Fidelity taps Goldman Sachs to expand lending services through RIAs

Fidelity Custody & Clearing Solutions is expanding access to loans for the roughly 6 million investors working with Fidelity through more than 3,500 registered investment advisers, broker-dealers and family offices.

Through a new partnership with Goldman Sachs, Fidelity is offering streamlined access to non-purpose loans that are collateralized by a borrower’s non-retirement investment portfolio.

Unlike a margin loan, which uses the portfolio as collateral to buy more securities, non-purpose loans can be used for virtually anything except buying more investment securities.

Fidelity, which has for the past two years been offering RIAs and other intermediaries access to non-purpose loans through U.S. Bancorp, will now also connect to the newly-launched Goldman Sachs Private Bank Select platform.

A Fidelity spokeswoman declined to say exactly how many loans were generated through U.S. Bank, but said the loan volume “nearly tripled” between June 2016 and June 2017.

The increased appetite for non-purpose loans, which appeals to investors because it keeps investment portfolios fully invested, led to the new partnership with Goldman Sachs, which is offering intermediaries working with Fidelity the same lending services it offers its wealthy private banking clients.

Andrew Kaiser, head of Goldman Sachs Private Bank, said the non-purpose loans can be approved in minutes and funded within 24 hours.

“By applying technology across the life cycle of a loan, from origination through collateral management, we are able to more quickly and effectively meet the needs of financial advisers and their clients,” he said.

Loans through GS Select will range from $75,000 to $25 million.

“This effectively provides the ability for independent advisers working with Fidelity to do the same things for their clients that an adviser at a wirehouse can do,” said Mr. Kaiser.

While non-purpose loans are not a new concept, they haven’t always been this accessible at Fidelity, unlike its custodial counterparts TD Ameritrade and Charles Schwab, which own banks, or Pershing, which is owned by a bank.

“We are directly seeing and hearing demand from our clients for help as they continue to be more planning centric, which includes helping investors with their personal balance sheets,” said Mike Durbin, head of Fidelity Institutional Product.

“We’re not a bank, or part of a bank, but it’s very exciting that we’re able to do this,” he added.

Prior to partnering with U.S. Bank for non-purpose lending services, Mr. Durbin said Fidelity would provide non-purpose loans on a “case-by-case basis.”

Fidelity still handles margin lending services, which typically limits loans to about 50% of an investment portfolio.

A non-purpose loan will typically lend up to the equivalent of 70% of an investment portfolio, according to Dave Mook, chief private banking officer at U.S. Bank Wealth Management.

In terms of competing with Goldman Sachs for non-purpose lending business through Fidelity’s intermediary channels, Mr. Mook shrugged it off as being good for the consumer.

“Fidelity is taking care of its RIA clients, and I think those RIAs would like to have various options,” he said. “It’s not good for the ultimate borrowers to not have competition.”

Mr. Mook said U.S. Bank, which has a $250,000 minimum for non-purpose loans, is focused on a slightly different borrower than Goldman Sachs.

“We’re focusing on the larger clients, and part of our offering is custom credit that might go beyond lines of credit against an investment portfolio,” he said.

But even though U.S. Bank does have a direct link to Fidelity, it is still not yet able to move at the pace of GS Select.

“We’re not going to be that fast,” Mr. Mook said. “But when we get more streamlined, we’ll be able to make smaller loans.”

Related Topics: Fidelity Investments, Goldman Sachs & Co.