Fidelity says bigger broker teams going independent

By Joseph A. Giannone

NEW YORK, Oct 14 (BestGrowthStock) – Fidelity Investments on
Thursday said while breakaway brokers may be shrinking in
numbers this year, they are much bigger in terms of the client
assets they manage.

In the first nine months of this year, nearly 120 brokers
or teams with a combined $8 billion in assets, left big
brokerages to form independent firms that use Fidelity for
custody services. In terms of assets per breakaway, that is a
26 percent increase.

“The movement of these large breakaway teams is being
fueled by the creation of new independent business models,”
said Michael Durbin, president of the Fidelity business that
caters to registered investment advisers (RIAs).

Among Fidelity’s class of 2010, 45 percent launched their
own RIA firms while 55 percent joined either an independent
broker dealer or existing RIA. Five of the teams each managed
more than $500 million in assets.

In one example, a team of former Morgan Stanley Smith
Barney brokers on Thursday announced the launch of Sapient
Private Wealth Management. The Eugene, Oregon, team created the
new firm with help from RIA consolidator Focus Financial
Partners.

The Sapient team led by Greg Erwin, Alan Rexius and King
Martin previously managed more than $500 million for clients in
the Pacific Northwest. The new firm plans to expand throughout
the region by pursuing new clients, acquisitions and recruits.

The movement of brokers away from the largest U.S.
brokerages peaked in the wake of the 2008 financial crisis, as
more than 1,500 advisers abandoned hard-hit Wall Street firms
to join independent brokers and RIAs in search of higher
payouts, fewer client conflicts and stability.

The trend was loudly trumpeted by Fidelity, Charles Schwab
Corp (SCHW.N: ) and other firms that provide custody and other
services to independents.

Executives at Bank of America’s (BAC.N: ) Merrill Lynch and
Morgan Stanley (MS.N: ) (Read more about the money market today. ) earlier this year played down the trend
as immaterial to their dominant share of the overall market and
observed that the pace of defections had slowed.

Fidelity’s Durbin, though, contends that increasingly
larger broker teams are considering moves and weighing a
growing number of breakaway options: from launching an RIA or
brokerage firm to joining forces with an established RIA or
brokerage through match-making services.

The number of private investors and consolidators like
Focus Financial and Hightower Advisors, poised to invest in
RIA’s, is also growing.

In contrast to the 2009 wave and worries about the survival
of the big banks, breakaways now are driven by the availability
of investment capital, by the search for ways to monetize a
successful practice, and by the improvement in technology
accessible to independent firms.

Durbin contends that as larger teams depart from the big
firms, it lends more credibility to the trend and encourages
more brokers to consider making a move.

“Clearly we’re moving past the fear-driven, crisis phase of
the breakaway movement,” Durbin said in an interview. “The next
phase is here. Brokers are being thoughtful, more strategic
about their options.”

(Reporting by Joseph A. Giannone; Editing by Bernard Orr)

Fidelity says bigger broker teams going independent