Fidelity Targets Balance Between Technology and Personal Attention

“Whatever happens to Social Security I have not heard one prediction that it will increase,” said Bob Reynolds, vice chairman and COO of Fidelity, in summing up the climate behind the financial industry’s increased focus on wealth management. “The responsibility for retirement income has been shifted back to the individual.”

Fidelity is focused on helping baby boomers prepare for retirement, said Gail Graham, senior vice president in charge of the firm’s Private Access program, which focuses on clients with $1 to $5 million, a number that is pretty large when the value of housing in the nation’s priciest zip codes is included.

While many traditional asset management firms are responding to the high costs of providing advice by raising the minimum holdings they require from clients before allowing them to speak to a financial advisor, Fidelity has focused on using technology to provide a scalable and cost-effective way of serving its clients.

“Technology doesn’t substitute for people; it complements the service that customers are looking for,” explained Graham. “Our clients do more on their own using the Web and tools we provide them, but they still touch back to an individual from time to time at critical decision points. The combination of high tech and high touch is really important because it means that for the client, doing business with Fidelity is a lot cheaper. Our clients pay about one-third what traditional firms charge.”

Industry research shows that many investment clients are concerned about fees that firms charge for managing their assets.

“A lot of clients are unhappy with their providers and are questioning the fees, while most wealth management firms are struggling with their margins as their costs are rising and they are unable to cut expenses,” Graham said.

The typical Private Access client at Fidelity is 57 and uses the Web frequently. Fidelity offers a Web-based retirement planning tool which, she said, clients love.

Like AdviceAmerica customers (see page 17-18) Fidelity provides a mix of Internet tools with personalized planning.

“They tend to play with the tool on the Web and then do the actual plan with their advisor,” said Graham. In the first six months of this year, Fidelity did 140,000 retirement plans; 100,000 of them were over the Internet. Private Access clients have an advisor assigned to them, while clients with smaller holdings can work with an advisor they reach through Fidelity’s call center.

Graham said that clients who work with advisors transfer an average of 20 percent more assets to Fidelity.

Fidelity makes the most of its technology. Long ago it integrated its systems so it can provide a comprehensive view of client holdings.

“Because we are big and have a massive technology platform, we can make connections,” said Graham. “The same tools that are available for wealthy people are available to people with less. We build it once and we build it big. We have made so many significant technology investments that other firms are years behind.”

The top priority, after ensuring that clients are saving enough, is to keep them focused on asset allocation and periodic rebalancing.

Because it uses so much technology, Fidelity can help clients rebalance their portfolios on a regular basis.

“We can work with a client cost effectively to review a portfolio every year, or make an adjustment if they have a child or decide to buy a home. Clients are constantly tweaking their plans. But having a plan really helps clients keep focused on their assets for the long term. We encourage clients to find a cost-effective way to plan, invest and manage for the long haul, not just one trade or one planning session.”