What’s Next for LPL’s Advisor Sleeve? Machine Learning and AI

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LPL Financial recently made its Advisor Sleeve technology, which allows advisors to trade their own models like a strategist within the firm’s centrally managed platform, available to its network. But the firm is already working on the next iteration of the technology, which will give advisors the ability to analyze and stress-test their models through machine learning and artificial intelligence, among other new features.

“You can begin to think about it using machine learning, to be able to look at the trading that you are doing and be able to help you learn, ‘Oh my gosh, the more I trade, the worse I am,’” said Burt White, managing director of investor and investment solutions and chief investment officer at LPL. “Or, ‘Actually, every time I try to think about this emerging markets trade, I get it wrong every time,’ or, ‘I’m a lot better at asset allocation than I am selection. Maybe I should think about utilizing a recommended list and just doing the asset allocation.’”

The analytics tool, coming this summer, will look at how an advisor trades and provide relevant insights, such as when earnings on a particular stock are near, timing for capital gains and performance parameters.

“These are all utilizing data and machine learning and AI, to enrich and improve the ability for advisors to make better decisions, quicker decisions and more thoughtful decisions to manage money better,” White said.

The firm has a team of eight data scientists working on the modeling internally, and it’s in the process of bringing on a new head of data analytics and business intelligence. Analytics technology from AdvisoryWorld, which LPL acquired late last year, has already been integrated into the risk scoring of Advisor Sleeve and will be further integrated into other parts of LPL's technology stack.

LPL is investing a lot into the new capabilities, recently allocating an additional $15 million to tech spend, bringing its planned tech budget to $150 million for 2019, up from $120 million in 2018.

The idea behind the Advisor Sleeve was to give advisors control over all or a portion of their clients’ portfolios, while outsourcing rebalancing, trading, cash disbursements and administrative work to LPL. These are things advisors can’t really use as differentiators in attracting new bsuiness so that time can be used on other, more important tasks. It’s a new wrinkle, White says, on the traditional unified managed account.

“All UMAs that were out there were all centered around the U—unified; ‘I just want one account and one statement, one performance board, one tax statement,’ and it was all around that,” White said. “The most important piece is to be able to think about how you could have an advisor be able to do the business that they want to do with the flexibility to drive their value proposition, while at the same time getting the efficiencies that they want and need.”

The vast majority of LPL’s advisors operate in teams, so the firm created the technology to allow them to share models effectively across their practice. The specialist advisor, the one who created that model, can go in and change it, and it will in turn update all of the accounts using that model across the practice.

The system was also designed to track every trade or change in a model portfolio, for compliance purposes. And every time an advisor makes a change, it asks for a rationale for the change.


The independent broker/dealer is also working on natural language processing to provide advisors with talking points on how their model has performed and traded, such as top and bottom three positions, highest and bottom sectors, and attribution. They can then use those talking points in meetings with clients who are allocated to that model.

Most fund companies and product manufacturers have some kind of analytics tool to help advisors test their models and get a second opinion. LPL currently has a microsite where advisors can manually enter their models and send it off to a number of product providers, free of charge. But early next year, the firm expects to embed a button within Advisor Sleeve that allows an advisor to get a second opinion on their model from a fund company, automatically—no spreadsheets necessary. The feature also provides fund companies with an opportunity to get their tools and names in front of LPL advisors, something they’ve struggled with in the past to distribute, said Rob Pettman, executive vice president, product and platform management.

By year-end, LPL will also expand the security types, adding equities and separately managed accounts as an option in Advisor Sleeve. It will also explore adding alternatives, such as structured products and interval funds, in the first half of 2020, creating sleeves around these products so that LPL can do the trading. Annuities is another product type the firm looks to add down the road.

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