LPL watching $100 million in NPH production move to rivals, executives say

Securities America, Cambridge and Commonwealth are winning advisers, but LPL may still retain 50% to 75% of NPH revenue

Three key rivals of LPL Financial are scooping up advisers affiliated with the National Planning Holdings broker-dealers who annually generate $100 million in fees and revenues, known as gross dealer concession or GDC in the industry, according to industry executives.

By year’s end, Commonwealth Financial Network is set to sign up NPH advisers with $14 million in annual production, according to Andrew Daniels, managing principal, business development. And Cambridge Investment Research Inc. has recruiting commitments from NPH advisers with $35 million in annual revenues to move by the end of December, according to Amy Webber, president and CEO.

Meanwhile, industry executives and recruiters said Securities America Inc., the largest firm in the Ladenburg Thalmann Financial Services Inc. network, looks to be the biggest winner in recruiting advisers from the four NPH broker-dealers, which LPL said in August it had purchased for $325 million. LPL is currently working to move the first wave of those advisers to its platform.

Securities America will recruit NPH advisers with between $50 million and $70 million of annual revenues, according to industry sources who spoke confidentially to InvestmentNews. With 3,200 advisers at the four NPH firms – National Planning Corp., Invest Financial Corp., Investment Centers of America Inc. and SII Investments Inc. – thousands of those advisers are deciding where to work in the future.

DECIDING FACTORS

Size and culture matter to the NPH advisers, executives said.

“The advisers who have chosen to come here have valued the community in the comfortably sized NPH firms,” said Mr. Daniels. “Their concerns center on the mega-sized LPL, moving from an 800-adviser firm to 16,000, and the significant cultural and service differences in the models.”

“The issue of private ownership is important,” said Ms. Webber. Cambridge, like Commonwealth, is a privately held company while LPL is listed. “NPH advisers want to hear a commitment that they will never go through a sale again.”

“As a matter of policy, Securities America doesn’t publicly discuss our specific recruiting efforts, particularly with respect to any specific firms,” said spokeswoman Janine Wertheim, in an email.

An LPL spokesman, Jeff Mochal, said he had no comment.

LPL Financial Holdings Inc., the broker-dealer holding company, will report its earnings Thursday afternoon after the market closes. Its CEO, Dan Arnold, is expected to comment on the NPH merger on a conference call with investors later that afternoon.

WITHIN RANGE

Not signing up advisers who generate $100 million in fees and revenues from NPH is significant, but also within LPL’s potential goals from the merger. In 2016, the four NPH broker-dealers reported $909 million in annual fees and commissions. In other words, Commonwealth, Cambridge and Securities America will recruit roughly 11% of NPH advisers’ total revenue, based on 2016 data.

Of course, other broker-dealers are actively trying to recruit NPH advisers, but it wasn’t clear how successful those firms have been.

Earlier this month, InvestmentNews reported that industry executives expected LPL to bring on board between 50% and 75% of that total, or $454.5 million to $682 million.

LPL also structured the acquisition so that it would increase the amount it paid to Jackson National Life Insurance Co., the parent of NPH, contingent on the number of advisers who eventually join LPL. But no contingency payment would be due if less than 72% of NPH’s production is moved to LPL, according to the company.