Products December 8, 2022

Fidelity Moves Adviser Services Out of Institutional Investing to Align with Brokerage and Technology

Fidelity said it has moved client services and technology out of institutional investment to improve innovation and speed to market for in-demand digital services.  

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Fidelity Investments said it has shifted its adviser services and technology out of its Fidelity Institutional division and closer to brokerage and technology operations to meet client demand for digital technology and scale of services.

The investment manager and service provider is moving its clearing and custody sales, relationship management, service and operations teams under the same umbrella as its Fund and Brokerage Operations and Technology unit, a spokesperson said in a statement. The moves take these teams and technology out of Fidelity’s institutional investing division to focus that business unit on institutional investment management.

The move allows for “greater technology innovation and speed to market in an industry where clients value scale, digital technologies, and differentiated service,” the spokesperson said. “Fidelity remains committed to the clearing and custody business and our clients, and we have a very strong team in place.” 

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The decision comes as financial advisement becomes more digitized and automated with the advancement of technology and savviness of users. The company as recently as last month signaled investment in its adviser technology platform by enhancing its account onboarding services, open architecture platform for advisers, and its Wealthscape brokerage platform.

“By realigning these focus areas in into two separate divisions, we aim to deliver a better client experience through a greater level of dedicated resources,” the spokesperson said.

Adviser services and technology will now align with Fidelity’s fund and brokerage operations and technology business, which is run by Ron DePoalo.

Meanwhile, Vadim Zlotnikov has been named the new head of Fidelity Institutional with a “singular” focus on institutional investment management solutions. Zlotnikov was most recently president of Fidelity Asset Management Solutions, and before joining Fidelity in 2018 spent 25 years at AllianceBernstein in various leadership roles, the spokesperson said.

“For our focus on institutional investment management solutions, Fidelity Institutional has a reshaped strategic focus as a fully integrated, open architecture investment management distribution business that delivers investment-led solutions, capabilities, and insights to the intermediary and institutional markets,” the statement said. Fidelity Institutional has $3.5 trillion in assets under administration and 2,724 employees, according to its website.

Zlotnikov replaces Mike Durbin, who was president of the division for five years and now moves into a senior adviser role, continuing to report to the Chairman and CEO Abigail Johnson. Durbin will remain active in the wealth management and institutional client space, the spokesperson said.

The Markets December 7, 2022

Stock-Trading Platform Robinhood Launches IRA with 1% Match

Robinhood, which came to fame during the pandemic stock-trading boom, enters the retirement space via an IRA with an automatic 1% match.

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Robinhood, which made its mark during the pandemic when retail investing in both stocks and cryptocurrency was booming, has entered the retirement savings space with an individual retirement account offering a 1% match to whoever uses it for at least five years.

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Robinhood said in a blog post Tuesday that it opened a waitlist for Robinhood Retirement, a traditional or Roth IRA that would match 1% of every dollar contributed even if the investor does not have an employer. The commission-free online broker is positioning the product for gig workers or part-timers who do not have access to a workplace retirement plan.

“People are relying on themselves. They’re taking on gig work, side hustles and building their own companies,” Robinhood said in the post. “Tools that can make it easier to save for retirement—such as automatic transfers from a paycheck or contribution matching—are often not available to the gig economy.”

About six out of 10 households in the U.S. had some kind of retirement plan, as of mid-2021, according to the latest research from the Investment Company Institute. Of those who had plans, 37% owned an IRA or Roth IRA. Much of the growth in IRAs, however, comes from people rolling over savings from employer-sponsored plans, the ICI said, with 57% of traditional IRA-owning households indicating that their investment contained rollovers from employer-sponsored plans.

The current Internal Revenue Service cap on annual IRA contributions is $6,000 for taxpayers younger than 50; for those 50 or older, the cap is $7,000, though it will increase to $6,500 and $7,500, respectively, in 2023. Based on that maximum, people investing in Robinhood’s IRA could receive up to $60 from Robinhood in matching contributions for 2022. Matching funds do not vest to the account owner until they have kept funds in the account for at least five years.

Robinhood is entering the retirement space after seeing its seventh consecutive quarter with declining revenue in the third quarter of 2022 from its core business as an investing platform that also offers educational content and guidance.

The online broker is not charging a commission or custodial fee for the IRA investment. It will make money in the same way it does from its brokerage accounts, including margin interest, income generated from cash and offering its gold subscription, a spokesperson noted via email. The IRA plan might also be the first of future offerings in retirement, according to the company.

“We think this is a building block for other products down the road,” Sam Nordstrom, lead product manager for Robinhood Retirement, said via email.

“This product will provide a new, valuable touchpoint with customers looking to open a new retirement account, roll over an existing IRA or take their first steps in long-term investing.”

Customers using the Robinhood IRA can choose to invest in stocks and exchange-traded funds, both equities and fixed income, through either a traditional IRA or Roth IRA. They can customize their own portfolios or do so through Robinhood’s in-app recommendations.

The brokerage does not offer access to money market accounts, though the company is continuing to explore new assets to make available to customers, according to a spokesperson.

Investors who sign up for early access via Robinhood’s waitlist will be able to use the service on a rolling basis in coming weeks, the company said.

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