San Diego-based LPL Financial is huge, but nimble enough to dodge the sword of Damocles.
The Department of Labor’s glacial process on the fiduciary rule has been hanging over the financial industry’s head for so long, preparations have long been underway for its eventual adoption. But on Wednesday, likely weeks before the rule goes into effect, the nation’s largest independent broker-dealer has announced a slate of changes to its products and platforms.
The DOL rule will apply the fiduciary standard to advisors across the retirement planning industry. In recent years, LPL, which manages a total of $459 billion in advisory and brokerage assets, has actively lobbied against the proposal, arguing it will constrict investors’ freedom of choice.
“While we continue to advocate for a thoughtful resolution to the fiduciary issue -- one that preserves investor choice -- LPL recognizes that the DOL rule will have implications for financial advisors and investors,” said Dan Arnold, LPL president, in a statement on Wednesday. “Since last summer, we have been preparing to ensure our advisors and the firm approach this opportunity from a position of strength.”
Over the last four years, LPL has slowly shifted from fighting the proposed changes to adapting to them, beefing up its risk management staff, eliminating some custodial fees and lowering costs to advisors in hopes that they would be passed on to the end clients.
Now, just ahead of the new rule, LPL is again lowering its pricing, but also will reduce its account minimums, introduce a simplified brokerage IRA and increase support for its advisors.
“Regardless of the final outcome, we expect demand for advisory services to increase going forward,” Arnold said. “We also believe that retirement investors will continue to benefit from a brokerage relationship and that the need for a brokerage offering will continue if these relationships can be supported under the DOL rule … LPL is taking a proactive approach by making changes to our platform and capabilities that we believe will help advisors grow their practices and support more investors in need of financial advice.”
The firm will reduce the price of its centrally managed platforms, purportedly to help advisors provide more cost-effective services. These reductions include LPL's Model Wealth Portfolio, which had some research and maintenance fees eliiminated earlier this year. All told, the price reductions should lower the total cost of financial advice for some investors by almost 30 percent compared with current pricing, says LPL.
Simultaneously, LPL is lowering the account minimums for its Optimum Market Portfolios from $15,000 to $10,000 later this year, and will create a simplified mutual fund-only brokerage IRA that is not expected to carry an annual IRA maintenance fee.
LPL will attempt to streamline the process of converting a brokerage account to an advisory account by allowing dually registered representatives and investors to keep their account numbers unchanged through the transition. The firm also plans to simplify other operational processes this year, and will offer advisors specialized practice management support, including licensing assistance and business analysis.