LPL offers generous recruiting package to rivals at PE-owned broker-dealers

LPL Financial continues to take aim at rival broker-dealers owned by private-equity firms and this month reintroduced a special recruiting deal that could be particularly lucrative to recruits from those firms.

Among the firms LPL is targeting: Kestra Financial, whose majority owner is Stone Point Capital; Cetera Financial Group, which is close to finalizing a deal with Genstar Capital; and Cadaret Grant & Co., which agreed to be acquired earlier this year by Atria Wealth Solutions, a firm backed by private equity.

Last week, InvestmentNews reported that LPL had recently created a video that appeared to be taking a swipe at some competitors owned by private-equity managers. The video is titled “How Financial Advisers Can Be Impacted by Private Equity Ownership” and outlined the potential drawbacks — and benefits —of such ownership.

It appears that video was part of a broader recruiting effort under LPL’s new head of business development, Rich Steinmeier, managing director and division president, who was hired in June from UBS Global Wealth Management. He replaced 14-year LPL veteran Bill Morrissey.

The reintroduced recruiting deal is specifically for brokers and advisers currently working at firms owned by private-equity managers, said two sources, both of whom asked not to be named. The terms of the deal are similar to what many in the industry considered a highly attractive package LPL was offering for a limited time in the spring and early summer.

In April, LPL said it was focusing recruiting on advisers at select firms, including Cetera, Kestra and Securities America Inc., which is not owned by private-equity managers. The offer is in the form of a three-year forgivable loan that pays an adviser 50 basis points on assets transferred to LPL.

The adviser’s assets include advisory and brokerage assets, those sources said, and must be moved to LPL’s corporate platform.

LPL declined to comment when asked about the specifics of the new recruiting deal. But in an email, Mr. Steinmeier wrote: “Our market leadership and financial strength are a competitive differentiator for LPL. We believe advisers want to be with a firm that has demonstrated a commitment to ongoing investments in the tools and capabilities that support their growth.”

Long the industry powerhouse in recruiting, LPL previously had a much wider approach to the market. With dozens of recruiters across the nation, it could simply flood the zone and add hundreds of brokers and advisers on an annual basis. This new approach, targeting specific types of advisers, appears much more narrowly focused and could evolve to include different segments of the industry over time.

LPL was privately held until 2005, when two private-equity managers bought a majority stake. It is no longer privately held and is now a publicly traded company.

Like other independent broker-dealers, LPL has traditionally offered advisers the firm wants to recruit a traditional recruiting package of 25 to 35 basis points based on the previous year’s production of fees and commissions.

The two types of deals, one based on assets under management and the other on the previous year’s production, are markedly different. For example, a team with $200 million in assets would get a recruiting bonus of $1 million if all those assets moved to LPL under the new deal. The same team would receive a bonus of roughly $500,000 to $550,000 using the formula based on moving fees and commissions.

“I think this will create a lot of interest from potential candidates,” said Casey Knight, executive vice president and managing director at ESP Financial Search, a recruiting firm. “LPL will see the success they are hoping for from this campaign.”

LPL on Wednesday said it had hired Scott Posner, most recently with IBM, as executive vice president, business development. He will report to Mr. Steinmeier.

Related Topics: LPL Financial