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Fidelity’s 401(k) Revamp Targets Advisors

By Murray Coleman July 14, 2016

The traditional “big four” retail back-office providers for RIAs – Schwab, Fidelity, TD Ameritrade and Pershing – are facing increasing competition.

That’s particularly true for defined contribution retirement plan record-keepers, say industry analysts. Indeed, recent wealth management studies of U.S. custodians share a common thread: asset managers and insurance providers are battling to take a bigger share of a highly fragmented institutional marketplace.

One key theme seems to be a greater focus on improving technology platforms for advisors. Along those lines, Fidelity says it’s rolling out on a limited basis a major revamp of its FidelityConnect portal, which has been around in various forms for about 15 years.

By early next year the fund provider and RIA record-keeper says it expects to formally re-launch its site to about 6,000 advisors now using Fidelity to handle back-office tasks for corporate 401(k) and similar retirement plans.

In a June survey of leading DC record-keepers, PlanSponsor listed Fidelity as number one in assets by a wide margin. The rest of the pack was more closely contested among providers such as TIAA, Empower Retirement, Vanguard, Aon Hewitt and Voya Financial.

“Our DC platform was originally designed as an administrative site for plan sponsors,” says Phil Chisholm, head of product development at Fidelity for DC plans up to $100 million in assets. “So the old experience for advisors trying to tap into those resources was fairly narrow in scope.”

Josh Ulmer, an advisor and senior institutional consultant at Morgan Stanley in Portland, Ore., is helping to beta test the new technology. He believes other FAs like himself who work with plan sponsors will see a smoother, easier-to-use interface with some interesting new wrinkles than anything else now on the market.

“Before, we had to go into separate interfaces to link to each plan’s site,” says Ulmer, whose team manages nearly $1 billion. “Now, we don’t have to keep track of multiple logins and we can see summary information across all our plans.”

One nice feature he’s finding in the new software is the development of summary pages. These built-in “dashboards” are designed to give advisors “big picture” overviews of details such as individual plan assets, how much is held in different funds, aggregated data on cash flow activities and participation rates across different plans, says Ulmer.

Another big plus he’s finding with the new system is that his staff doesn’t have to manually download data from Fidelity’s computers to their own networks one plan at a time. Now, such data crunching and record transferring work can be done in a single push of aggregated buttons on FidelityConnect’s dash board.

“It’s just a little dashboard feature that you’d think would be almost a no-brainer for record-keepers to offer,” says Ulmer. “But it still isn’t common in this industry – even though it can make such a huge impact on an advisor’s productivity.”

James Sampson

Advisors working with small- to mid-tier retirement plans are likely to find the most upside from such upgraded technology, predicts Fidelity’s Chisholm. Along those lines, the U.S. sub-$100 million DC plan arena is where he sees most of the industry’s growth coming in the future.

It’s also a much more diverse part of the institutional marketplace, points out Chisholm. “As a result, we see an upgraded FidelityConnect as a real competitive differentiator for us in working with advisors and DC plans,” he says.

But not everyone is so optimistic. Jim Sampson, who helps to manage 140 different employer plans at Cornerstone Retirement Advisors in Warwick, R.I., says working in such a fragmented yet growing institutional marketplace can quickly turn any potential technology tweak into looking outmoded in relatively short order.

“I’ve been asking Fidelity for years to make these kind of changes – in our view they’ve been fairly slow to respond to the technological changes we’re seeing elsewhere in the DC market,” says Sampson.

A retirement plan specialist, his firm – which manages about $280 million and is affiliated with LPL Financial – works with 17 other DC plan third-party administrators besides Fidelity.

As a consultant to plan sponsors, not retail investors, Sampson’s view of the market is that Fidelity’s new upgrade only brings its online portal to an even keel with other major institutional platforms he’s come across.

The advisor hasn’t seen the finished product yet. Even so, he says “based on the concept alone of Fidelity bringing out a type of online dashboard” is “technology that every major record-keeper we deal with in the DC market already is offering to us.”

Still, Sampson says he welcomes Fidelity’s upcoming software revamps.

“A big part of my job working with plan sponsors is deciding whether a record-keeper’s technology is intuitive and useful,” he says. “If Fidelity can offer us a better mouse trap, then it’ll be a welcome innovation to a market that’s notoriously conservative and slow to adapt to new technologies.”