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Rating:An RIA Custodial Giant Creates a Email Routing List Email & Route  Print Print
Thursday, February 02, 2017

An RIA Custodial Giant Creates a "Have Your Cake and Eat It, Too" Fund Platform

Reported by Neil Anderson, Managing Editor

One of the big three RIA custodians is poised to potentially shake up asset managers' RIA channel in a big way with a new platform.

Carolyn Clancy
Fidelity
EVP, FundsNetwork
Word on the asset management street is that yesterday, Fidelity began rolling out a new mutual fund platform that offers institutional shares, but with no transaction fees.

Carolyn Clancy, executive vice president of the FundsNetwork at the Boston Behemoth, did not immediately return calls for comment on the new platform.

The new Fidelity platform seems to combine the best of both the NTF and the institutional worlds, at least from the perspective of the RIAs working with the custodian.

On the one hand, retail or "advisor" shares on RIA custodians' traditional NTF platforms can be bought and sold without a trading fee, but those shares tend to be higher-priced to be able to pay platform fees in the neighborhood of 40 basis points to the RIA custodian, i.e. Fidelity, Schwab or TD Ameritrade.

On the other hand, institutional shares on RIA custodians' traditional transaction fee platforms tend to be lower-priced as they only have to pay platform fees in the neighborhood of 10 bps. Yet investors buying and selling such shares have to pay trading fees, as if they were trading stocks or ETFs.

The catch with putting institutional shares on an NTF platform seems to be on Fidelity's side. Such a platform leaves the custodian receiving both no trading fees and what have to be lower platform fees, too, because you can't squeeze much blood from an institutional share class stone. So far, MFWire has not been able to determine what price mutual fund shops will be paying, up front or in asset-based platform fees or both, to be on the new platform.

Fidelity is not the first RIA custodian to try this. For nearly three years, Pershing has been building out its institutional shares offerings on its FundVest NTF platform. Pershing is primarily known as a clearing and back-office support giant for broker-dealers, but they've been expanding their RIA custody business, and word is that the institutional NTF lineup is driving that RIA custody growth. Pershing now has more than 7,000 funds on FundVest, and more than 2,500 of those are some kind of institutional shares. 

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