LPL Financial Holdings, which oversees more than 30,000 financial advisors, will introduce a new annual fee next year on mutual fund accounts held directly at outside mutual fund companies. Advisors who use the "direct to fund" (DTF) model—a long-standing method for selling mutual funds through firms such as American Funds—will incur a five basis-point charge starting in January, according to InvestmentNews.
The DTF structure allows advisors to work directly with mutual fund companies rather than routing assets through their broker-dealer. For practices with substantial assets held directly at fund families, the new fee could create a meaningful expense. One senior industry executive told InvestmentNews that advisors with a large DTF book may see thousands of dollars in new annual costs.
Advisors routinely criticize these types of charges because they reduce practice revenue. Despite that frustration, LPL describes the fee as necessary. In an email to InvestmentNews, Marc Cohen, LPL's Chief Growth Officer, said the firm aims to preserve choice for advisors while funding support and improvements for direct mutual fund business.
InvestmentNews also reports that LPL will reduce fees next July for advisors in its Strategic Asset Management, Model Wealth Portfolios, and Guided Wealth Portfolios programs. The company noted that nearly 80 percent of its organic net new assets now flow into advisory platforms, reinforcing the broader shift away from traditional brokerage arrangements.
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