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Fidelity’s New Robo Ups Ante for Advisors

By Murray Coleman March 6, 2017

After launching its robo for retail investors last summer, Fidelity Investments is forging ahead on a revamped technology platform for advisors. By mid-year, the asset manager and financial services custodian expects to offer its 3,000-plus customer base of RIAs and brokerages a whole new set of online tools to manage client portfolios.

“We’re making some important changes here – this is a completely different platform from our retail (Fidelity Go) service and comes with several new features,” says Gary Gallagher, head of Fidelity Institutional’s digital-advice services group.

But Fidelity isn’t the only industry heavyweight trying to develop robo technologies for advisors, says Sean McDermott, an analyst with Corporate Insight in New York.

SigFig, which includes backing by UBS and Eaton Vance, is one such rival listed by the veteran robo analyst as already making significant inroads.

Another established player in U.S. wealth management is FutureAdvisor, McDermott adds. FutureAdvisor is owned by asset manager BlackRock.

“Fidelity might be considered as entering the RIA game a little late,” McDermott says.

Even so, he believes with a “large existing base of advisors,” Fidelity’s progress on the robo front will come as “welcome news” to many FAs using its custody and clearing services.

In fact, company officials started telegraphing their plans to develop an institutional robo late last year.

Although they’re still not saying what they’ll charge FAs, Gallagher suggests Fidelity’s automated service will be “on the low end” of current market rates, which range from 0.15% to 0.90% or more.

Two advisors who’ve been keeping abreast of preliminary testing of the project tell FA-IQ they believe Fidelity’s institutional-only robo will enter the market at an average cost of around 0.15% to 0.30%. Both asked for anonymity since they’re not authorized by Fidelity or other RIAs to disclose private conversations about the matter.

Fidelity’s upgrades will be delivered through its so-called automated managed platform, or AMP. Advisors will be able to customize “the risk questionnaire profiling process” before putting clients into 14 different model portfolios, Gallagher says.

The AMP is also being built with a host of different collaboration tools so that advisors can answer questions online and invite remote users to communicate over the phone.

The revisions are part of a broader effort to refresh Fidelity’s entire Wealthscape platform – the custodian’s general “gateway” for advisors to tap into a range of different digital account management and client reporting features.

Mike McDaniel

“Taken as a whole, our technology platform is being designed so that advisors have the option to seamlessly transition their online clients at a later date to become full-service customers,” Gallagher says.

David Edwards, president of Heron Financial Group, counts himself as one long-time Fidelity customer who is very interested in the AMP upgrade.

“One of the nice features of their new robo is that we’d be able to use it to plug and play into our core eMoney financial planning software,” says the New York-based advisor, whose firm manages $295 million.

Edwards, though, observes that as many as 20 different vendors are offering robos that in various forms could be adopted for institutional purposes.

One such robo he’s considering is powered by Riskalyze. This spring the developer of investment-risk-assessment software is planning to launch a new generation of its original Autopilot robo package.

The updated version will expand to work in a “multi-custodial” format and not just with TD Ameritrade’s systems, says Michael McDaniel, Riskalyze’s chief investment officer.

Autopilot is also being created to work with model portfolios by more than just CLS Investments, the program’s current outside manager.

McDaniel says he expects a beefed-up Autopilot to integrate with models run by more than 100 different outsourced managers.

But here’s the kicker that appeals to advisors like Edwards: The updated Riskalyze software is designed so that FAs can also integrate their own model portfolios into the robo process.

“We’ve automated the whole online investment process so that a professional can assess their clients’ appetites for risk, then put them into models of that advisor’s choosing – whether it’s designed in-house or by someone else’s staff,” McDaniel says.

The new Riskalyze robo’s price to FAs is being targeted at 0.10% to 0.15% a year, McDaniel adds.

“We’re focused on providing the choices that advisors really want – not some sort of prepackaged set of investments,” he says.