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LPL Adds Strategies to Growing Fee-Based Models Platform, Lowers Minimums

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LPL Financial (LPLA) announced Tuesday that it has expanded the mutual fund and ETF strategies available on its Model Wealth Portfolios (MWP) platform, adding strategies from AlphaSimplex, J.P. Morgan Asset Management and Morningstar Investment Services.

Additional strategies were added to the platform from LPL Financial Research and BlackRock. Altogether, there are now eight investment management firms offering strategies on MWP.

At the same time, LPL said it had lowered the account minimum for MWP to $25,000 from $100,000; the $100,000 minimum had been in effect since the platform’s launch in 2008.

John Moninger, executive vice president, LPL FinancialJohn Moninger (left), the LPL Financial executive vice president of Advisory and Brokerage Consulting, said the additions were part of a longer-term strategy to add select mutual fund and ETF strategies that follow specific themes such as minimizing taxes, absolute return strategies, tactical investing and risk management. “We didn’t want to build a supermarket,” Moninger said in a Tuesday interview, but rather to offer a “complementary roster of choices that advisors could implement in different ways.”

Lowering the end-client minimum investment for participating in the platform from $100,000 to $25,000 came as a result of “big advisor demand” not merely for clients with lower asset levels but also wealthier clients who wanted to put part of their assets into one of the strategies, Moninger said. There’s also been big advisor buy-in to the MWP platform: assets under management on the platform stood at $8.7 billion as of March 31, 2012, a 72% increase over the prior year. MWP assets stood at $64.7 million shortly after MWP was launched March 31, 2008, LPL said.

Moninger wouldn’t disclose if that rapid growth was due more to market appreciation or net new assets coming into the platform, but did say that there has been “great growth” in ETF assets. In “dollar volume, you see it in mutual funds” still, which he said made sense since most of LPL’s advisors use actively managed mutual funds.

While Moninger said LPL considers macroeconomic issues in determining which strategies to add to the platform, the first priority, he said, is asking “How do you solve” for investors’ needs? “Let’s solve them first,” he said, but also give the advisor the discretion to “move from strategic to tactical, for example, to be proactive” in moving client funds from one model to another, choosing the right strategists to address client needs.

What themes are resonating on the platform now? Moninger said capital appreciation gets the most assets, as might have been expected, but that “downside risk-aware models are No. 2.” He said that while “it’s still early, the tax theme is starting to pick up momentum,” again not a surprise considering the looming likelihood of higher tax rates at year-end should Congress not take action on the Bush-era tax cuts.

As for the kinds of theme-based portfolio strategies that may show up on the platform in the future, Moninger listed income distribution for retirees—“We’ll probably have a complementary set of choices allowing clients to get money out”— tax-aware strategies and inflation protection. LPL Research, Moninger said, is working on ways to provide to clients through advisors an investing vehicle that has some of the key characteristics of fixed income but will also mitigate the risk of rising interest rates.

The newly added offerings to the MWP platform are:

  • LPL Financial Research: Absolute Return Diversified Plus, Tactical Opportunities Diversified Plus, Strategic Exchange-Traded Product (ETP) Portfolios
  • AlphaSimplex Group: Risk Efficient Portfolios
  • BlackRock: Tactical Mutual Fund Model
  • J.P. Morgan Asset Management: Global Asset Allocation, Tax Sensitive, Absolute Return Portfolios
  • Morningstar Investment Services: Mutual Fund and Exchange-Traded Fund Managed Portfolios, including tax-conscious mutual fund options and Absolute Return Model.


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