Fidelity is doubling down on digital advice: The firm is ending its alliance with Betterment Institutional and plans to announce its new digital platform, including plans for a digital offering for advisors.
At the same time, the financial services giant is in the pilot stages of developing a direct-to-consumer robo advisor, company representatives confirmed.
The advisor platform Fidelity is developing will be unveiled in early 2016, Fidelity spokeswoman Erica Birke says, and is intended to allow advisors to fully digitize their practices.
In a sign of just how rapidly the digital wealth management space is changing, just 13 months ago, Fidelity struck its partnership with Betterment, the industry's leading independent robo advisor. However, Fidelity look a big leap in February when it made a $250 million acquisition of eMoney Advisor, providing it with the industry's most popular financial planning software.
"After a year of engaging with Betterment Institutional and our clients/prospects on their digital advice needs, we have learned a great deal about what our clients are looking for in this space," Birke says.
David Lyon, founder of Oranj, a practice management application for advisors, speculated that the short relationship demonstrated the lack of traction the partnership garnered.
“Many advisors have made the decision that robo advisor-for-advisors solutions like Betterment Institutional are not in line with their business," Lyon says. "The automated investment management service just doesn’t provide enough value to the traditional advisor, and it appears that Fidelity has recognized that in their decision.”
Betterment spokesman Joe Ziemer says that it will continue to serve the Fidelity-affiliated RIAs on the platform, "and their RIAs are still more than welcome to adopt Betterment Institutional." Fidelity-affiliated advisors won’t have to transition off the Betterment platform.
Ziemer and Birke termed the separation as "amicable."
"We entered our relationship with Fidelity to learn about how a digital-first approach could improve RIAs' practices, and it's been a positive learning experience for both of us," Ziemer says, noting that Betterment is making its own investments into its institutional efforts with the hiring of the former co-founder of Upside, Tom Kimberly, as general manager of Betterment Institutional.
"Our biggest takeaway has been the need to develop a strong internal practice management team to support the increasing number of RIAs on our platform," Ziemer says. "Our vision is to be the leading digital-first custodian."
Fidelity's consumer-facing platform will be called Fidelity Go and will require a minimum initial balance of just $5,000, according to an ADV filing with the SEC. Some of the ETFs included in the platform will be provided by BlackRock’s iShares. Details on pricing were not disclosed.
Launching a retail version would enable Fidelity to join the ranks of major brokerage institutions with digital advice platforms such as Schwab, Vanguard and TD Ameritrade.
Fidelity Go will be “appropriate for an investor who likes to engage digital-first,” says Fidelity spokesman Rob Beauregard. “For decades, Fidelity has offered online tools and portfolio builders, but there are investors who lack the skill, will or time to manage their own investments. Fidelity Go will be an easy entry into professionally managed money for a low cost,” Beauregard adds.
The online advice market will top $650 billion by 2019, but assets will largely be split between the digital offerings of traditional discount brokerages and firms focused on defined contributions plans, a recent report by industry research firm Tiburon predicts.
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