LPL Financial cut trade, advisory costs by $15 million in 2019

CEO Dan Arnold expects more of the same in 2020

Oct 25, 2019 @ 4:08 pm

By Bruce Kelly

As the financial advice industry settles into its battle over pricing, LPL Financial's CEO Dan Arnold said on Thursday that the independent broker-dealer in 2019 cut costs on transactions and advisory platforms by $15 million.

LPL expects to deliver a similar amount of price reductions to its 16,000 financial advisers in 2020.

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"If you look in the last couple of years, we've made pricing adjustments as a part of our strategy in order to help drive growth in areas like our advisory platforms and transaction costs, and that's been roughly on an order of magnitude or an average of about $15 million investment a year," Mr. Arnold said during a call to discuss the company's third quarter earnings with analysts. "As we go forward and we think about our strategy, as we move into 2020, I would just give you a little color that we will likely approach it in a very similar way."

LPL is likely "to focus in those areas of the advisory platform and transaction charges and, secondarily, it would be at a similar magnitude or impact," he said.

Earlier this month, LPL in a memo to its advisers said it was "exploring its options" when it comes to the price war and will share its strategy with advisers by Christmas.

Publicly traded brokerage firms and wealth managers have been reporting their third quarter earnings over the past couple of weeks, and during conference calls analysts have routinely peppered CEOs like Mr. Arnold with questions about pricing and the move by some industry leaders to cut commissions to zero for trades of stock, exchange-traded funds and options.

Discount broker and RIA custodian Charles Schwab Corp. ignited a price war 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.

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Other discount brokers soon mimicked Schwab's move, while full-service brokerage firms have said they are increasing the number of free trades or programs for their clients.

While executives acknowledge the industry-wide pressure on pricing during those calls, they typically respond that the move has been a long time coming and the impact on revenue is likely small. They also stress that their firms for the past decade have been growing or accumulating assets and advisers, and a larger pool of assets potentially offsets or softens any hit to revenues created by price cuts.

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