Andy Gluck wrote an article about the odd Fidelity Wealth Central announcement. He wonders why they announced the product more than a year before they think they can ship it. Pre-announcing products like this is classic Microsoft strategy that they used often in the pre-anti-trust days. They preannounce a product, which makes prospects wait before buying a competitor’s product. If the product ships late, without a full feature set, or never ships at all, then the prospects lose out.

Usually companies don’t pre-announce years in advance. Those that do, often reget it. Adobe’s president Shantanu Narayen says:

Narayen emphasized that early announcement can be a double-edged sword. “When we preannounce products, sometimes people tend to stall their purchases because they’re aware there’s a new product [coming out]. So there has to be a balance. In retrospect, maybe announcing something nine months ahead of schedule–[like] when we said Creative Suite is going to ship in the second quarter–might have been a little premature.”

With Fidelity making such a bold announcement years before the product release, they’re setting themselves up for some major embarrassment if the product doesn’t ship. I’m sure it was fun having those billboards up during the Schwab conference but I wonder if they should have saved the stunt for next year.

Fidelity’s spokesperson admits the pre-announcement was part of the marketing strategy, designed to keep users from jumping on board with Schwab before Fidelity has a chance to build a competing platform.

From Andy’s article:

“We want our clients to be prepared for what were doing and  understand our direction in technology,” [Fidelity S.VP Ed O’Brien] says. “If our advisors are thinking of looking for a new accounting system in the next year, we want them to be aware of this now.”
The announcement was uncannily timed to coincide with the annual conference for advisors sponsored by Fidelity Institutional’s larger rival, Schwab Institutional. Despite competitive pressures, for a large company like Fidelity to issue a press release and do a press tour announcing a technology product that is a year away from being launched is strange, though custodians try to upstage each other all the time.

Andy points out that Fidelity has tried this before and failed which, in advisors’ minds, increases the risk that they might never ship a WealthCentral product.

This is not the first time Fidelity has tried to launch an integrated platform for its RIA clients. About three years ago it announced plans to launch an integrated platform using Integrated Decision Systems, an institutional PMS vendor, as its hub. That deal collapsed after IDS’ venture capital backers pulled the plug on funding, leaving Fidelity executives embarrassed. So it is surprising to see Fidelity making this announcement so far in advance of the launch of WealthCentral.

I’m not sure Fidelity can be held responsible for the IDS implosion. It sounds like they just happened to be doing a deal with them when it happened. I’m still planning on investigating IDS a bit more–I hear different stories from everybody I talk to about them.

And apparently we’re both wondering how somebody could possibly spend $50 million simply on integrating three different pieces of software:

OK, we all know Advent is expensive, but even Advent can’t be that expensive! It’s difficult to imagine how Fidelity could spend $50 million integrating three applications that are already developed. Despite these oddities, the Fidelity announcement nonetheless highlights the independent wealth management industry’s migration to Web-based applications. 

My pet theory is that most of the $50M is earmarked for licensing fees to be absorbed by Fidelity and not passed back to the clients. Despite the concerns raised by Andy, I still think this could be a great thing for investment advisors if Fidelity can pull it off. An integrated best-of breed wealth management platform is something that might actually be worth waiting for.