Fidelity recently announced the initial rollout of their new total advisor platform, beginning a multi-year effort that will continue through at least 2018. The goal of the new platform is to enable the digital financial advisory practice. There are a number of important aspects to this rollout.
The first and perhaps least sexy aspect of the new total advisor platform is the combining of all the capabilities of the current Fidelity Streetscape® and WealthCentral® workstations into a common infrastructure for these two workstations requiring only one single access point called Wealthscape. The transition to Wealthscape will be complete in December 2016, and has been underway for the last two years so as to minimize impact on clients. All existing functionality will continue, but with added capabilities. As a web platform, Wealthscape updates will take place seamlessly for firms.
Although this platform upgrade sounds mundane, it is significant for a number of reasons. First, it creates technology scale and efficiencies for Fidelity. Going forward, they will only need to maintain one technology platform, and their employees will only be required to service, maintain and upgrade one platform. By the same token, the institutions that clear/custody with Fidelity will have a single point of access. Previously, dually registered advisors, for example, might have had to conduct a portion of their business on each system. This meant that the institution needed to maintain two systems with all of the inefficiencies that entails. Now, only one is required.
A much more enticing aspect of the new total advisor platform is the Fidelity deep integration between Wealthscape and the eMoney emX suite of products. This has the potential to enhance the investor-advisor experience. Although many advisors already use eMoney software, the deep integration with Wealthscape will enable them to move swiftly from planning into areas requiring brokerage integration, such as account opening, funding and trading.
The emX suite of products offers a personal financial management portal that includes views into the household balance sheet, planning tools and secure document storage, and financial planning solutions. These include cash flow-based planning, needs-based goal planning and estate planning. Integrations between Wealthscape and the emX suite include: a collaborative vault investors can use to automatically access copies of their Fidelity brokerage account documents; investor self-service tools like eDelivery enrollment (currently only available to broker/dealer clients) and integrations with the Fidelity brokerage platform for account maintenance as well as integrated advisor workflows that link the two platforms together. Initial brokerage integrations with eMoney focus on the investor experience and are in use by more than 100 firms since becoming available in September 2016. Additional integrations will become available throughout 2017.
The value of the eMoney/Fidelity integration should be self -evident. Those advisors who custody at Fidelity and use eMoney software will be able to seamlessly move from the prospecting phase to the data gathering phase through the planning phase right to the implementation phase within the same platform. Furthermore, eMoney aggregation will give both the advisor and the end client a more holistic view of the client’s total financial picture.
DIGITAL ADVICE SOLUTION
Perhaps the most exciting portion of the new Fidelity/eMoney offering is the digital advice solution for advisors and their clients. Fidelity Clearing & Custody Solutions is launching WealthscapeSM Digital Advice Solutions, which includes a custom-built digital advice offering for advisors, as well as connections to other third-party digital solutions through deep integrations or APIs built for digital solutions.
The custom-built digital advice solution, Fidelity Automated Managed Platform (AMP), co-developed with eMoney, will begin its pilot in late Q1 2017. It is the first fully integrated planning-centric digital financial advice platform delivered through financial advisors. Unlike many competing products, AMP is financial goal-centric. AMP will provide a streamlined and fully digital experience for investor onboarding, goal setting, and monitoring powered by eMoney, with straight-through account opening and funding through Fidelity’s brokerage capabilities. Advisors will also be able to evolve clients, when ready, from an automated to a collaborative advised experience – without changing their technology platforms.
AMP will offer flexibility, allowing the advisor to remain the investment advisor of record on the account. Firms can craft their own Investment Profile Questionnaires, selecting from a range of investment portfolios created by sub-advisor Geode Capital Management, and then serve as the investment advisor on the portfolio. Fidelity AMP will also allow advisors to manage their automated and traditionally advised portfolios side-by-side.
Investors working with advisors will be able to access self-service tools, like an automated onboarding workflow and dynamic financial fact-finding process, through a totally digital, intuitive interface. As these clients’ financial lives become more complex, advisors will have the opportunity to create a path toward a more collaborative, traditionally advised experience. The product development roadmap calls for Fidelity Clearing & Custody Solutions to offer additional third-party digital solutions, based on client interest, through APIs created for digital solutions, as well as select deep integrations.
AMP is well suited to capitalize on a number of industry trends. According to a 2015 Gallup Poll (June 29, 2015, Wells Fargo/Gallup Investor and Retirement Optimism Index Survey), modern investors expect an advised experience that looks like the rest of their digital lives. 61% of investors less than 50 years of age and 83% of investors less than 50 years of age rate digital tools as important; nearly two in three prefer to get advice from both human and digital sources (citation). Furthermore, according to McKinsey & Company, (The Virtual Financial Advisor: Delivering Personalized Advice in the Digital, June 2015) advisors mistakenly underestimate the actual size and growth of the digital market. 40%-45% of affluent consumers who switched their primary wealth management firm in the past 24 months moved to a direct, digitally led firm-in many cases choosing to work with a phone based advisor at those firms. In addition, according to McKinsey, institutions launching virtual financial advisors have seen a 140% increase in positive customer ratings.
INTEGRATED PORTFOLIO MANAGEMENT TOOLS
Fidelity will offer an integrated suite of portfolio management tools, WealthscapeSM Portfolio Tools, to help clients more efficiently manage portfolios from beginning to end, fueled by a new consolidated data platform. Wealthscape Portfolio Tools is a modular suite and includes tools for: proposal generation, modeling, advanced rebalancing, performance measurement and fee billing, and will be delivered separately and in waves starting in 2016 and throughout 2018.
WealthscapeSM Performance Measurement, part of Wealthscape Portfolio Tools, is currently in use by 15 piloting firms representing more than 150,000 accounts. Performance Measurement will be generally available in 2017. While it will only be available for Fidelity accounts initially, the plan calls for multi-custodial capabilities by the end of 2017.
There are a few planned aspects of this reporting tool that make it intriguing. One is that Fidelity and eMoney plan to offer not just time weighted and money weighted performance calculations, but also performance calculations against financial goals. This is something that many advisory firms have been demanding for years. In addition, with the aggregation and data capabilities that Fidelity is building out, it could give them the ability to provide some performance numbers on held-away accounts as well.
Although no pricing information has been provided for the performance measurement services yet, Fidelity has indicated that they are well aware of what the competition charges, and they plan to price aggressively. We suspect that a two-tier pricing system is likely. For accounts that are custodied at Fidelity, the incremental cost of reporting on each additional account should be relatively low, so pricing for those accounts could be very aggressive. Since there will be real costs to Fidelity to report on held-away accounts, the pricing there will most likely be higher, but still competitive.
One question that often arises is: Will the performance engine and the reporting software address alternative investments. I’ve been told that it will, but to what extent is not clear at this time.
WealthscapeSM Advanced Modeling & Rebalancing, also part of Wealthscape Portfolio Tools, will pilot household rebalancing at the start of 2017, followed by asset class rebalancing later that year. Tax sensitive rebalancing capabilities will follow.
Powering Wealthscape Portfolio Tools, Fidelity will deliver a multi-custodian consolidated data platform. The platform will provide a holistic view of wealth, for both the advisor and for the client, and it will provide rich analytics to further enhance the advisor/client relationship. The consolidated data platform with Fidelity brokerage data powering Wealthscape Performance Measurement is now in pilot with another 25 firms into 2017. Multi-custodian capabilities are targeted for late 2017.
Fidelity Clearing & Custody Solutions will continue to offer its Managed Accounts Solutions platform, powered by Envestnet, to clients. Fidelity will continue to integrate additional third-party portfolio management tools.
All of the functionality cited above will be delivered through WealthscapeSM Automated Workflows and Advanced Analytics to help home offices and advisors improve efficiencies, grow their businesses and manage risk. WealthscapeSM Regulatory Early Warning, an advanced analytics offering, allows compliance personnel to identify and track regulatory content that may impact their firm, all in one streamlined user interface. Sixty-one percent of Fidelity broker/dealer clients have already signed up for the offering since it was launched in July 2016. The next phases include plans to create a central operations hub for home office professionals and smart analytics and data visualization for the advisor.
Based upon what we’ve seen so far, the Fidelity/eMoney collaboration will deliver significant benefits to both advisory firms and broker/dealers that do business with both Fidelity and eMoney. Firms that custody with Fidelity but do not work with eMoney, or firms that work with eMoney but to not custody with Fidelity will each receive many new features and capabilities, but for now, the greatest benefit will accrue to firms that use both Fidelity and eMoney because, at least initially, the very deep integration achieved by the two will not be available through other third parties. Over time, however, third-party providers will be able to tap into Fidelity and/or eMoney API’s to achieve similar results; at least that’s what the plan currently calls for.
GAPS TO FILL
Although I am very impressed with the joint Fidelity/eMoney effort, there are a few gaps to rapidly fill. One is the need to integrate with third-party risk assessment packages. Many advisory firms and broker/dealers have been investing in solutions from firms including Riskalyze, Finametrica and AdvisoryWorld, and they would clearly prefer to use these tools rather than the built-in Fidelity tool. This would appear to be a high priority item.
Second, regarding AMP, although many advisors are content to outsource portfolio construction and maintenance to Geode Capital Management, a significant number of firms believe that their own investment process is a differentiator, one they refuse to relinquish. Fidelity will have to enable advisory firms and broker/dealers to create and manage their own AMP portfolios.
Third, although Fidelity has announced full digital processing for all AMP accounts, they have not yet announced it for all other advisor initiated accounts at Fidelity. That situation will not be sustainable. Once you enable digital processing for some of my accounts, I want it for all of them. This appears to me to be another high priority matter.
Finally, for this platform to reach its full potential, some other deep third-party integrations will be necessary. Although eMoney justifiably has many fans, a good number of Fidelity clients have other preferences for financial planning software. CRM is another area where integration will play a vital role. There are other software integrations that firms will find critical to their businesses that Fidelity and eMoney cannot currently provide; those needs must be addressed through integration.
If seems clear to me that the competition among custodians and clearing firms to provide superior technology to advisors is heating up. The eMoney/Fidelity combination is a formidable one, and competitors will need to respond.
As I indicated in an article last month, other firms are attempting to broaden their role from that of a software provider to that of a platform. The firms referenced in that article are certainly not the only ones trying to offer a more complete platform. Morningstar, Advyzon, and many others are pursuing similar strategies. While it is too early in the game to predict who the big winners will be, privately-held Fidelity, with its substantial resources, and eMoney, with its spirit of innovation, look to be among the beneficiaries of current industry trends.