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LPL to Waive Mutual Fund Ticket Fees on New Hybrid RIA Platform

April 26, 2018 – Financial Planning

LPL Financial’s hybrid advisors will pick up a lower-cost option for their clients’ mutual fund investments on a new platform set to roll out later this year. Some financial advisors on the firm’s corporate RIA will also see reduced prices, starting next year.

Advisors using the No. 1 independent broker-dealer’s Strategic Wealth Management advisory program will get access to roughly 30 companies’ funds without any ticket charges or transaction fees, according to LPL. The firm will launch the first offerings on the NTF platform in July.

On the corporate RIA’s Strategic Asset Management program, advisors with between $25 million and $50 million in assets will pay a flattened fee of 8 basis points beginning in 2019. The cut on administrative fees follows one for advisors with higher asset levels at the beginning of the year.

Andy Kalbaugh, president of LPL’s national sales and consulting division, announced the changes in two email messages to the firm’s advisors this week.

JPMorgan Chase, John Hancock Financial, AllianceBernstein, Legg Mason and five other companies have verbally agreed to join the first wave of funds available on the SWM No-Transaction Fee Network, Kalbaugh wrote.

“The implications for this new offering are huge,” Kalbaugh told the firm’s advisors. “Of course, we’re excited to launch a more competitive platform for you and your clients by offering reduced transaction charges for those who use mutual funds. But we’re also proud to provide one of the most compelling NTF mutual fund lineups available.”

“I couldn’t be more excited about LPL’s efforts to enhance our offerings,” he added, “no matter what affiliation model you choose. We’ll continue to evolve both our corporate RIA and hybrid platforms to serve the needs of you and your clients.”

LPL’s hybrid channel consists of about 420 practices with 5,200 advisors managing $113 billion in assets under management in outside RIAs — or roughly one-third of its advisors and 41% of its advisory assets. The firm started a discounted platform for mutual funds on its corporate RIA last year.

At the beginning of the year, LPL put the slashed prices in place on the corporate RIA. The No. 1 IBD standardized the fees on the SAM program to 5 basis points on advisors with $50 million to $100 million in AUM and 3 basis points for those with more than $100 million.

At the same time, however, LPL began requiring new advisors to have at least $50 million in advisory AUM on the corporate platform before joining a hybrid RIA. At least four hybrid practices have since left the firm, including one with $9.5 billion in AUM.

Hybrid advisors praised LPL for lowering its fees on mutual funds. The NTF platform for hybrid advisors will cost about 10 basis points more than institutional levels for P-shares or similar offerings from the fund families, according to John Hyland, a co-owner of LPL’s largest hybrid RIA, Private Advisor Group.

“We’ve been asking for this for a long time, to make us more competitive. The second part of it is being competitive in the marketplace to recruit,” Hyland says. “If you’re trying to recruit an advisor to the hybrid platform and [LPL] didn’t have an NTF platform, that’s not ideal.”

The mutual fund offerings will become available in three waves between July and the end of the year, building up to an expected 70% of the AUM in mutual funds on the SWM platform, Hyland told advisors in attendance this week at Private Advisor’s annual conference.

Several IBDs and custodians have unveiled NTF platforms in recent years ahead of the partial implementation of the fiduciary rule and the ongoing regulatory scrutiny of share classes. LPL had earlier informed its top producers of the new NTF platform at its Masters conference, Hyland says.

LPL spokeswoman Lauren Hoyt-Williams declined to state how much the firm charges for transactions on the SWM platform, calling the information proprietary.

Other fund families set to join the first wave on the NTF platform include Columbia Threadneedle Investments, MFS Investment Management, Natixis, OppenheimerFunds and Putnam Investments.

The list of participating companies is “still being finalized,” Kalbaugh wrote in the message to advisors, adding that LPL is working through the contracting phase with the initial wave of firms that indicated they would join.

The NTF platform will be helpful to hybrid advisors’ bottom line by providing their clients the possible mutual fund investments without ticket charges, says Abby Salameh, Private Advisor’s chief marketing officer. The fees currently hit clients on every trade or re-balancing within their portfolios.

The industry’s move away from more costly share classes had hurt the bottom lines of LPL and other BDs by cutting out 12b-1 fees from their previous revenue-sharing agreements. The new platform will help address part of that loss, says Private Advisor’s other co-owner, Pat Sullivan.

“Here is a good way for the advisor to get a good solution for their clients and for LPL to get a good solution for their corporate purposes,” Sullivan says.

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