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Fidelity Redefines the Future Value Proposition for Advisors

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Advisors who want their businesses to grow and thrive will have to do a lot more than manage clients’ investments and use goals-based planning. They’ll need to help clients achieve peace of mind and ultimately a sense of accomplishment with their life and the ability to leave a legacy, according to Fidelity Investments.

Its Clearing and Custody Solutions division just introduced this “New Advice Value Stack” to help advisors “articulate and deliver greater value to their clients” by way of three “New Advice Value Drivers.” The drivers focus on Better Outcomes for Clients, Building Digital into a Firm’s DNA and Creating a Sustainable and Enduring Firm. Advisors would use all three drivers to achieve each of the four values included in the value stack.

Matt Chisholm, head of the division’s practice management and consulting group, described this new model as “a redefinition of” of wealth management that reorders priorities for advisors to better align their business with the needs of clients, the quickening pace of technology and changing regulations.

“Firms need to be ‘future ready,” said Chisholm.

But to get there they first have to get through “the big squeeze,” said Sanjiv Mirchandani, president of Fidelity Clearing & Custody Solutions in a video on the Fidelity website.

They’re being squeezed by increasing demands from investors who are sensitive about fees and demanding high-touch and high-tech services; by regulators requiring higher standards of client care and transparency on fees and conflicts of interest; and competitors delivering high-quality, tech-savvy services, at lower prices, such as Vanguard and robos, according to Fidelity.

Advisors can get through that squeeze by creating value for their clients, according to Fidelity.

“To achieve success firms must be methodical in how they deliver value and be open to delivering it differently in order to move up through the layers of the value stack,” said Sanjiv Mirchandani, president of Fidelity Clearing & Custody Solutions in a statement.  

Fidelity’s new model is based on Bain & Co.’s “Elements of Value,” which are fundamental attributes of companies that customers value. They form a pyramid, from the bottom up as follows: Functional (such as saving time), emotional (reducing anxiety), life-changing (a new affiliation creating a sense of belonging) and social impact (self-transcendence).

Fidelity presented its new model at its Executive Forum in May, a gathering of 350 leaders of wealth management firms representing more than $1.2 trillion in AUM. Afterward it polled attendees, asking where their firms stood on the value pack in terms of the services they provided now and where they would like their firms to focus in the future. The results were staggering, indicating a desire for a future that’s very different from the present.

Thirty-one percent said their firm’s focus now was on money management; only 5% desired that for the future. Six percent were focused on fulfillment today; 36% preferred that for the future.

“The wealth management business will continue to be a very good business, but it’s changing,” said Mirchandani in his video. “It’s consolidating, business models are converging, technology is more important, and it will get more competitive and pressure from regulators will increase …. Ultimately client value creation will drive organic growth and that’s going to create a solid foundation for your business.”

Chisholm said that advisory firms performing well on multiple values in the stack currently grow revenues three times faster than those who focus on just one.

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