How far will LPL move amid an industry price war?

After Schwab and other brokerages cut some commissions to zero, LPL tells brokers it is 'exploring its options'

Oct 15, 2019 @ 2:19 pm

By Bruce Kelly

Management at LPL Financial is trying to figure out how to wade deeper into the pricing war that discount broker and RIA custodian Charles Schwab Corp. ignited at the start of the month when it said it was eliminating commissions for online trading of U.S. stocks, exchange-traded funds and options.

Competitors, including TD Ameritrade Holding Corp., quickly followed Schwab's lead and erased commissions on the same types of trades.

The move has stunned many executives and advisers in the brokerage business, as trading — a significant line of revenue for many firms — faces renewed pressure.

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LPL, the largest independent broker-dealer, with more than 16,000 advisers, is "exploring its options" when it comes to the price war and will share its strategy with advisers by Christmas, according to a memo last Thursday signed by Andy Kalbaugh, managing director and divisional president of national sales and consulting.

LPL recently has made several moves to reduce pricing and fees, Mr. Kalbaugh noted.

"You likely saw media headlines last week about certain firms eliminating transaction charges on U.S. stocks, exchange traded funds, and options," he wrote. "The changes were targeted at the retail do-it-yourself marketplace. However, we realize there may be a residual impact on how you think about the cost to operate your business, or questions you may receive from your clients."

"We know one of the best ways we can support you in today's complex and changing business environment is by leveraging our scale to reduce and simplify your pricing," he wrote. "We're actively engaged and exploring our options, and we expect to have an update for you on our thinking within 60 days."

Mr. Kalbaugh pointed out that LPL has recently reduced commissions on certain products substantially. In a move announced earlier this year, it is cutting ETF transaction charges this quarter from $9.00 to $4.95 on two of its proprietary advisory platforms, Strategic Asset Management and Strategic Wealth Management. The ETF trade price cut on those two platforms apply to three companies' funds: State Street, Invesco and WisdomTree.

In the memo, Mr. Kalbaugh also stressed that LPL has been evaluating the marketplace and looking at pricing. LPL has recently simplified and reduced pricing on its SAM platform and expanded the no-transaction-fee mutual fund network to all versions of SAM and SWM for participating funds.

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