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Industry Spotlight > Broker Dealers

Fidelity: Breakaway Broker Assets Up 26%

By Janet Levaux

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Fidelity Investments said Thursday that nearly 120 brokers and teams with $8 billion in assets went independent through its financial services in the first nine months of 2010, representing a 26% of average assets per breakaway.

Of the nearly 120 individual brokers and teams that transitioned to independence, five had assets in excess of $500 million, according to Fidelity. The average level of assets is roughly $67 million.  

Fidelity also said that of this group 45% started their own RIA firm, and that the average asset level was 57% than for those staring at RIA during the same period last year. The remaining breakaways (more than 55%), either joined a broker-dealer client of National Financial, Fidelity’s correspondent clearing business, or joined an existing RIA on Fidelity’s platform.

“Not only do we continue to see a significant number of brokers going independent, but we also are seeing more assets move with each broker,” said Michael R. Durbin, president of Fidelity Institutional Wealth Services in a press release.

In many cases, the movement of large breakaway teams “is being fueled by the creation of new independent business models,” Durbin explained.  He also acknowledged in an interview with Reuters that the total number of breakaway brokers is declining after a surge in 2009.

One of the largest firms Fidelity helped transition to independence wasa group of three Morgan Stanley Smith Barney advisors with about $500 million in assets. The group formed Eugene, Ore.-based Sapient Private Wealth Management, affiliated with Focus Financial Partners Connections program, in September. Sapient is an independent RIA using Fidelity as its sole custodian.

“Both our team and our clients couldn’t be more pleased with how smooth the transition is going,”said Greg Erwin, a co-founder and partner of Sapient, in a statement.

Fidelity says it is has identified six options for advisors: join an independent broker-dealer, join an existing RIA, join a strategic acquirer either through an employee model or an affiliate model, or start a broker-dealer or RIA firm either through an outsourcing model or an in-house model.  In the past two months, Fidelity helped facilitate six deals between RIA clients and third-party outsourcing providers.

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