With the DOL rule expected in the next few weeks, LPL Financial Services is planning to roll out a robo advice platform later this year to help advisors deal with small accounts on a cost-efficient basis.
This is just one of the steps the nation’s largest independent broker-dealer is undertaking in order to cut costs for both advisors and their clients, according to Bill Morrissey, managing director in charge of recruiting. It has also stripped out between 14 and 20 basis points of expenses from its asset management programs.
He believes that the shift from commissions to fees is likely to continue as a result of the DOL rule and notes that fees tend to only move in one direction, lower.
Two client segments that could be effected by the DOL rule are emerging savers with few assets and small business owners who have most of their assets tied up in their businesses. Given the fact that these clients offer advisors long-term potential, the firm is hoping new efficiencies will make it cost-effective for advisors to continue to serve them.
Morrissey also said he expects the DOL rule to accelerate consolidation in the industry, both among broker-dealers and advisory firms. “The advisor population will continue to shrink,” he says, citing data from Cerulli and other research firms.
This decline in the number of advisors is coming at the same as a wave of baby boomers approaches retirement, implying that the demand for financial planning and advice may explode.
Older advisors may have other reasons to consider selling their firms. The current bull market is nearly seven years old and one can usually get a better price for their business in good times. Morrissey believes attrition could spike because of margin compression and the increased complexity of serving retirees.