Asset management giant Fidelity Investments Canada ULC is launching Fidelity Wealth ULC, a new wealth management platform targeted at advisors thinking about retiring.
Eugene Boakye, managing director of Fidelity Wealth, said the firm is aiming to be “ready and operational” later this year and to transition their first book of business early in 2025.
Fidelity Wealth received approval from the Canadian Investment Regulatory Organization to operate as a mutual fund dealer and investment dealer on Wednesday.
The firm is hoping to attract advisors who are looking to retire in the near term, and isn’t focused on advisors from any particular channel.
“We don’t know whether we’re going be a better fit for the mutual fund channel or [securities channel],” Boakye said. “We just know there’s a need, and so that’s part of our strategy — to take a slow approach.”
Books from retiring advisors would be transitioned to mid-career employee advisors, which Fidelity Wealth plans to hire. So far, the firm has one such advisor on board.
“We want to make sure that there’s a proper transition in place,” Boakye said, with Fidelity Wealth open to transitions lasting six, 12 or 24 months, for example.
These transitions would include “multiple joint meetings to get to know the client, understand [their] situation [and] leaning on financial planning while we have the retiring advisor with us, to really get an understanding of that client as if we’re starting from scratch,” he said.
Boakye acknowledged many dealers have succession programs for their advisors. However, Fidelity Wealth would be an alternative for those “who aren’t comfortable with either the advisor pool they have to transition their book to or, potentially, a small subset of dealers that they might not be comfortable transitioning their books to.”
Charlie Spiring, founder and chair of Wellington-Altus Private Wealth Inc. in Toronto, believes Fidelity Wealth will mostly be of interest to mutual fund dealer advisors. “Some of those [advisors] have less line of sight on opportunities of how they could monetize their books. And some of them will go [to Fidelity Wealth].”
As a dual-registered firm, Fidelity Wealth “can draw from the independent dealers, banks and the insurance dealers as well. What a tremendous pipeline,” said John Cucchiella, president of SMEx Advisory and partner at First North Consulting.
“I’m not hearing that it has been a challenging market to sell a practice,” Cucchiella added. “There is always a buyer, but there’s [sometimes] a misalignment or false expectation of what a book is valued at. It will be interesting to see what valuation [Fidelity Wealth] decides to apply to a book purchase.”
Fidelity’s research shows there are more than 16,000 financial advisors who expect to retire in the next decade, with close to 40% who are 55 years or older, the firm said in its release announcing Thursday’s launch.
Boakye said he doesn’t believe Fidelity’s entrance into the distribution space will create competitive friction with firms that already work with Fidelity’s other divisions.
“If you look at this new legal entity, [Fidelity Wealth] is completely separate from our clearing business and from our asset management business,” Boakye said. “The same level of service and partnership [you’ve] gotten as an advisor or dealer from our investment arm of the business is going to continue.”
Kish Kapoor, president and CEO of RF Capital Inc., the parent company of Richardson Wealth, said Fidelity Wealth’s launch is “a good thing for the independent system.”
“It just raises the bar for all of us and certainly creates awareness of options for every one of us relative to working at a bank,” Kapoor said. “They see what we see.”
The fact that Fidelity Wealth will use Fidelity Clearing Canada for its clearing and custody services will also benefit Richardson Wealth, he said.
“When we joined Fidelity Clearing Canada, they had $27 billion in assets. Today they have $133 billion in assets, and when they build this [Fidelity Wealth business] out, it will be even bigger,” Kapoor said. “They’ll have the size, scale and capability to continue to invest and upgrade their platform, and that benefits all us — especially us, because we’re one of their largest clients.”
Boakye said Fidelity Wealth’s distribution platform will be open architecture and completely independent, with advisors receiving no extra compensation for selling in-house product.
“We want to do what’s best for the client, and make sure that we maintain our objectivity [and] independence, so that we have integrity in this dealer,” Boakye said.
As of June 11, Fidelity Investments Canada has $247 billion in assets under management.