Products March 17, 2010

Fidelity Institutional Centralizes Services to Advisers

Fidelity Investments has created a Client Experience organization within its institutional division in order to meet the “evolving demands” of independent advisers, broker/dealers, traders, and family offices.
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The unit will be headed by Maggie Serravalli, reporting to Gerard J. McGraw, president of Fidelity Institutional. Most recently, Serravalli served as executive vice president, Client Experience, for Fidelity’s Operations and Services Group. In her new role she will continue to be responsible for the client management and client service teams of Fidelity’s brokerage business.

Fidelity said the Client Experience organization will work across each of Fidelity’s institutional businesses—Fidelity Institutional Wealth Services, National Financial, Fidelity Family Office Services, and Fidelity Capital Markets—to develop and implement service strategies to support institutional clients. The organization will help clients from the initial sales process to day-to-day service interactions and ongoing relationship management, the firm said.

The first step is to roll out new service teams for independent adviser clients of Fidelity Institutional Wealth Services. The teams comprise a client service manager and professionals focusing on key areas, including transfer of assets, new accounts, and money movement.

Fidelity said the new organization will make it easier for Fidelity clients to conduct business in multiple channels, from fee-based registered investment advisers (RIAs) to hybrid broker/dealers. After an initial pilot period, Fidelity said it is rolling out the model to its RIA clients throughout 2010.

Data & Research March 17, 2010

Target-Date CTFs Taking Hold in the DC Market

Collective trust funds (CTFs) are experiencing a renewed interest over the last few years in the defined contribution landscape, according to the latest retirement-focused research from Cerulli Associates.
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Target-date CTFs are taking hold due to their low fees, flexibility, and fiduciary structure and as a result, these products are poised for growth, Cerulli said. The latest findings of an ongoing survey of asset managers that captures CTF metrics and opinions reveal that asset managers are largely developing CTFs because of client demand, and they are most concerned about competition from their peers.     

Cerulli explained that the structure of CTFs gives them a particular advantage over mutual funds in target-date products.  Banks that act as trustee of a CTF by definition must act as fiduciaries for the fund’s assets; therefore, if pending regulations force investment managers to have greater fiduciary responsibility over target-date funds, CTFs will have an advantage over mutual funds as they are already providing this service, according to the press release.     

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Another advantage CTFs have over mutual funds is the added flexibility to invest in alternative asset classes, such as direct real estate, according to Cerullil. CTFs could invest in non-correlated asset classes—making them a better single-fund solution for target-date investors.     

However, Cerulli noted that only a few target-date CTFs are using alternative investments, perhaps because the market is still young, or trustees are reluctant to take on additional fiduciary risk.     

Cerulli also found that product developers working to build a CTF business for legacy ’40-Act fund companies are poised to have a good year. In a recent Cerulli survey, 29% of respondents expect CTF asset growth in 2010 to increase by 20% or more and 53% believe it will increase by 10% to 20%.

While Cerulli believes target-date CTFs are poised for success, it is difficult to predict the future of these products without more information from CTF providers. CTFs have historically disclosed very little about their products to research firms, and Cerulli encourages firms to participate in industry surveys and databases to increase transparency in this industry.

More information about the report is available at www.cerulli.com.

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