Less than a year after a major reorganization of Fidelity Institutional’s clearing business, Mike Durbin, president of Fidelity Institutional Wealth Services, reports that the RIA custodian is doing quite well, thank you, with total client assets under custody of more than $750 billion as of year-end 2013. In that year, 109 net new RIA firms, with an average of $127 million in assets under management, chose to custody with Fidelity IWS.
In an interview Thursday, Durbin noted that the data from new firms doesn’t include RIAs or registered reps who joined an existing RIA firm. “It’s a good business,” he said, helped by “the prevailing tailwind in this broadly defined independent space,” but also by “great new net asset flow from existing” Fidelity IWS RIA firms, along with new firms that are “being created and/or joining us.”
Admitting that “it helps to have an S&P at 1,900,” the trends pushing the independent space continue, he argues, notably “bigger and better RIAs getting bigger and better.” While not that long ago it was “rare to have a $1 billion RIA, now there are more and more” achieving that benchmark in AUM through organic growth and expansion either geographically or through mergers and acquisitions, producing a “growing cadre of pan-regional” RIA firms.
That overall growth in the industry, and Fidelity’s investment over the past few years in “reinventing” its technology platform and service offerings, “allows us to be more strategic with our clients,” Durbin said, helping in particular firms around the $500 million mark to leap over that hurdle where too often “the principal wears too many hats.” Instead, the fastest-growing firms, which Fidelity calls “high performers,” are being run as businesses, with a “clear segregation of duties and clear processes,” creating “real firms with real management teams that can provide leverage” to that overworked principal.
While Durbin says “we have a very strong base proposition for all our clients” around brokerage and custody, operations and service, the notion of keeping an eye on the bigger, fastest-growing firms “allows us to provide our more human-capital-intensive programs” to those high performers, such as practice management consulting or succession planning or even M&A financing through its partnership with Live Oak Bank. “We want to earn a seat at their conference room table with them,” he says of the fastest-growing firms.