LPL isn't ruling out zero-fee ETFs in RIA push

As LPL Financial strives to bolster its RIA offerings, the No. 1 independent broker-dealer is cutting ETF ticket charges by nearly half for three major fund families.

Transaction fees for ETFs from State Street, Invesco and WisdomTree Investments will drop to $4.95 from $9.00 in the second half of the year. LPL announced these specific families on May 30 after CEO Dan Arnold unveiled the price reductions in its earnings call earlier in the month.

LPL’s corporate and hybrid RIA channels grew a combined 10% year-over-year to $312 billion in assets under management. Record recruiting of advisors managing more than $30 billion in client assets over the past 12 months is helping to fuel expansion.

The firm also aims to make its pricing for RIAs simpler and more attractive, according to Rob Pettman, LPL’s executive vice president for products and platforms. Since 2017, LPL has launched zero and lower transaction-fee mutual fund offerings for corporate and hybrid RIAs.

ETF providers have been waging a much-ballyhooed “race to zero” which often obscures the management fees still assessed within so-called zero-fee products. LPL’s main corporate advisory platform also collects an administrative fee for compliance and other services.

LPL is pursuing lower transaction fees for other ETF families, as well. Describing the 3,000 types of no transaction-fee shares of mutual funds as “an incredibly competitive offering,” Pettman says he wouldn’t rule out moving to ticket charges of zero for the ETFs too.

“That's certainly a possibility in the future,” Pettman says. “You're seeing us looking to aggressively compete in the RIA marketplace.”

Pettman spoke the week after LPL recruited three advisors with about $460 million in combined client assets to its brokerage and corporate RIA platforms over a two-day span. In the past two weeks, LPL has announced additions from Waddell & Reed, Raymond James and Ameriprise:

•Waco, Texas-based financial advisors Brian Davis and Brian Remson opened the seventh location of the hybrid RIA practice Credent Wealth Management. The team — which has $110 million in client assets — made the move on Feb. 11, according to FINRA BrokerCheck.
•Jake Murray, Mike Canavan and Jill Phillips of Idaho Falls, Idaho-based Teton Wealth Management manage $185 million in client assets. The trio of advisors came to LPL on May 23.
•Advisor Mike Bensey affiliated the following day, aligning with the Orlando location of the corporate RIA office of supervisory jurisdiction called Good Life Companies. His team has $275 million in advisory, brokerage and retirement plan assets.

LPL and other IBDs near its size are adjusting to the growth of the RIA space, which has coincided with fewer firms, lower margins and shrinking headcounts at IBDs. LPL’s status as a self-clearing firm and its multiple affiliation options display how the IBD label no longer fits exclusively, Pettman says.

“This is LPL using its size and scale to go about lowering price on our advisory platforms,” he says. “We're a lot more than that, if you think about our business model.”

The firm is betting that its overall size of 16,189 advisors and record client assets of $684 billion will force its competitors into a tough spot when it cuts prices. In remarks at an investors day last month, Arnold mentioned how lower fees can act as a lever for the firm.

“We see the opportunity to continue to expand our capabilities and use pricing as a way to differentiate,” Arnold said. “We think that will put more and more pressure on our competitors in this part of the industry and will challenge them to follow. We think that will be difficult for them.”