LPL Financial will debut a new mutual fund only (MFO) platform in early 2018.
The creation of the MFO platform is in reaction to the Department of Labor (DOL) fiduciary rule and aims to offer funds with reduced fees and standardized advisor compensation.
‘When we began our work on the Department of Labor (DOL) fiduciary rule more than two years ago, we knew that we’d need to develop a unique solution to preserve investor choice in brokerage accounts to create better experiences and opportunities for you and your clients,’ LPL said in a memo to its advisors, which was seen by Citywire.
The memo also states that less than 20% of the currently available funds will not make it onto the new platform.
The MFO platform will include a feature that allows investors to switch between different fund families for free.
1,500 mutual funds from 20 different providers will be featured on the platform, including ones from Alliance Bernstein, American Funds, Fidelity, BlackRock, Columbia Threadneedle, Goldman Sachs, Oppenheimer Funds and Franklin Templeton.
The funds were selected from the same pool of investments that LPL advisors currently use in brokerage accounts.
According to an LPL spokesperson, there has not been a final decision on what will happen to the current platform as it is dependent on regulatory and industry developments.
All funds will be sold with a single upfront-commission of 3.5% and a trail payment of 0.25%, with no annual account and trading fees.
Discounts will also be made available depending on the amount of assets investors have in funds throughout the platform.
Rob Pettman, executive vice president of product and platform management at LPL, said: ‘With this platform, LPL is striving to preserve choice for investors while managing the evolving regulatory environment.’
In the memo, the firm made it apparent that it is going a step further than solely rationalizing its platform.
‘As you know, other financial firms have limited or even fully removed brokerage options for retirement investors,’ said the memo.
‘But when brokerage is in the best interest of your client, we’re providing a solution.’
This July, the firm also decided to get rid of general securities bonuses which are based on the volume of equity and fixed income securities traded by advisors.
The change was related to preparation for the DOL fiduciary rule as well.
Additionally, the firm announced in June that it would halt the purchase of no-load mutual funds in brokerage accounts due to the difficulty of offering similar products at different compensation levels under the DOL fiduciary rule.