As Fidelity rolls out an institutional NTF platform, another RIA custodian has been making such a push for two and a half years. And that custodian now sees institutional shares totally dominate flows on its NTF platform.

Rich Calvario Investment Solutions at Pershing Director

Rich Calvario, director of investment solutions at Pershing, confirms that after two and a half years of focusing on adding institutional shares to its no transaction fee FundVest platform, more than 2,500 of the 7,100 CUSIPs are institutional shares. And the flows picture is dramatic.

"We certainly have seen this play out as we expected," Calvario tells MFWire. "In 2014, 86 percent of net flow into FundVest went to institutional shares. In 2015 it was 96 percent of net flows."

"Last year it went through the roof," Calvario adds. "500 percent of the net flow went into institutional share classes."

FundVest now has about $120 billion in assets. In 2016 more than $5 billion net flowed into institutional shares on the platform, while all other share classes saw net outflows of $4 billion.

"Our clients are using it the way we expected them to use it," Calvario says. "Our goal is to have our clients have the best possible selection of funds to choose from and at the same time keep their cost of doing business down ... Most of them are electing to use these less expensive share classes in their advisory business."

More than 100 mutual fund firms have institutional shares on the platform, Calvario says.

"I give a lot of credit to our asset manager partners. Most of the time when I approached them with this request, they had never been asked before," Calvario says. "Nine times out of ten the mutual fund company saw the benefit, realized that it was in the best interest of our mutual clients, and ultimately decided to add it to FundVest."

"The conversation's getting easier and easier. Now most of the time they've heard it from me or from mutual clients," Calvario adds. "Occasionally we'd be told, 'No.' Many of them are beginning to come back to start the conversation over."

Calvario declined to detail FundVest's pricing for institutional shares. (Word in the industry is that Fidelity is charging 15 basis points for its new iNTF program.)

"We've been able to set a rate that we think is both reasonable and affordable that asset managers have been able to pay," Calvario says. "We don't think that we're challenging the share class of the asset managers too much. Ultimately everyone sort of has to compromise to continue to be successful in this new world." 

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