Structured Notes Access Added At Fidelity, Envestnet

Structured investments platform provider Simon Markets has partnered with both Envestnet and Fidelity Institutional to provide advisors with easier access to structured products, according to recent announcements from the three firms.

Envestnet’s integration allows advisors using its unified managed account platform to provide end-clients with structured investments as “fee-based solutions,” while facilitating advisor management of the products from within Simon’s software.

Fidelity, which is calling itself the “first clearing and custody firm to offer an integration with Simon,” is making its integration available through Wealthscape. The integration will feature portfolio construction analytics and is accessible via single sign-on.

As Envestnet integrates with Simon over the course of 2022, advisors will eventually be able to not just place structured investments in UMAs, but also include them in proposals, allow advisors to “actively manage” their structured investment books of business, provide advisors and end-client with post-trade data and help advisors fulfill self-paced certification requirements. Features from Simon will eventually be incorporated into financial planning software MoneyGuide, which will feature a module specifically for structured investments, and reporting integrations with Tamarac.

Fidelity’s integration with Simon will similarly feature book of business management and post-trade analysis for advisors, via a feature called “Spectrum.” It will also provide a degree of education and training for advisors interested in structured investments.

Fidelity’s Simon integration is currently available for RIAs, with a “fast-follow for broker/dealer clients in the coming months,” said Scott Bohlen, vice president of transaction solutions at Fidelity Institutional. “While this integration could expand to other platforms or software [beyond Wealthscape], we have nothing else to announce at this time,” he added.

Both Fidelity and Envestnet cited strong advisor demand behind their decisions to partner with Simon and offer easier access to structured investments. At Fidelity, the integration is a “key differentiator,” according to a statement from Thomas Tesauro, president of Fidelity Capital Markets.

But not all industry observers see the same demand. “Not a single investor has ever come to one of these brokerage firms and asked for structured products,” said Andrew Stoltmann, a Chicago securities attorney and former president of the Public Investors Advocate Bar Association (PIABA). “These investments are sold and almost never bought. They are complex. They are opaque. And most investors don’t understand them.”

The increased visibility and accessibility of structured investments in the past five years “is not a good development for investors at all,” he added, blaming their rise in part on brokerages being squeezed on fees because of “the near elimination of commissions and fees.”

Nevertheless, part of the allure of a partnership with Simon is how easy it makes to buy structured investments. In a deal announced earlier this month, the firm partnered with order management system provider +Subscribe. +Subscribe CEO and Founder Rafay Farooqui, praised the partnership, emphasizing the speed of transactions that’s now facilitated by Simon.

Simon is the “preeminent platform with major [structured notes] issuers,” said Keith Styrcula, managing director at i(x) Securities, a New York-based registered broker/dealer focused on impact investments. He founded the Structured Products Association, an industry trade group.

“The promise of the platforms is in expanding the pie of structured investments,” he observed, stating that Simon, alongside Halo Investing and Luma Financial Technologies, are democratizing access to structured notes. “The utility of these instruments is beyond dispute.”

Halo Investing, a startup platform that allows advisors to monitor structured notes for their clients, has seen investments from Allianz Life Ventures. Luma Financial Technologies is another advisor-focused tech platform meant to ease access to annuities and structured products. It is backed by Navian Capital, Bank of America Merrill Lynch and Morgan Stanley and recently launched a comparison tool.

Simon, Halo and Luma have disrupted a corner of the industry once saddled with middlemen and onerous paperwork, Styrcula added. But he isn’t worried that advisors will suddenly clamor into structured notes without doing their own homework. “It’s an acquired taste. It’s not for all financial advisors,” he said. “This is for sophisticated investors.”

Simon Markets has the backing of seven financial institutions, including Barclays, Credit Suisse, Goldman Sachs (the firm that spun it off in 2018), HSBC, JPMorgan, Prudential and Wells Fargo. It announced a $100 million Series B capital raise in July, led by WestCap.

Minnie Arwood

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