LPL Wades Into Pricing Wars; Axes Platform Fees on ETFs for Advisors

December 6, 2019 | Alternative Investments, News

LPL Financial launched a no-transaction-fee, ETF network where advisors can trade ETF’s for free in their advisory accounts.

LPL Financial partnered with three leading ETF providers for its platform – State Street Global Advisors, Invesco, and WisdomTree. It will offer the zero-fee service from December 6.

Corporate RIA, hybrid RIA or RIA-only advisors may use LPL’s Strategic Asset Management and Strategic Wealth Management Platforms for free ETF trading.  However, free trades only with the above-named ETF providers will be available for the present.

“We are able to use our scale as a strategic lever to drive pricing,” said Rob Pettman, executive vice president, Investor, and Investment Solutions.

“This move by LPL eliminates transaction charges on purchases and sales of our ETFs on their platform. This will help advisors and their clients save more and simplify their total cost of ownership equation,” said Sue Thompson. She is head of SPDR® Americas Distribution for State Street Global Advisors.

Advisors welcome the change

According to Bruce Kelly, of InvestmentNews, LPL is eliminating a $9 ticket charge on these transactions for its 16,000 advisors.

“We do a lot of re-balancing of client portfolios, and this drives down the underlying costs,” said Doug Flynn. He is the co-founder of Flynn Zito Capital Management, which uses LPL as its broker-dealer.

Can LPL sustain the free trading facility?

Further, according to Boston Business Journal, the ETF providers on LPL’s platforms will subsidize the loss of revenue incurred by LPL as a result of the scrapped fees. “This approach involves co-funding the reduction, which prevents LPL from having to offset significant revenue loss associated with eliminating these charges,” said LPL spokeswoman Lauren Hoyt-Williams in an email.

LPL continuing on its strategy to cut trading costs

Previously, LPL eliminated IRA custodial fees and slashed its overall program fee for Model Wealth Portfolios by a third.

“As a custodian in the expanding RIA marketplace, we will continue to invest in platforms as well as the technology and service experience to do more than lower costs, but create value with advisors,” said Pettman.

Meanwhile, LPL may add more ETF providers to its fee-free network for advisers.

Pitched pricing battles in the investment industry

LPL’s move adds to the pricing wars raging in the investment industry. Already, players such as Robin Hood, Charles Schwab, E-trade, TD-Ameritrade gravitated towards zero commissions as a strategy to gain scale and market share.

Last year, Fidelity Investments set the cat among the pigeons by offering a clutch of zero-fee index funds.

[Related Story: Bonanza of New Accounts at Charles Schwab After Zero-Commission Trading ]

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