I have written at length about the changing landscape created by robo-advisers and mega direct-to-consumer brands like the fund companies, banks and custodians. And while I don't have a crystal ball, I think
the acquisition of eMoney by Fidelity — for a rumored $250 million — might be a real canary in the coal mine moment for every independent adviser.
First, some important disclosures: We have had a very deep and good relationship with both Fidelity and eMoney and they have been an important part of our business for many years. Secondly, I have no inside information, so all of the following is pure conjecture on my part. It is my imagining of what might be compelling Fidelity to make this purchase, and how they might maximize the value of their purchase. However, it should be noted that
strategic acquisitions are often as much about avoiding future risks as maximizing future opportunities. So with that, here are some thoughts on why this purchase could be a watershed moment for our industry and how things could transpire over the next few years. With this important and sizable acquisition Fidelity gets three things:
1. A proven client aggregation system. Fidelity could use eMoney as a client onboarding tool for all of their direct retail clients and see all of their clients' assets beyond those held at Fidelity. Will Fidelity now be able to reverse engineer strategies and tactics to get what they can see, but don't hold?
2. Big data about all of the advisers on the eMoney system. This is a leap forward toward the Holy Grail. They will now know how much thousands of advisers have at every custodian and with every investment solution. That's really powerful in the hands of their sales people. What's more, past efforts by many, including Fidelity, to link all accounts have been clumsy at best. Could eMoney be successful on this front?
3. A scalable planning system. Fidelity now has a state of the art planning solution they can have fully integrated into their retail client experience. eMoney has one of the best user interfaces in the industry – could we see this drive other changes at Fidelity and beyond?
(Related: Why advisers are worried about the Fidelity-eMoney Advisor deal)
It was just a few short months ago that
Schwab announced its launch of a robo-adviser offering and Vanguard launched their in-house retail advisers, and just this month Merrill Lynch shared that over 60% of their advisers are using their Clear client app. With this acquisition, Fidelity is making a huge leap ahead of its mega retail competitors in the client experience for their retail clients. In my humble opinion, these retail giants are very swiftly engaging in an arms war that will pale in comparison to what we are seeing from the robo types like Wealthfront, Personal Capital and Betterment. They are a small fry compared to the fallout we might get from the rampant innovation occurring within these mega retail brands.
I could be completely wrong, but I am paid to be worried about the future, so my paranoid side looks out and imagines a set of what ifs…
• What if a huge retail firm were to offer a customized aggregated portal and planning tool to their retail clients through their massive network of in-house advisers?
• What if they layered it on top of a really functional and scalable investment platform?
• What if they could offer those services for 20 or 30bps profitably?
• What if the other big retail firms were launching their own version of a client self-directed solution as the starting point to expanding and deepening the tools their own retail advisers could offer?
(More from Joe Duran: What advisers can learn about making tough decisions from the Super Bowl's ending)
We have deep and important relationships with all of the big custodians and investment managers, we value the partnerships. I recognize that they are making smart decisions about how they continue to grow and evolve in a world with ever-changing threats. However, the fallout for all of us independent firms is very clear in my mind:
• We will need to be comfortable with cross channel conflicts amongst the vendors we use because we have created a unique moat around our client experience.
• We need to have a differentiated and unique client experience that is all encompassing, engaging and personalized. It will have to be human driven, but technology powered, for clients (what I referred to as
the bionic adviser in another post).
• We will need to spend big to keep it dynamic, adaptable and fresh.
• We will need to understand that pricing is going to have to reflect the amount of human time commitment and have adaptive pricing models.
• It's going to be expensive and time consuming and require a permanent spend to R&D.
I hope that those of you reading this who want to build a lasting firm are taking some of these big changes into account as you plan your strategy for the future, or it could be a tough decade ahead. So I could be wrong and none of this might transpire, but there is no downside to planning for this outcome since it will lead you to creating a really innovative firm regardless. And remember, as Andy Grove, former CEO of Intel, so aptly titled his bestselling book: “Only the Paranoid Survive.”
Joe Duran is chief executive of United Capital and author of “The Money Code: Improve Your Entire Financial Life Right Now.” Follow him @DuranMoney.
