Fidelity Rolls Out Institutional Custom SMAs

What You Need to Know

Broad availability to RIAs, broker-dealers and family offices is expected in early 2023.
Fidelity sees the offering as a step to offering sophisticated, personalized services more broadly.
The product won’t compete with other Fidelity programs, quant leader Neil Constable says.

Fidelity Investments says it is expanding its direct indexing capabilities with the Fidelity Institutional Custom Separately Managed Account lineup for wealth management firms and institutions.

The Institutional Custom SMA offering, announced Monday, is being introduced to some clearing and custody clients in the coming months — expanding a limited rollout that began Oct. 1 — with broader availability to all RIA, broker-dealer and family office clients expected in 2023.

“Financial advisors are increasingly looking to help improve client outcomes and deliver personalized investment solutions, and we see custom SMAs as an opportunity to address these needs with scalable yet highly customizable solutions,” Gary Gallagher, head of Fidelity Institutional Wealth Management & Advisory Solutions, said in a statement.

Fidelity, which historically focused such services in the ultra-high-net-worth space, now aims to extend them “much more broadly across the wealth spectrum” through the Custom SMA, Gallagher told ThinkAdvisor, noting that the offering can help advisors provide a more personalized product to lower net worth investors who also need customized services and tax management.

Program Details

Through the program, Fidelity builds and manages equity portfolios customized to investors’ needs and preferences, it says. The current lineup includes 10 tax-managed equity strategies with U.S., international, global and sustainable equity holdings. 

As it further expands its custom SMA offering, the firm is aiming to target more market exposures. Also, advisors and their clients can use the program to tailor SMAs for clients by applying tax management; excluding certain securities, sectors or industries; and applying a sustainable overlay.

 “We’re moving into a world where hyper-personalization is becoming the norm,” Neil Constable, head of Fidelity’s Quantitative Research and Investments division, told ThinkAdvisor.

Fidelity sees the offering as the start of the company’s ability to offer highly personalized and customized portfolios to all advisor clients, expanding the reach of its sophisticated asset management services, Constable said.