LPL’s Blockchain Portfolio: Forward Thinking or Foolish?

LPL Financial moved Friday to be the first independent broker-dealer to offer a blockchain portfolio. But is such a step the right way to go?

“Whether what they are bringing to the market has any meat to it or not, broker-dealers like to be seen as early adaptors of new technology,” said independent-advisor recruiter Jon Henschen.

“It positions them as cutting edge and innovative in the eyes of the industry,” according to Henschen. “We saw the same thing when consolidated client statements were new with Nathan & Lewis [Securities] and social media with Cambridge [Investment Research] at the forefront.

Blockchain is a digital ledger system that can be used to record transactions in cryptocurrencies like Bitcoin or Ether. The technology has other potential uses, like records management or smart contracts. Holdings in the portfolio include SAP, IBM, Microsoft, UPS and Aetna.

LPL’s separately managed account offering is a “new strategy [that] can further help our advisors differentiate their practices in the marketplace,” said Chief Investment Officer Burt White, in a statement.

The IBD’s announcement came one day after a top Securities and Exchange Commission official said that the cryptocurrency Ether was not a security and would not be regulated by the agency.

“We are proud to be able to lead the industry by leveraging our scale and expertise to provide low-cost solutions that support our advisors’ ability to meet market demands,” White added.

According to a recent report from Wintergreen Research, the global market for blockchain in 2017 was an estimate $708 million. But that figure could hit $60.7 billion in 2024, it says, as firms like IBM and Microsoft drive use of blockchain and their clients transition to cloud services.

Not everyone, though, is convinced that blockchain’s future success is secure.

“I’ve never known any encryption technology not to be broken,” said George Friedman, founder of the online publication Geopolitical Futures, on CNBC last week. “It’s useful. It’s visible … [but] at some point it’ll be obsolete.”

Friedman pointed to the possibility that intelligence services in Russia, China and the U.S. could decrypt it.