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How LPL is Succeeding in Luring More FA Assets to Platform

July 31, 2018

LPL Financial’s recent moves to convince its advisors to hold more assets on its platform appear to be paying off, according to InvestmentNews.

LPL, unlike other broker-dealer networks such as Cetera Financial and Advisor Group, operates its own trading and clearing platform, the publication writes. But advisors on the LPL network who have their own RIAs have the option of custodying with LPL or with another firm such as Schwab Advisor Services or TD Ameritrade Institutional, according to InvestmentNews.

Two recent strategic decisions have helped steer assets onto LPL’s platform. About a year ago LPL began requiring new recruits to use its platform to custody their first $50 million, the publication writes. And this spring the firm offered an “unprecedented” signing bonus to new advisors via three-year forgivable loans that paid 50 basis points of the assets they moved onto LPL’s corporate advisory platform, according to InvestmentNews. That offer, however, ends August 1.

Nonetheless, last week CEO Dan Arnold told analysts and investors on a conference call about the firm’s second-quarter results that LPL has seen “increasing use of our advisory, corporate, and centrally managed solutions,” according to InvestmentNews.

Moving assets from commission-based brokerage accounts to fee-based advice accounts has been essential to LPL’s growth in profitability, the publication writes. Advice assets are 10 basis points more profitable than brokerage assets for the firm, according to a presentation LPL made in May.

LPL squeezes out an additional 10 basis points if the assets are held on its centrally managed platforms, which let advisors outsource trading and portfolio construction to LPL, according to the presentation cited by the publication.

In last week’s conference call, LPL’s chief financial officer Matthew Audette said 75% of the firm’s net new advice assets were on its corporate platform, InvestmentNews writes.

LPL’s centrally managed platforms had inflows of $1.5 billion, representing about a third of net new advice assets in the last quarter, Audette said, according to the publication. Arnold, however, said there were $1.5 billion in outflows last quarter from the hybrid RIAs that can custody outside LPL, and that the firm expects similar levels of outflows over the next two quarters, InvestmentNews writes.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.