LPL Financial has boosted it separately managed account (SMAs) platform, adding a host of new strategies and cutting costs for some offerings.
The cost cuts come as a result of the firm now offering SMAs on the platform via model delivery, meaning asset managers submit holdings and transactions to LPL and the broker-dealer conducts the trading in-house.
This has allowed the firm to lower management fees on the strategies and account minimums for the platform.
‘Until last year the only way that a separately managed account manager could offer their service to our advisors was through SMA delivery, where the managers are handling all of the trading,’ Steve Snyder, research operating officer at LPL, said.
‘We’ve changed that, so they can still do SMA delivery, but we’ve transitioned some and flipped the switch where instead of managers conducting the trading, LPL is conducting the trading.’
‘Now we can lower the minimums for those managers, generally cutting them in half because managers don’t have to deal with trading and new account paperwork and they can just submit the model to us where we do all of the trading and handle all of the operational aspects, which also enables us to get the management fees lower,’ Snyder added.
The platform has around 650 SMA strategies, of which 90 are now available via model delivery. Of this 90, 37 were converted from SMA delivery and 53 were newly added strategies.
Snyder said strategies that were moved to model delivery were mainly in areas like large-cap equity, mid- and small-cap equity and international equity, while more intricate fixed income and balanced strategies retained their SMA delivery format.
Offerings from Alliance Bernstein, ClearBridge Investments and Neuberger Berman, were among those converted.
New strategies that were added to Manager Select via model delivery came from Alpha Quant, Applied Finance Group International, Capital Group and Morningstar Asset Management. Recent strategies added via SMA delivery came from Nuveen and Wells Fargo Asset Management.
According to Snyder, management fees on strategies that were transferred to model delivery dropped by between five and 20 basis points (bps). The average management fee for strategies on the platform had been between 40bps and 50bps.
Account minimums for the platform were lowered last year to $50,000 for model delivery access, compared to $100,000 required for the SMA delivery option.
The Manager Select platform is made up of both available managers and recommended managers. The latter is a high conviction list crafted by LPL’s traditional due diligence team.
That team recently lost leader Joey Rackley, who departed the firm for a sales role at asset manager PGIM.
For now, LPL’s traditional due diligence team, comprised of equity and fixed income analysts, reports to Jason Hoody, assistant vice president of research, who reports to Kirby Horan-Adams, director of research.