In through the back office door
The latest entry route to the lucrative wealth management business appears to be via the back office. Fidelity, which has provided technology services through its brokerage business to family offices for more than a decade, is now creating a stand-alone business that will provide family offices in the US with a platform offering technology-based solutions and wealth management services.
Fidelity joins the back-office experts – custodians such as Northern Trust and State Street – which are becoming increasingly aware of the benefits they can offer the ultra-high-net-worth investor or family.
According to Steve Martiros of family office forum CCC Alliance, the segment of $100 million-plus investors are decoupling their custody from advice and investment management and going directly to global custodians. "They [the custodians] benefit from being independent, and having the financial capacity to build suitable platforms to fit the individual. And they are not bound by legacy systems as private banks and full-service brokers often are," says Martiros.
He claims that investors are also not discouraged by being charged separately for the highly specialized service and realize they are paying for custody anyway as part of the bundled service with their broker or adviser.