Fortigent Buy Plays Into LPL's Long-Term Strategy

Wednesday, January 04, 2012 11:47
Fortigent Buy Plays Into LPL's Long-Term Strategy

Tags: LPL

A lot of people are talking about LPL's acquisition of wealth management outsourcing firm Fortigent as a real transformative move for the industry, but few have much detail about what exactly it means.

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Fortigent provides outsourced portfolio construction services to a wide range of advisors in banks, brokerage firms, and RIAs.


Firms like this essentially create model portfolios -- using best-of-breed third-party ideas -- and charge advisors to build real client portfolios according to those directions.


It's a fairly simple proposition that is winning a lot of fans on the private banking side in particular. The relationship managers who know their high-net-worth clients can spend more of their time working with them instead of sitting behind a screen investing client money.


Meanwhile, the people who know the most about the way markets work can spend more of their time running simulations and looking for opportunities -- without having to gather the assets themselves.


Call it "model-only" or "overlay" or "open architecture" investing, Fortigent managers are now consulted in the way $50 billion in assets are invested.


Last fall, LPL made a fairly quiet purchase of overlay technology firm Concord. That gave them the software they needed for their affiliates to roll out overlay portfolios.


Yesterday's purchase of Fortigent adds best-of-breed managers to the mix, giving LPL reps the models they need to populate those portfolios.


They've just brought the "outsourced" approach in house. And that's a big deal.

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