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Fidelity buys eMoney Advisor, but is it too much to chew?

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3 February 2015
William Trout
The wolves have been circling eMoney Advisor for some time now. But it is Fidelity Investments, and not some pinstriped P/E firm, that has gobbled up the financial planning lamb. Should we be surprised? For the past few months, the Fidelity strategy team has been working overtime to buttress the firm's position in the shifting wealth management universe. The announcement of a partnership with automated investment firm Betterment last fall was followed quickly by a tie up with online financial planning firm LearnVest. Now the boys from Boston are diving into the real-life planning space by acquiring a top-tier vendor. For Fidelity, the logic behind the acquisition is unassailable:
  1. Fidelity gets an important new touch point to the end-client, thus making the firm and its advisor network more relevant. As I discuss in my previous blog post, financial planning software has given new life to the advisory relationship by allowing clients the means to input data and visualize its impact on their financial trajectories.
  2. Financial planning has become a core offering as demographics and the embrace of goals-based investing post-crisis have brought issues of retirement income and wealth transfer to the fore. The software plays a key role by helping advisors to tell clients how far along they are to their plan goals at any given point in time, and to adjust client portfolios in response to changing needs.
  3. In our digital age, data has emerged as an increasingly strategic asset, and what better way for Fidelity to get a leg up on rival custodians? Do we really suppose Fidelity will not want access to the information submitted via client portals? Or a peek at the holdings of the 3/4 of RIAs that use eMoney but don't custody with Fidelity?
The rub here is that these RIAs may not take the acquisition lying down. They may feel like second-class citizens under the new regime as well as pressured to move their assets. Such sentiment represents a real risk to Fidelity. Because if eMoney client firms vote with their feet, then what is the acquisition worth?

Comments

  • Great article.