Thoughts and Analysis
A recent Fidelity study concluded that only about 30% of advisors the company surveyed were “eAdvisors”—those who took advantage of key technologies. Why is this significant? Because Fidelity found a strong link between advisors’ use of technology and their success metrics. Such advisors boast median assets under management 40% higher than other advisors. They have 35% more high-value clients (those with $1 million or more). They have higher median AUM per client, and they have more Gen X/Y clients. Clearly, eAdvisors are more successful by every metric that was measured. That being the case, it would seem to be in Fidelity’s interest, as well as the interest of its advisor clients, to convert as many advisors as possible into eAdvisors.
Wealthscape has the potential to create many more eAdvisors for the Fidelity platform. By providing integrated performance reporting and a data platform with advanced analytics and by finally providing a robust, tax-sensitive rebalancing solution, Fidelity is filling some gaps in its current offering. Other capabilities, such as robust fee billing, proposal generation, integrated work flows, etc., could propel the Fidelity platform beyond the capabilities of what its competitors offer in the very near future.
Will advisors gravitate rapidly to this platform, or will they shy away from something so Fidelity-centric? It is too early to tell, but I suspect that for many it will be a great fit. Small to midsize broker-dealers who struggle to keep pace technologically can outsource a good deal of their technology to Fidelity going forward. Breakaway brokers who are used to having their technology managed for them by their B/D are likely to welcome this development as well. For independent RIAs, the picture is a bit more complex. If you already do most of your business with Fidelity and the company’s offering meets or exceeds what you currently have, Wealthscape will be a good option. Even those who value their technology independence and prefer a best-of-breed approach may be tempted to give Wealthscape ample consideration as long as Fidelity delivers on all the promise of deep integration, seamless work flows, etc. No pricing has been provided yet, but it is a good bet that the full Wealthscape offering will be very attractively priced.
Having said all that, Fidelity says the platform remains open, and third-party providers with long-standing Fidelity integrations are sure to respond with innovations of their own, which they will need to do in order to retain their clients that custody at Fidelity.
Wealthscape will initially appeal to some B-D clients, breakaways and some RIAs transitioning to Fidelity. I don’t envision a mass exodus on the part of current Fidelity RIAs to a Wealthscape-only environment. In the longer term, however, when a firm is looking to update its existing technologies, I suspect Wealthscape will receive serious consideration from a portion of the Fidelity RIA population.
If Wealthscape gains traction, as I expect it to, it will be interesting to see how competitors respond. Will they alter their models and offer more propriety technology products? Only time will tell, but the battle among the custodians for technology supremacy shows no sign of abating anytime soon.