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Fidelity Will Charge Consultants for Access to Advisors

July 5, 2018

Fidelity Clearing & Custody Solutions’ new digital referral program will connect financial advisors to industry consultants and charge 18% to consultants for any contracts awarded, InvestmentNews writes.

Fidelity has been piloting ConsultSpace since February and expects to launch it in September, according to the publication.

The platform, run by a third-party firm, Boston-based Catalant Technologies, works much the same as typical referral programs offered by custodians, which offer advisors a pre-screened list of consultants in the fields of marketing, regulations and technology, InvestmentNews writes.

So far, 50 consulting firms are on board, Kim Sheehy, vice president of practice management and consulting at Fidelity, tells the publication. Sheehy says she hopes to recruit up to 100 companies, according to InvestmentNews.

What sets Fidelity’s platform apart is the 18% markup, the publication writes. And during Catalant’s conference call in May, consultants were encouraged not to reveal the markups to advisors on the platform, two sources who participated on the call tell InvestmentNews. That’s not sitting well with some industry consultants, who declined comment to the publication.

Knut Rostad, president of the Institute for the Fiduciary Standard, tells InvestmentNews that while he sees no problem with charging consultants a fee for using the platform, it “is quite audacious to say, ’Don’t tell the advisers this is what we’re doing.’"

A spokesperson for Catalant tells FA-IQ insists that in the ConsultSpace terms of service, Catalant makes it clear there is a fee included in the project costs: “The ConsultSpace Platform is free to join, and there are no charges to post Projects or review Consultant profiles. Instead, Catalant collects fees for each Project that is completed via the ConsultSpace Services."

Sheehy confirms that the consultants will be charged a fee and tells the publication that it’s presented as the cost of marketing and promotion. Mike Monagle, vice president of the solutions business at Catalant, tells InvestmentNews that consultants are paying for access they would not otherwise have and the fee will be absorbed by them if they are to remain competitive.

"The fee is baked into the proposal. If a consultant justifies slapping an 18% fee on top of their price, they could price themselves out of the market,” he tells the publication.

A spokesperson for Catalant tells FA-IQ the company "advises consultants to propose one fee, which should include their professional fees as well as the marketplace fee. The 18% fee should be considered a cost in place of traditional business development and marketing costs that a consultant would incur if they didn’t have access to the ConsultSpace marketplace.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.