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Pair of Executives Leave Fidelity’s National Financial

  • April 22, 2008
  • John Hintze

Fidelity Investments’ correspondent clearing arm, National Financial Services (NFS), has seen its national sales manager and head of Northeast regional sales depart. Both executives left at the end of March and the positions were filled internally earlier this month, said a Fidelity spokesperson.

George Keith joined National Financial as EVP and national sales manager in May 2004 from AllianceBernstein, where he held leadership positions since 1999. He was replaced by long-time Fidelity executive John Phillips. Joseph Kelly, SVP and head of NFS’s Northeast relationship management, was replaced by Larry Thiel, who since 1999 has held a relationship management role. National Financial’s sales and relationship management functions are divided into five regions: the Northeast, South, Midwest, West and New York metropolitan area.

The changes--Fidelity declined to say whether the executives left voluntarily--come at a time when correspondent clearing firms are facing an uphill battle to grow their customer bases. The number of broker-dealers registered with the Financial Industry Regulatory Authority (Finra) increased by 5.6 percent from March 2003 to March 2008, to 5,272 from 4,993. However, the number of registered reps fell by 3.4 percent in the same period, to 653,887 from 676,820.

“There are few new broker-dealers being created and smaller firms are withdrawing their broker-dealer status,” said Matthew Bienfang, research director in Needham, Mass.-based TowerGroup’s brokerage and wealth management group.

Law firms with trust departments and family office-type businesses and mutual fund companies that may have operated broker-dealers have found the regulatory costs excessive, said Bienfang. In addition, smaller brokers are increasingly opting to become less regulated registered investment advisers (RIAs). “My contacts at Finra are saying they saw more BD withdrawal forms last year than they ever have before,” he noted.

The number of correspondent clearing firms has also dipped. According to TowerGroup, approximately 75 broker-dealers have cleared for others this year, compared to more than 150 doing so in 2000. TowerGroup estimates that the number of firms actively seeking correspondents has fallen to 25, down from about 50 in 2000.

A handful of those firms, including NFS, Bank of New York Mellon Corp.’s Pershing unit, Bear Stearns, Goldman Sachs and Wachovia Corp.’s First Clearing, service half the correspondent broker-dealers. The laborious process to convert to a new clearing firm, combined with the slow increase in brokers, has stymied clearers’ growth.

As a result, clearers have sought to expand their products and services, increasing workstation functionality and offering new financial products such as separately managed accounts to bolster correspondent reps’ production. Clearing firms are also seeking to move into related areas. NFS, Pershing and others have fought for RIA business, but they face strong competitors such as Charles Schwab & Co. and TD Ameritrade.

On April 8, NFS announced the launch of a new unit that will service self-clearing broker-dealers; it plans to begin testing with its first client in three months. Mark Healy, National Financial’s COO, moved over to head up the new unit--National Financial Self-Clearing Outsourcing--early this month. The new service is designed to permit broker-dealers to retain their Depository Trust & Clearing Corp. code and self-clearing status while outsourcing operational functions such as corporate actions, proxy processing and customer-facing activities including new-account opening, customer reporting and account transfers.

NFS head of product management Jody Meth and other executives have taken up some of Healy’s responsibilities as he focuses on the new business. National Financial says that self-clearing firms represent 83 percent of broker-dealers’ $16 trillion in assets under management; correspondent brokers manage the rest.

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