Fidelity-Evensky Alliance May Extend Reach of Hedge Funds through Family-Office Network

November 7, 2000 (—Mutual-fund giant Fidelity Investments has formed a strategic partnership with the Florida-based Evensky Group to build a nationwide wealth management practice that will offer family-office-style services to affluent investors, including consulting on alternatives such as hedge funds.

“There are seismic changes taking place in the private-wealth management industry, incredible growth, and having a strategic partner like Fidelity puts us in a position to take advantage of that growth,”Harold Evensky, head of the Coral Gables, Fla.-based Evensky Group, told HedgeWorld.

“Alternative investments—including hedge funds—are a part of that growth and represent an area we will be paying more attention to, going ahead,”he said.

Terms of the deal between Fidelity and the fee-only consultant were not disclosed, but Mr. Evensky made it clear that his family-office practice was poised to grow dramatically with or without Fidelity.

“We’re in a growth industry and you can do well independently,” Mr. Evensky said. “But I’m of the mind that for the next stage of growth, it makes sense to have a strategic partner like Fidelity to take advantage of the opportunities that are emerging.”

The Evensky Group today oversees $350 million in assets. Through planned acquisitions of other regional wealth -management firms, Evensky projects that figure will grow to $19 billion in the next four-and-a-half years.

The Evensky-Private Family Offices, now focused primarily in the East Coast, plans to acquire 26 wealth management firms. The first acquisitions are expected next year.

“We’ve already identified about 40 firms that may be interesting in joining us,” Mr. Evensky said. “The groups would keep their name and identity but would be able to share resources.”

Among those resources would be technological tools aimed at allowing wealth managers to create model portfolios for their family office clients.

“The idea is to put the types of tools that institutions have traditionally used in making investment decisions and making those available to individual investors,” Mr. Evensky said.

The Evensky family-office network is not aimed exclusively at ultra high-net-worth individuals, who have been the traditional target audience for such wealth-management practices. In fact, anyone worth $1 million or who earns a few hundred thousand dollars per year is eligible to join.

“We won’t be a family office in the traditional sense in that we won’t be involved in art appraisal or making sure the family helicopter’s maintenance schedule is being met,” Mr. Evensky said. “But we will be extending professional wealth consulting services—in many cases—to individuals who never made use of them before.”

Those services include consulting on asset management, taxes, insurance, estate planning and charitable giving.

For Fidelity, the alliance with the Evensky Group enhances its financial-planning capabilities and builds a relationship that potentially could be used to distribute future products aimed at the high-net-worth marketplace as well as the moderately wealthy.

Fidelity, which has lost top talent to the hedge fund industry in the recent past, has made no official announcements about launching alternative-investment products. But, Mr. Evensky says both his firm and Fidelity have recognized the growing importance of alternatives to the wealth-management industry.

The strategic deal also helps Fidelity put a dent in a rival’s custodial business. Some $350 million in Evensky accounts will be departing Charles Schwab and moving to Fidelity. Through it’s US Trust subsidiary, Schwab earlier this year announced plans for a hedge fund of funds.

By Pete Gallo, Editor


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