Fund company's brokerage model finds favor with high-end clients. Fidelity Brokerage Services treats its affluent clientele better than 50 of its peers treat their own clients. That's the headline grabber from a study published last month by the Luxury Institute, a New York-based marketing research firm. If it holds any water, this finding should raise a few eyebrows in the brokerage-based wealth business and beyond.

"Fidelity's customer-retention index score was two points above its nearest competitor while its customer-referral index score was three points above its nearest competitor," says Milton Pedraza, CEO of the Luxury Institute. "Despite all the chatter from consultants and executives about customer-relationship management, most companies are in the stone age in terms of measuring their own customer experience; never mind measuring the competition's."

The un-cola

The Luxury Institute surveyed 2,100 U.S. households with gross annual incomes of at least $200,000 or total assets of $750,000 and above, including home equity. Respondents who used one or more of the 50 "top" brokerages - so called because of the size of their sales forces - were asked to rate those firms on a number of criteria touching on their ability to deliver a favorable "customer experience."

Fidelity came out on top with a "customer experience" index score of 71.4. It edged out Edward Jones with 70.9 and Charles Schwab with 69.8. The other brokerages most highly rated by their wealthy clients in the Luxury Institute's survey were A.G. Edwards, Ameriprise Financial (formerly American Express Financial Advisors), Merrill Lynch, Smith Barney, TD Waterhouse, UBS, Wachovia, and Wells Fargo.

Boston-based Fidelity also took first place in a separate, and smaller, Luxury Institute survey as the full-service brokerage with the "most prestigious brand" in a field of 20 brokerages - again, chosen for the size of their sales teams.

Fidelity's top-place ranking doesn't surprise John Shields, head of business consultancy Navigant's financial service practice. "It's a well-received platform that has been designed with the target audience in mind," he says, speaking specifically of Fidelity's high-end Private Access platform. "They listened to their customers, which is what they're very good at doing."

Gail Graham, senior v.p. in charge of Private Access, calls Fidelity "the un-cola of the wealth-management business."

Private Access clients need at least $1 million invested with Fidelity to qualify for the Private Access platform - at that point, in fact Fidelity clients automatically become Private Access clients. They pay fees only to the extent that they access funds through Fidelity - there's no pure consulting fee per se, in other words, though they can get advice (or at least they have access to "resources") on things like asset allocation, tax-management, and retirement and estate planning.

Private Access clients also get access to third-party security and market research, discount rates on trades, a deal of some sort on credit cards, a quarterly magazine, and invitations to "exclusive" events and seminars. Clients with at least $100,000 get most of those services through Fidelity's Preferred Services platform, though with higher price tags on some of the services and minus what Fidelity calls "strategic consultations" on investing and managing.

Good name

Private Access clients can run their own portfolios, alone or in consultation with a Fidelity rep, or they can invest in Fidelity funds, including a mutual-fund wrap program with some outside managers called Portfolio Advisory Services.

Fidelity won't say what its Private Access assets come to. At the end of June 2005, however, its total private-client brokerage assets were around $222 billion, according to a company spokeswoman. Though Fidelity fields 7,000 brokers all told, only about 250 of them are dedicated to the Private Access clients. And those brokers earn no fees or commissions.

Wealth managers FWR contacted were reluctant to comment on the apparent high standing among affluent clients of a platform so much at odds with the fee-based, advice-driven model that holds sway on most private-client brokerages. On the condition of anonymity, one surmised that the survey result might boil down to Fidelity's ability to translate its reputation as a wildly successful mutual-fund retailer and 401(k) provider into the brokerage realm. "People trust Fidelity, and they don't trust brokers so much," says the un-named source. "With Fidelity, the client's relationship is with the firm, not so much [with] the individual broker as it is on [other platforms]."

Graham agrees that Private Access benefits from Fidelity's track record as a fund complex and retirement-plan provider. "People know Fidelity," she says. "They know we're an industry leader." But she also credits the company's "ability to make customers feel special. And they feel special because they get great service at a great value," she says. "It's about knowing that customers do business 24/7 and having the tools and technologies [to support that]." -FWR

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