LPL Financial has unveiled a new mutual fund platform designed to adhere to the fiduciary rule, though the rule's uncertain fate poses an impact on a key aspect of the plan.
The platform would feature load-waived shares in more than 1,500 funds from 20 sponsors, the country’s largest independent broker-dealer announced last week. LPL also plans to limit upfront commissions to 3.5% and set trailing fees at 0.25% on the platform, which is slated to launch early next year.
The lower, standardized fees reflect the mandate on firms
The rule has
“At launch, [the platform] will be a price-competitive solution that not only preserves investor choice — but amplifies it,” according to a company memo to advisers obtained by Financial Planning.
“As you know, other financial firms have limited or even fully removed brokerage options for retirement investors. But when brokerage is in the best interest of your client, we’re providing a solution.”
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Dan Arnold expects that upheaval to lead to more movement of advisers and assets.
April 28 -
The firm has already standardized its variable annuities and alternative investments and is working toward doing the same for mutual funds as well as indexed and fixed annuities.
March 9 -
The $420 million team marks the latest wirehouse exit over a lack of flexibility around the rule.
May 9
Wirehouses, broker-dealers and banks unveiled client-friendly policies while asking the agency for further delays.
WHO’S ON THE PLATFORM?
Company executives expect the platform to keep more than 80% of LPL’s mutual fund products for brokerage clients while eliminating trading fees and annual account fees, according to the memo. Offerings from Fidelity Investments await final approval for possible inclusion on the platform, LPL says.
Clients could exchange their investments among the various fund families after opening accounts. Existing clients would not pay commissions if they have holdings in funds eligible for the platform, including vehicles from Goldman Sachs Asset Management, BlackRock, Columbia Threadneedle and other managers.
New clients entering the platform would pay a one-time commission while routing their investments through a partnering Goldman Sachs institutional money market fund to the funds of their choice.
“Our research shows that screening for funds with low fees and high manager ownership will help identify equity funds with a history of superior long-term outcomes,” Bill Brady, a senior vice president at American Funds, said in a statement. Brady said products from his firm would be eligible as well.
FIDUCIARY FUTURE
LPL execs plan to decide whether they’ll require retirement accounts to move on to the platform closer to its launch date, a company spokesman said in an email. The choice depends on the “regulatory environment and industry developments,” he said. The firm is bracing for the rule, despite uncertainty.
“We expect the rule to create disruption that will lead to movement of both advisers and assets in the coming months and years,” CEO Dan Arnold
LPL is testing the platform with the various fund sponsors ahead of a pilot later this year among a small number of advisers, according to the firm.
Mutual fund experts predict advisers of all firms will see a
“If your value proposition to a client is picking funds or creating models, in five years, I just don’t see that being relevant anymore,” said Carly Maher, a senior vice president for enterprise initiatives at Ladenburg Thalmann.
