LPL Acquires Fintech Firm Blaze Portfolio

LPL Acquires Fintech Firm Blaze Portfolio

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Deal Could Really Move the Needle for LPL

LPL Financial Holdings Inc. (Nasdaq: LPLA), the parent corporation of leading retail investment advisory firm and independent broker/dealer LPL Financial LLC, recently announced the company has acquired Blaze Portfolio, a Chicago-based fintech firm founded in 2010.

Blaze Portfolio currently serves 135 investment firms and provides an advisor-facing trading system that LPL will integrate into its platform to expand its wealth management capabilities and drive growth. “For many advisors, our trading platform is their lifeblood, and the way they express and execute their investment strategies for their clients in a sophisticated way. It’s important, therefore, that we continue to invest in our offering to help them differentiate, grow and win in the marketplace,” said Burt White, LPL Financial managing director and Chief Investment Officer. “Acquiring Blaze Portfolio will enable us to provide our advisors with a dynamic trading and rebalancing system that can be utilized by practices of all sizes, affiliations and sophistications to meet their clients’ needs.”

In addition to bringing Blaze Portfolio’s trading capabilities to all LPL Financial advisors, LPL will continue to offer Blaze Portfolio’s services as a stand-alone solution to the wealth management industry. LPL intends to retain the talented team of employees who will continue to evolve and expand the Blaze Portfolio technology offering.

“We are excited to join LPL because of our shared commitment to innovation and focus on delivering best-in-class advisor technology,” said Blaze Portfolio Chief Executive Officer Bryson Pouw. “With LPL, we have opportunity to scale, expand the capabilities of our product and partner with an experienced team to design technology around the advisor experience.” The transaction signed and closed on Oct. 26, 2020. LPL paid an initial purchase price of approximately $12 million and has agreed to a potential contingent payment of up to $5 million subject to milestones and customary purchase price adjustments.

At first glance, the size and scope of this deal might appear insignificant for a firm of LPL’s size, but we believe that this acquisition could have a large impact on LPL for several reasons. First and foremost, LPL has lagged in this area for years. For a firm that is the leading independent broker dealer in the nation, and a sizable RIA custodian as well, the status quo was no longer acceptable. Their trading and rebalancing capabilities have significantly lagged what best of breed providers have offered for years.
The acquisition of Blaze should narrow or eliminate that gap in short order. This is no small matter.

Over time, the capabilities that Blaze brings to LPL will promote better efficiencies and scalability to all advisors, no matter where they sit the investment management spectrum. So, for example, if they want to build their own models and manage them, Blaze will empower them to trade and rebalance the models across all accounts quickly and efficiently. If they want to outsource all or a portion of the asset management to LPL or a third party, they can do that as well.

According to Burt White, Blaze will empower adjacent opportunities as well. Fractional share trading will open the door to more customized portfolios for smaller accounts, direct indexing, more personalized
portfolios (with ESG models being just one example) tax managed portfolios. All of these capabilities are opportunities for LPL advisors to differentiate themselves from the competition.

Perhaps the most exciting prospect for LPL advisors is the opportunity to deeply integrate all of the above functionality into the existing LPL platform. The result could be end to end workflows that greatly simplify portfolio management, model management and the like, allowing advisors to deliver portfolios that are more personalized for end clients.

The acquisition of Blaze has the potential to be a real game changer for LPL. If they can execute on their plans to deeply embed Blaze functionality into the LPL infrastructure, and if they can create the seamless workflows that Burt White envisions, the future of LPL investment management technology looks bright indeed.

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