Wanting What Schwab’s Got

Jan 1, 2009 12:00 PM, By Brooke Southhall

Fidelity has recruited a crew of all-star executives and is throwing money at technology to challenge the No. 1 in the RIA support business: Schwab

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Fidelity will also need to sell advisors on its technology so that they implement it. That's no easy feat. On the other hand, with WealthCentral, it chose to use three “best of breed” providers: Advent Software for portfolio accounting, Siebel for customer relationship management and EISI for financial planning. Fidelity expects to have 1,000 of its 3,500 RIAs using WealthCentral by the end of 2009, says Edward O'Brien, senior vice president of Fidelity.

“We're already seeing the efficiencies coming to a head,” says Brian Johnson, who has begun using the new platform. “I have a heck of a lot more time on my hands.” Johnson is vice president of Anchor Bay Capital in Carlsbad, Calif., which manages $100 million.

The big time savings comes from the integration of the different technologies and platforms, which vastly simplifies data entry: it can be done once instead of multiple times for each client, each account and each application, Johnson says. Fidelity charges advisors a minimum of about $8,200 annually to use WealthCentral with all applications. The key cost variable is the number of accounts being managed by Advent. Each extra account costs $45 to $75 per year, with a lower price for advisors with a larger number of users.

The technology is so efficient that it is allowing Streettalk Advisors of Houston to maintain a rock bottom minimum account size of $50,000, and to handle five new prospects daily, according to Streettalk Principal, Mike Smith. Another advisor who was part of Fidelity's pilot program, however, says that he had a rougher time trying to use WealthCentral. “The integration issues are exacerbated” by WealthCentral's strategy of keeping to one provider for each software application, says Scott Barbee, wealth advisor for TruePoint Capital, which manages $550 million from Blue Ash, Ohio. But Mr. Barbee applauded the core of WealthCentral as “more organized and intuitive.”

WealthCentral's day of reckoning may still come, says Dan Skiles, vice president of advisor technology solutions for Schwab Institutional. “Is there a belief that there should be one central management software?” he asks. “One thousand appointments a year with advisors tell me it's an emphatic ‘no.’” There's also a group of advisors who are accustomed to plug-and-play technology — breakaway brokers from wirehouses — that Fidelity has in its sights. Fidelity has lured 59 of them with $9 billion of new assets in 2008, a doubling of last year's total.

“I think Fidelity is going in the right direction, especially for advisors who don't have custody yet,” Barbee says. “This is a huge win for them.”

THE RIA CUSTODY RACE

Charles Schwab leads in FAs, assets and breakaways.