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Regulation and Compliance > Federal Regulation > DOL

A Look Inside LPL’s DOL Fiduciary Strategy

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Bill Morrissey admits it’s difficult to predict the future when it comes to the Department of Labor’s fiduciary rule, but he also admits he’s feeling confident in the work LPL Financial has done to comply.

“I am confident [in] the vast majority of the work we’ve done to comply with the DOL fiduciary rule, creating better tools, more solutions, better transparency, lowering fees,” Morrissey, head of business development at LPL, told ThinkAdvisor during the LPL Focus conference, held earlier this week in Boston.

“Whether the fiduciary rule is enforced on January 1, or it gets pushed back again, or it’s eliminated and another rule comes in its place — we’re going to go forward with the majority of these tools and these capabilities because they’re in the best interest of our clients,” he explained.

During the firm’s earnings call with equity analysts last week, CEO and President Dan Arnold alluded that there has recently been “some reduction in that level of uncertainty” tied to regulatory issues such as the new Department of Labor fiduciary rule — a view that Morrissey told ThinkAdvisor he agrees with.

A year ago, Morrissey said, the whole industry was “focused like a laser” on the DOL fiduciary rule.

“It galvanized the entire industry,” he said. “There was lots of disruption in the space because firms were wrestling with how to comply with it. Advisors were concerned … whether or not their firms could comply with it. And so that created a lot of energy around how to comply with the DOL rule.”

When the election cycle shifted later in the fall of last year, there was a lot of speculation that the Trump administration was going to eliminate the Labor rule. This caused a lot of that energy and sense of urgency around the rule to dissipate in the first quarter, according to Morrissey.

Now, though, Morrissey said he’s starting to see that energy pick up.

“When we get calls from other firms [and] advisors from other firms, their concern about whether or not they can comply with the DOL fiduciary, the urgency of getting either to a firm that is in compliance or helping their current firm get into a place that will comply with it — that urgency is increasing,” he said. “Because as of right now there’s a Jan. 1 enforcement date.”

Morrissey feels like LPL is an a good place, and he told ThinkAdvisor why.

“As an independent firm, to comply with the DOL fiduciary rule, you need three things: You need to believe in choice, you need to have scale, and you need to be fully self-clearing,” he said.

Regarding choice, Morrissey said LPL “wouldn’t presume” to tell an advisor who to work with or how to work with their clients. “And there are independent firms out there who have decided not to allow their advisors to use brokerage products, transactional products with tax-qualified plans,” he said.

Rather, he added, it’s LPL’s job to make sure their advisors have the tools and resources they need.

And to have scale, Morrissey said that the largest asset managers in the industry “have to want to work with you.”

The third piece is being fully self-clearing.

“As a self-clearing firm, it’s only through that capability that you can make the pricing policy decisions that you need to really innovate around product design,” Morrissey said.

LPL’s Mutual Fund Only platform is a “great example of how those three things intersect,” according to Morrissey.

“You couldn’t construct a platform like that unless you believe in choice, the largest asset managers are willing to work with you, and you can make those policy and pricing decisions that are necessary,” he explained.

The Mutual Fund Only platform is a price-competitive solution to preserve investor choice in brokerage accounts. The platform, which is expected to be available in early 2018, will offer load-waived shares from 20 mutual fund companies, with free exchangeability across fund families to be able to move funds over time as investors’ needs change.

The platform also eliminates certain annual account and trading fees and standardizes compensation, with a uniform upfront onboarding commission of 3.5%, and a consistent trail of .25%.

During his opening remarks at LPL Focus, Arnold said, “we’ve used the DOL mandate to innovate, to streamline services, and to create better resources — like the Mutual Fund Only [platform].”

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