LPL reports record recruiting year

Indie B-D recruited $27.3 billion in brokerage and advisory assets in 2018, at the same time the firm was experiencing big shake-ups in its operations.

LPL Financial set an annual record for the amount of assets that recruited advisers brought over to its platform last year, following rollback of a contentious recruiting policy and a shake-up within the recruiting unit.

LPL recruited $27.3 billion in brokerage and advisory assets in 2018, executives said Thursday — the largest annual total for the independent broker-dealer and an increase of 9% from the prior year. The firm’s recruited assets were up $8.6 billion in the fourth quarter, despite losing a net 65 advisers during that period.

Dan Arnold, LPL’s chief executive, said during an earnings call with analysts that the third and fourth quarters were “our best recruiting quarters on record” and that the firm had “a lot of momentum” heading into 2019. The net loss of 65 advisers in Q4, he said, is “a bit illogical when you look at the solid quarter from a recruiting standpoint and the consistency around our retention from quarter-to-quarter.”

LPL, the nation’s largest indie B-D, gained a net 899 advisers in 2018 — a 6% increase — bringing its total headcount to 16,109. It’s unclear if the net growth in annual adviser headcount was also a record.

LPL’s acquisition of four National Planning Holdings broker-dealers was not a factor in the recruiting totals from a recruited-asset perspective, a spokeswoman said.

Several big changes occurred in LPL’s recruiting operation over the past year. A number of recruiters left LPL in 2018, some to work at rivals. Bill Morrissey, former head of business development, who led the recruiting group, retired in June.

Mr. Morrissey was replaced by Richard Steinmeier, a veteran of UBS Financial Services Inc. — one of the signals that LPL is putting itself in the position to attract more brokers from the four wirehouses: Merrill Lynch, Morgan Stanley, UBS and Wells Fargo. Last December, LPL hired Marc Cohen, who as former head of strategic business development at MarketCounsel has an extensive background in breakaway brokers, or those advisers leaving wirehouses to go independent.

“We continue to benefit from the movement from an employee-based model to an independent model, so we see success in recruiting both from the wirehouses and the regionals,” Mr. Arnold said during the earnings call.

Last October, the brokerage rolled back a controversial recruiting policy aimed at pushing more assets to its corporate RIA platform. The policy, instituted in August 2017, required new advisers joining LPL to have at least $50 million in assets held in custody with LPL before working with an LPL hybrid adviser that custodies with a third-party firm like Charles Schwab or Fidelity.

LPL also began offering lucrative recruiting deals last year to private-equity-backed broker-dealers, targeting advisers from firms such as Kestra Financial, Cetera Financial Group and Cadaret Grant & Co.

Independent Financial Partners, a mega-hybrid advisory firm, is leaving LPL in a few months to start its own broker-dealer, which Mr. Arnold said contributed to the net decline in adviser headcount in Q4. During such a shake-up, advisers must make the decision whether to transition to the new brokerage, stay with their current B-D (which is LPL, in this case) or move to a different one altogether.

Fifty of the 65 advisers were retirement-plan focused and decided to leave for another firm, Mr. Arnold said. He’s likely referencing the departure of Retirement Benefits Group, which had $10 billion and 55 retirement plan advisers as of year-end 2017, according to InvestmentNews data.

Mr. Arnold said IFP had $12 billion in brokerage and advisory assets when it began the process of moving from LPL — which is planned for April 1 — and said LPL had retained roughly $6 billion to date.

Bill Hamm, chief executive of IFP, said that number is inflated, and said Mr. Arnold is likely “painting a more optimistic picture for his shareholders.”

“I really wish that Arnold would stick with the facts and not speculation,” Mr. Hamm said. “We’ll know in a couple months what that number is. Dan might be right. I don’t think so.”

Only 124 of IFP’s total 480 producing advisers have officially elected to stay with LPL, Mr. Hamm said. LPL has recently begun re-contacting some of the IFP advisers and offering them larger upfront recruiting packages — in some circumstances increasing the upfront bonus to 15% of production from 10% — to incentivize them to stay with LPL, Mr. Hamm said.