Spring Brings New Tools From Custodians

(Dow Jones) Spring has sprung, and with it have come new announcements from custodians eager to describe the ways they can help financial advisors flourish.

Fidelity Investments said Monday it has introduced an online matching program to help brokers who are looking to leave their employers identify independent broker-dealers or registered investment advisors who might be a good fit.

Fidelity wants to pave the way for brokers to join a brokerage firm that clears trades through its National Financial business, or an advisory firm that keeps client assets with Fidelity's Institutional Wealth Services.

Matching programs like this are meant to increase the number of financial advisors and investor assets on a custody provider's platform. They're also intended to help financial advisor clients recruit brokers with sizable books of business.

Fidelity said it helped 48 broker teams form or join an independent advisory or brokerage firm during the first quarter of 2010, a 20% increase from 40 teams during the same period last year.

Custody providers like Fidelity hold client assets and provide trading, technology and investment-platform support for financial advisors and charge them for these services. The more advisors and assets custodians serve, the more money they make.

Regional events and webinars offered by Fidelity and its competitors are intended to help brokers understand the various independent business models. The more familiar brokers are with the concept of independence, the more likely they are to consider a move, according to research that Charles Schwab Corp.'s financial advisor business released last year.

Bank of New York Mellon Corp.'s Pershing Advisor Solutions also announced Monday a new practice management offering meant to help investment advisors evaluate the strengths and weaknesses of their businesses.

A Web-based questionnaire asks advisors about topics such as compliance, client communication and succession planning, among others. Advisors receive a report with recommendations from Pershing and can meet with a company consultant.

Also, in an effort to ensure client assets remain with the custody provider when an advisor sells his business, TD Ameritrade Holding Corp.'s institutional business is offering tools to help financial advisors determine the value of their businesses and find potential merger, acquisition or succession partners.

These offerings are aimed at different categories of financial advisors and are often minor adjustments to existing programs or efforts to catch up with competitors', says Bing Waldert, a director at Boston research and consulting firm Cerulli Associates.

Custodians grow by recruiting new financial advisors to their platform, attracting financial advisors from other custodians and helping teams already affiliated with them increase their asset levels.

"It's a competitive marketplace," Waldert says. Although one custodian is unlikely to introduce an offering that catapults it ahead of its current standing, firms do need to keep up with their competitors.

Schwab Advisor Services held about $590 billion in investor assets at the end of 2009, according to its most recent public filing. Fidelity's Institutional Wealth Services held about $430 billion in assets as of March 31. TD Ameritrade Institutional custodies about $100 billion in investor assets.