LPL near launch of ex-wirehouse channel after starting employee model
Undeterred by questions about an independent firm acting as an employee brokerage, LPL Financial is finalizing another new option for prospective advisors.
After its largest affiliated group rolled out a new ex-wirehouse affiliation model earlier this year, LPL plans to launch a company-wide channel over the next couple of months. Consolidators, platform providers and other independent broker-dealers compete with LPL for breakaways.
LPL is the largest IBD with $5.19 billion in revenue last year. The former MarketCounsel COO, who joined LPL last year after a dozen years with the breakaway transition compliance firm, will lead the new model, according to Rich Steinmeier, LPL’s Head of Business Development.
“That’s why Marc Cohen is here,” Steinmeier says, “to bring that expertise to build that business and launch it.”
Private Advisor Group is LPL’s largest office of supervisory jurisdiction and hybrid RIA at some $17 billion in assets under management and 650 advisors. It rolled out its model in January under LPL and Cohen’s prior firm. The publication Wealth Management reported in April that LPL would pitch wirehouse breakaways on a specific model aimed at larger teams.
In an interview, Steinmeier and Cohen said details like the branding, RIA structure and fees would soon become available. Cohen mentioned Thanksgiving as a timeline, pushing back on the idea that representatives in the channel would get lower payouts than other advisors.
LPL’s model stands out “by us being able to serve as custodian, being able to serve as broker-dealer, have it all be self-clearing, being able to overlay on top of that compliance support by serving as a corporate RIA,” says Cohen, now a senior vice president with LPL.
“There's a multi-tiered approach to where we are earning economics in ways that many of the other firms on the street don't necessarily participate,” he adds. “We can probably offer that back to the advisors in a way that can be more economically efficient to them, but probably also offer them increased levels of support and assistance beyond what some of those others can.”
Cohen and fellow executives spoke after LPL announced that it had recruited 15 more advisors with a combined $1.5 billion in client assets from firms like Advisor Group, Ameriprise and MassMutual’s IBD. To keep expanding, though, LPL needs to retain its current core as well.
Some advisors who attended the company’s Focus conference last month had questioned CEO Dan Arnold in a town hall about whether the new W-2 representatives would compete with them under another new affiliation after LPL acquired Allen & Co. of Florida this summer.
The company argues there is no conflict. The employee setup expands the choices available to incoming advisors to make the same LPL capabilities available to them while “making a different trade on payout” for additional services like real estate and benefits, according to Steinmeier.
LPL executives also point out that LPL has no proprietary funds or insurance. Wirehouses and other firms that exited the Broker Protocol last year contrast with LPL.
“We’ll make no claims,” says Stenmeier, referring to efforts by firms to hold on to clients when reps depart through litigation. “You'll see us always participating in the protocol. And we will work every day to earn their business, but in no way will we encumber them.”
The definition of independence comes down to much more than the question of W-2 vs. 1099 status for representatives, adds Kenny Hullings, a senior vice president for business development, sales operations & enablement.
“It comes down to, do I own my client relationships, do I get to make the decisions of how to best serve my clients?” Hullings says. “It doesn't necessarily matter what the legalese is that's behind it. It's more so, what's the experience for the end investor that I'm able to provide?”
Since the Focus conference in late August, LPL has said it made a half dozen recruiting moves that brought advisors from Wells Fargo Advisors Financial Network, Royal Alliance Associates, Ameriprise, MML Investors Services and FSC Securities. Each of the teams joined the corporate RIA, other than one advisor who affiliated with a hybrid, Independent Advisor Alliance.
•Robert Russo’s hybrid RIA-OSJ added financial advisor Robert Paolini of Medford Lakes, New Jersey-based Paolini Advisors, which has about $150 million in client assets. Paolini affiliated with LPL on Aug. 27, according to FINRA BrokerCheck.
•Salt Lake City-based Intermountain Financial Partners made the largest move of the bunch, with six advisors managing $700 million in client assets. The team made their affiliation switch official on Aug. 1, BrokerCheck states.
•Three advisors with $150 million in client assets had aligned with LPL on July 26. Financial advisors Carter Johns, Michael Chu and John Gillis operate JCG in Chesapeake, Virginia, after forming the practice in 2012.
•The previous day, financial advisor Brian Gernant of Geneseo, Illinois-based Gernant Asset Management had affiliated with the No. 1 IBD. Gernant’s team has $125 million in client assets.
•Anaheim Hills, California-based Dennis Priest and Edmond Karam of Benefit Funding Retirement Services aligned on July 15 and attended their new IBD’s conference. Priest’s sons Jordan and Austin are also part of the firm, which has $150 million in client assets.
•In early May, LPL added financial advisors Barry Rucks and Matt Silverhardt of Philadelphia-based Barry A. Rucks & Associates. The team manages about $225 million in client assets.