LPL's Casady on tech, a bank and regulators

The chief executive offers frank talk on where the firm stands in key areas

Aug 20, 2013 @ 11:57 am

By Dan Jamieson

InvestmentNews caught up with LPL Financial LLC chief executive Mark Casady yesterday at the firm's annual adviser conference to ask him about some of the firm's recent developments, including its technology improvements, efforts to start a bank and regulatory scrutiny.

InvestmentNews: Is the announcement of a package of technology upgrades really LPL playing catch-up on its technology?

Mr. Casady: Not now. I would have said that a year ago. The [enhanced] trading system, the new account view, which is the way end clients look at data, and with mobile access as well, we're right there in terms of clients and mobile access.

InvestmentNews With private equity now owning just 17% of the company, LPL is in a position to start its own bank, primarily to handle cash sweeps. What's your thinking there?

Mr. Casady: We've been looking at it since 2008, when we'd gotten through a pretty significant loss of earnings from low interest rates — $170 million last year that should have otherwise showed up. We've been able to absorb that through [better efficiencies]. A bank would allow us to be more efficient users of capital. We could move some funds in one part of our business that today have to be in a money market fund. On our latest earnings conference call, I said it would be [$6 billion] in IRA rollovers within our advisory programs.

InvestmentNews: LPL would earn a higher spread than with the brokered-deposit program on all deposits, right?

Mr. Casady: We would, but it doesn't mean that it would be enough to pay for the capital required. You have to capitalize the deposits. It takes a pretty serious amount of capital — roughly a million dollars of capital per billion of deposits. So you have to think about that. It's possible [a bank] would be something interesting, but not accretive to the company.

There are other services a bank could provide, like capabilities in a bank custodian that we can't do today. Every now and then, a wealthy client says “I really trust the banks.” Well, today, they go to State Street or Northern Trust. If we had our own bank, it could actually offer bank custody, which would appeal to our RIA business in particular.

InvestmentNews: Assuming you formed a bank, what kind of time frame are you looking at?

Mr. Casady: It would be measured in years, not months.

InvestmentNews: What's the feedback been on your new supervision program that requires single-person offices to team up for supervision or pay the home office for oversight?

Mr. Casady: As you can imagine, people don't like to change, and I can't blame them. Once they understand that what we're doing will actually save them time, that it's a better way of working with the regulators and ensuring they're compliant, they'll feel much better about what we're doing and why. What this allows is to use our scale and technology to do the part they were doing — overseeing e-mails, branch trade reports and all the administrative work.

InvestmentNews: LPL has taken some lumps from regulators lately. Do you think they don't trust the independent-contractor model?

Mr. Casady: I won't touch that one. But every industry has good apples and bad. Our job and regulators' job is to get the bad apples out. The number of bad apples is the same if you normalize for the size of a firm. I'll stand by our record as being quite exemplary and our ability to oversee the majority of advisers here. We are going through a sea change in the industry. The majority of advisers are now independent. I do think the regulators are trying to do a good job of looking at that fluidity and the consequences of those changes.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 26

Webcast

Cracking the Code: Making Sense of Alternative Investments

InvestmentNews Research estimates that $150 billion in alternative assets could be added to client portfolios among independent advisers over the next three years. Roughly 85% of all clients are now expressing interest in learning more... Learn more

Accepted for 1 CE Credit by the CFP Board. Pending by Investments & Wealth Institute for 1 credit towards the CIMA® and CPWA® certifications.

Featured video

INTV

Here's how we came up with our list of undiscovered talent in mutual funds

Senior columnist John Waggoner talks with assistant managing editor Susan Kelly about how hard work, curiosity and passion landed some fund managers on our list.

Latest news & opinion

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

SEC advice proposal unveiling: Here's what to expect

Chairman Jay Clayton will initiate momentous action Wednesday, as the commission meets to debate a rule on broker and adviser standards.

How active are the largest actively managed funds?

Active-share measures for the 15 largest actively traded mutual funds.

Morgan Stanley's success looks long in the tooth to analyst

Sanford C. Bernstein & Co. analyst Christian Bolu, concerned over stalled adviser growth and what it means for lending and deposit growth, believes the stock will "under perform."

Retirement coverage gap, 401(k) rollovers are big emerging threats for plan advisers

Proliferation of state retirement programs approaching the 'tipping point' where it will lead the federal government to step in.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print