Rumors Of LPL Buying Fortigent Could Leave RIA Clients Making Interesting Choices

Thursday, December 08, 2011 07:56
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Rumors Of LPL Buying Fortigent Could Leave RIA Clients Making Interesting Choices

Tags: LPL

Word has it LPL is talking about buying at least a piece of portfolio creator Fortigent. If so, it broadens LPL's strategic offering, but the advisors who already use its investment models may be in the lurch.

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LPL has already demonstrated that it's hungry to add outsourced wealth management vendors to its overall platform. April's acquisition of overlay manager Concord is a good example.

 

Essentially, the more it can automate higher-end functions like customized asset allocation and security selection, the easier it will be for LPL's independent reps to move up market into fee-based relationships.

 

So on that level, the rumors make sense.

 

And Fortigent seems to be running cash-lean, so any formal team-up would give them access to LPL's resources and distribution network.

 

The 90 banks and RIA firms that currently use Fortigent models to build their clients' portfolios might be wondering what an outright merger would mean for them.

 

They could probably keep running Fortigent-derived portfolios for their clients.

 

But would LPL try to use their "foot in the door" to try to sell custody or other services to these advisors -- much less their clients? Probably not.

 

Fortigent is a white label vendor and assets run on its models remain under the advisor's choice of custodian. They have no access to the end-level investors, so there's no worry about LPL prospecting these clients.

 

The only real competitive threat to such a deal -- if it's even on the table -- would be in the form of LPL using it as leverage to woo independent advisors to their RIA. That's relatively remote, but it could happen.

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