Products December 9, 2010

Fidelity Offers Guidance for Advisers Going Independent

Fidelity has launched a program, “Options for Independence,” to help breakaway brokers understand the range of options available to them when going independent. 
Reported by

Fidelity created the program to address the needs of the growing number of advisers who are deciding to launch an independent registered investment adviser (RIA) or independent broker/dealer firm or to join an existing firm.   

The program consists of an enhanced client service model to further strengthen and streamline the support of independent firms that conduct commission- and fee-based business at Fidelity. The model features a dedicated client-experience leader who will work with advisers to help address each client’s distinct end-to-end service and processing needs.

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Complementing the client service model are four educational resources, which cover such topics as:

  • A white paper, “Options for Independence:  The Evolving Landscape”: Provides brokers in-depth analyses of the different independent models as well as the business and economic considerations, such as being a business owner versus an employee. The white paper also identifies best practices to consider when making the transition, including the importance of retaining legal support and identifying a custodian.
  • Business model consultation: Offers a high-level overview of different independent models, as well as questions that brokers should ask themselves when considering independence.  It also provides an overview of how Fidelity works with breakaway brokers to help understand the range of factors that may affect their ultimate decision.
  • Considerations before joining a firm: Identifies eight different factors for brokers to consider before joining an established RIA or independent broker/dealer, such as assessing the cultural fit and gauging the deal structure.
  • Considerations before becoming an RIA: Identifies 12 different factors for brokers to consider before starting an RIA, such as understanding the financial implications of establishing a firm and building a brand.
In Practice December 9, 2010

Asset Fees for Most Alternatives Dropping

Asset management fees for most non-traditional asset classes have fallen, following increased scrutiny from cost-conscious investors, according to a report by Mercer.
Reported by

A Mercer news release about its latest fee survey said, in particular, fees for hedge funds, private equity, infrastructure and real estate have all decreased, while charges for traditional asset classes have varied, with some increases observed in long-only equity and fixed income strategies.

Divyesh Hindocha, Global Director of Consulting for Mercer’s Investment Consulting business, said: “The impact of the financial crisis continues to be felt by companies and investors. Although not universal, subdued investment returns have taken the edge off many alternative asset products. Combined with an increased focus on operational costs this trend has put growing pressure on asset managers to reduce the complexity of their products and lower their fees in the pricey alternatives arena.”

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According to Mercer, global emerging markets equity remains the most traditionally expensive asset class category, with median fees averaging around 1% – up from 0.90% in 2008. Small cap equity also continues to be an expensive category with fees averaging around 0.89%. Global and regional equity strategies average 0.70%, while fixed income continues to be the cheapest traditional active asset class with average fees around 0.35%.

With an average fee of 0.68% pooled funds are more expensive than segregated fees across all comparable mandate sizes, Mercer found. There was no change in average fee levels for pooled vehicles between 2008 and 2010 – across all mandate sizes. Average fees for mandate sizes of $25 million have decreased where for mandate sizes between $100 million and $200 million, average fees have increased.

When comparing the data by regions, Canada is the least costly, with average fees of around 0.3%, according to the study. The UK and Australia follow with average fees of 0.46% and 0.47%, respectively. Emerging markets remains the most expensive, at around 0.87%, with Asia-Pacific a close second at 0.83%. Japan, Europe and the U.S. all range between 0.57% and 0.7%.

The study is a bi-annual report on fee data on more than 20,000 asset management products from over 4,000 investment management firms.

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