Fidelity Investments' managed account business has surged, growing faster than its peers this decade due to product and marketing changes as well as its big record-keeping presence, according to consultants and researchers.
"In recent years, Fidelity has put a lot of time, money and effort into its total global platform," said Brad Long, principal and research director for DiMeo Schneider & Associates LLC, Chicago. "They have improved their product quality, and the market has responded."
Fidelity's Portfolio Advisory Service at Work, also known as PAS-W, held a solid 12.7% market share at the end of the second quarter of 2018, more than triple its 3.9% share in 2011, according to research by Cerulli Associates, Boston. Cerulli said this translates as $36.4 billion.
Fidelity still trails the dominant managed account provider, Financial Engines, which had a 57.1% market share, or $163.5 billion, at mid-2018 as well as the second-largest player, Morningstar Inc., with 21.1%, or $60.4 billion. Both giants' market shares have trended slightly downward since 2011, according to Cerulli.
The firm analyzes results from the eight largest managed account providers, whose aggregate managed account assets reached $286.5 billion by mid-2018.
Cerulli calculates managed account assets of these eight providers represented 3.6% of total defined contribution plan assets in 2017 and estimates they will represent 3.8% this year.
Fidelity's gains appear to have come mostly at the expense of smaller managed account providers, said Jessica Sclafani, director of retirement at Cerulli.
Fidelity now has a bigger market share than the combined market share (9.2%) of the five other providers, including Guided Choice Inc. In 2011, the aggregate market share of these five was 13.9%.
"PAS-W has been a priority for (Fidelity) in recent years," Ms. Sclafani said. "They are well-positioned because they are the biggest record keeper."
The company, she added, has a big market share among sponsors with $1 billion or more in plan assets.
Fidelity's managed account program also can benefit from the company's other services such as health savings accounts and brokerage accounts, Mr. Long said. "It's a seamless experience for a Fidelity platform client," he said.