’s existing RIA business; this corporate-custody work includes some $75 billion in assets under management. (LPL’s total AUM stands at about $285 million.)
But it also anticipates that it will be quite attractive to “breakaway brokers,” advisors now with the wirehouse/full-service firms who are considering a shift into independence. “We want to build this as a model of new business growth,” shares Casady.
“This is about refining the independent model,” explains Gallagher, beyond the custodial, fiduciary roles. “LPL will let you build out your own RIA and do it all in one place.” This should create an integrated experience for both FAs and clients, he says. “And this will be easier on FAs and clients. Investors’ experiences will be more seamless.”
Casady adds that this new offering isn’t just about adding scale to FAs with LPL and those looking to come to LPL. “It’s also about adding scale and capability to this marketplace.”
LPL also disclosed that it launched Model Wealth Portfolios, a centrally managed fee-based asset allocation platform, in mid-May. Model Wealth Portfolios will be made available to over 11,000 of LPL Financial’s financial advisors.
“We launched Model Wealth Portfolios to meet the increasing demand from our advisors for advisory platforms as evidenced by our 79 percent growth in advisory assets over the last two years,” says John Moninger, senior vice president of Advisory Consulting Services at LPL Financial.
Model Wealth Portfolios offers theme-based asset allocation investment strategies to help advisors meet unique client needs, according to LPL. The themes are: diversified, alpha focused, socially responsible investing, income focused, tax aware and downside-risk aware. The downside-risk aware model, for example, uses a unique combination of mutual funds and seeks to outperform their benchmarks, especially in down markets by lowering overall volatility.
LPL Financial believes that advisors and their clients will benefit from the simplicity of having one account with one set of paperwork that is subject to one program fee. As of February 29, 2008, LPL Financial managed over $71 billion in fee-based assets.