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LPL unveils BlackRock's FutureAdvisor as its robo partner -- albeit with LPL model portfolios

After Nestwise dropped off the twig, then crickets, then a secret pilot launch, LPL announces that robo FutureAdvisor gets the nod

Wednesday, April 13, 2016 – 6:15 PM by Lisa Shidler
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Ryan Parker was brought over to LPL from Russell Investments and now heads its robo efforts.

Brooke’s Note: No doubt that this article raises as many questions as it answers but since its publication Lisa completed her reporting process and got some answers to basic questions like how much this will cost and how it can be robo-investing and be LPL model portfolios at the same time. See: With BlackRock’s robo and BlackRock’s ETFs — and two Blue Ocean efforts scrapped — LPL finds its comfort zone this LPL-FutureAdvisor deal does for sure is to give LPL and Mark Casady an answer to the question: What is your robo? It also gives BlackRock a partial answer to: Why did you spend $152 million to buy FutureAdvisor? See: Why BlackRock’s purchase of FutureAdvisor for $152 million could be a deal of destiny. Now it’ll be up to investors to prove whether all this activity has a life beyond whiteboard acrobatics and interesting PR.

LPL Financial just spilled the beans on its long-awaited robo partner: The Boston-based firm’s choice for its automated RIA is BlackRock’s FutureAdvisor.

Back in 2012, the nation’s largest independent broker-dealer took a risk choosing NestWise as its partner hoping to break into the mass market for investors, but that program failed to thrive and folded in 2013 — and it never carried the 'robo’ label. See: Why exactly LPL Financial nixed NestWise and how OSJs, once again, may be wagging the big dog.

Nestwise, an autonomous wholly owned subsidiary of LPL, was a direct-to-consumer play by LPL. The FutureAdvisor deal, at least according to the press release issued today,, does not seem to offer a way for investors to buy robo advice directly from LPL.

As of February 2015, Mark Casady was still up in the air about choosing a robo-advisor, according to his comments in that year’s first-quarter earnings call. But by July 2015, Dan Arnold, president of LPL, told 7,000 advisors at its Focus Conference in Boston that the firm would in fact be partnering with a robo vendor. See: LPL will launch third-party robo for advisors and eliminate some fees.

For the past year, LPL has been plotting out its next robo partner – but has kept its choice top-secret. Clearly, the firm didn’t want another very public reload. See: LPL will launch third-party robo for advisors and eliminate some fees.

Plot revealed

LPL, with its 13,000 advisors, is the first big RIA custody and clearing provider to choose FutureAdvisor — though RBC, which has a small RIA custody business, previously reported a FutureAdvisor collaboration.

Last fall, BlackRock rocked the industry by using what amounted to petty cash to tuck in up San Francisco-based FutureAdvisor — but after LPL had announced that it had a robo-advisor technology in pilot phase. The goal was that BlackRock, as the world’s biggest asset manager, would combine strengths with successful robo-advisor FutureAdvisor.

Before the BlackRock deal, FutureAdvisor focused publicly on retail distribution. Since the deal, industry observers have said FutureAdvisor is poised to serve as a tool for RIAs, brokerage firms or other institutional clients.

Although LPL is FutureAdvisor’s first client from the RIA arena, it isn’t its first business-to-business client: BBVA Bank also chose FutureAdvisor.

Stealth B2B

But one source, who asked not to be named, says that FutureAdvisor has been working on its business-to-business strategies for years behind the scenes.

“It just that the B-to-B part took longer, because those deals are slow, and it’s a behind-the-scenes strategy until you get a big deal to announce,” the source said. “They’ve had a business development team working on white-label deals for large clients since 2013. That’s how long it takes. That’s probably one of the reasons that BlackRock bought them.”

The source added that FutureAdvisor has always had a product that worked on other firm’s platforms, like those of Fidelity or TD Ameritrade.

“Having a product that works on other people’s platforms (as opposed to one that only works as a monolith on Apex) means that you’re built for white-label B2B deals. You’re modular.”

The source predicts there will be more deals like this.

“I think there’s a strong argument that the real market is only accessible through these deals, which means that FutureAdvisor is going to win over the other robos, who are picking up pennies off the sidewalk with their retail businesses and B2C marketing. The best go-to-market strategy is through partners like LPL.”

Digital alternative

LPL executives are energized by the news.

“The new solution will complement advisors’ existing practices and expand the availability of their services to current or potential clients who may prefer a digital alternative to the traditional method of receiving investment advice,” says Ryan Parker, managing director of investment and planning solutions for LPL, in a statement. “The platform, which will be accessible through a web portal, will also be integrated with LPL’s custodial platform.”

Parker joined LPL in 2013 from Russell Investments where he worked from 2007 to 2013. He joined LPL as executive vice president of investment and planning solutions and became managing director of investment and planning solutions in June 2014. See: LPL’s Robert Moore makes his next moves — and this time Joan Khoury is out.

Parker is charged with helping advisors grow their businesses and this robo effort could be a big boost for that initiative.

An email was LPL spokeswoman was not immediately returned by as this article went to press.

Not so robo?

According to the release, LPL intends to offer the low-cost investment platform to advisors with the goal of providing “more opportunities for advisors to grow and expand into new markets,” according to the statement.

What is confusing is that FutureAdvisor will distribute” LPL’s model portfolios,” though exactly what these are and how much they cost was not disclosed in the press release.

Nor did LPL disclose whether BlackRock products will be featured in those portfolios. BlackRock is the world’s biggest ETF provider with iShares but also a giant among active asset managers. See: Unfazed by its misfire, BlackRock is taking a second shot at the 401(k) market, this time with a whiter hat.

The release explains in a run-on sentence of epic proportions and countless polysyllabic words what this robo will look like. See: The ironic reason robo-advisors aren’t gorging on assets — a determination to dictate bloodlessly to millennials.

“The offering will feature access to the LPL research department’s model investment portfolios, and will incorporate technology-enabled advice capabilities from FutureAdvisor, specifically management of investor accounts in alignment with LPL’s model portfolios, aggregation of outside accounts, tax-efficient portfolio management and investor portal and online account enrollment,” the statement reads.

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Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Dan Arnold

TD Ameritrade
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Top Executive: Tom Nally

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