LPL's new robo-platform via BlackRock's FutureAdvisor tests waters with $5,000 account minimum

LPL's new robo-platform via BlackRock's FutureAdvisor tests waters with $5,000 account minimum
The firm's minimum for its automated investing platform is not unheard of, but in the future that number may be even lower, experts say.
AUG 09, 2016
Independent broker-dealer LPL Financial has set its robo-adviser account minimum to $5,000, standard fare in a market that may soon see low or even zero-account minimums. Earlier this year, LPL announced it was using BlackRock's FutureAdvisor for its adviser-driven digital advice platform. The name of the offering is Guided Wealth Portfolios, and comes a year after the company first announced it was rolling out a robo for its advisers. It is currently in the testing phase. Companies across the industry are picking up robo-adviser technology, and all firms approach details of these services differently. The $5,000 minimum is not unheard of, but in the future those numbers may be even lower, perhaps even non-existent, said Sean McDermott, a senior analyst at Corporate Insight. "Looking forward a year or two, we may be looking more toward a $0 route," he said. "We wouldn't be shocked to see that, especially when it comes to working with a digital advice provider." Dropping minimums was a trend last year. When Vanguard came out of testing its robo in May 2015, it dropped its account minimum to $50,000 from $100,000. A few months later, Wealthfront, an independent robo-adviser, dropped its minimum to $500 from $5,000. In November, Personal Capital slashed its minimum to $25,000 from $100,000 as well. Advisers' who use these platforms are faced with competition from retail robo-advisers, which may not have any minimum. Betterment and its adviser offering, Betterment Institutional, have no account minimums, for example. Charles Schwab & Co. offers its retail robo, Schwab Intelligent Portfolios, with no minimum, though its Institutional Intelligent Portfolios platform has a $5,000 minimum. "We made that functionality available to advisers so that they don't have to turn away any clients that want to be a part of their practice," said Tom Kimberly, general manager at Betterment Institutional. The cons of an imposed account minimum include stifling advisers' flexibility and discretion over the clients they place on the platform, or running the risk of losing out on potential clients, who may not qualify for the set amount or who would therefore refrain from testing out the service. "It is a stronger marketing tool and potential client funnel, because you are theoretically allowing prospects to go ahead and have a taste of the value without sticking any money with the company," Mr. McDermott said. Still, proponents of a set starting point say it weeds out the users who won't take it seriously. "You want the client to have some skin in the game," said Darren Tedesco, managing principal of innovation and strategy at Commonwealth Financial Network. His firm is in the process of building out a client-facing platform for its advisers, which will have an account minimum somewhere between $1,000 and $5,000. "If you go in with a $0 minimum and they put in $10, that's not a commitment of any sort." Account minimums were once a way to differentiate the amount of time advisers spent on their clients, said Jonathan Swanburg, an adviser at Tri-Star Group in Houston. Robo-advisers serve the purpose of working with clients who may have been a referral from existing clients and do not have enough assets but will grow over time. Connecting with the next generation of existing clients will be advisers' biggest opportunity in using robo-advisers, Mr. Tedesco said. "I don't see this as a huge pipeline improvement for them to drastically grow their business," he said. Rather, it will be an extension. What should be considered when marking a minimum is the service attached to the offering itself, said Brad Matthews, chief executive of Trizic, a robo-adviser vendor that works with financial institutions. Trizic does not impose account minimums but the firms that use its technology may. "If you have humans highly involved in managing the assets or humans highly involved in onboarding then it will be more expensive," Mr. Matthews said. "But for the most part if the technology is doing most of the work I don't see a need [for a minimum]."

Latest News

Farther debuts AI investment proposal tool for advisors to win clients
Farther debuts AI investment proposal tool for advisors to win clients

"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.

Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler
Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler

Former advisor Isaiah Williams allegedly used the stolen funds from ex-Dolphins defensive safety Reshad Jones for numerous personal expenses, according to police and court records.

Are you optimally efficient?
Are you optimally efficient?

Taking a systematic approach to three key practice areas can help advisors gain confidence, get back time, and increase their opportunities.

Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida
Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida

Meanwhile, Osaic lures a high-net-worth advisor from Commonwealth in the Pacific Northwest.

Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B
Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B

The deals, which include its first stake in Ohio, push the national women-led firm up to $47 billion in assets.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.