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Fidelity Posts Latest Results in Midst of Merger Madness

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Privately owned Fidelity released its latest financial report, saying it had some $8.3 trillion in assets under administration on Dec. 31. This was up 20% from 2018, thanks largely to strong market performance. 

The firm grew its total revenue about 2.5% to $20.9 billion in 2019, and operating earnings jumped 9.5% to $6.9 billion. 

Fidelity’s Clearing and Custody Services (FCCS) unit — which works with RIAs and other types of firms — ended the year with $2.6 trillion in assets under administration, a 24% jump from $2.1 trillion in 2018. It had about $120 billion in net new asset flows from RIAs and other clients in 2019. 

Rival Charles Schwab’s RIA-focused operations, which it labels Advisor Services, ended 2019 with $1.91 trillion. The unit had net new asset flows of $107.2 billion last year.  

Of course, that situation could change dramatically if Schwab gets regulatory approval to buy TD Ameritrade for about $26 billion. 

That deal, announced in February, could create a firm with $5.1 trillion in total RIA/discretionary and retail investor/non-discretionary assets. Its combined RIA assets are estimated to be about $2.4 trillion.

Meanwhile, Morgan Stanley says it plans to buy E-Trade, another player in the RIA space, for $13 billion.

Merger Mania

That merger would unite about 14,000 of the country’s 20,000 RIAs, according to Tim Welsh, head of Nexus Strategy, a consulting firm. Some of these 14,000 RIAs use more than one custodian, he adds. 

Schwab has an estimated 50% market share as an RIA custodian; TD Ameritrade’s is roughly 15% to 20%, and Fidelity has about 25%. (Last week, FCCS lost Matthew Chisholm, its former head of practice management and consulting, who joined Commonwealth Financial Network.)

But the “Schwabitrade” merger is no sure thing, some veteran industry players say. A large number of RIAs and professionals working with RIAs are getting calls from the Department of Justice’s Antitrust Division as part of its second request in the “discovery process” — or review — of a deal that could have anticompetitive results.

“There are many advisors and others who think this deal would be terrible for investors and for RIAs,” Welsh said. “It’s really no shoo-in.”