Giant Wealth Enhancement Group latest to split from LPL

The giant hybrid registered investment advisor, Wealth Enhancement Group, based in suburban Minneapolis-Saint Paul, is at least the second major independent financial advice firm to walk away from working with LPL Financial as its broker-dealer, where it currently has $4 billion in client assets.

Wealth Enhancement Group’s decision to split from LPL, with which it had a working relationship of more than a decade, comes after the former CEO of LPL Financial Holdings, Dan Arnold, over the summer made public comments that raised eyebrows around the industry about two large branches with $20 billion in client assets splitting from LPL.

Wealth Enhancement Advisory Services, the RIA, has $72 billion in client assets, according to its Form ADV. With a network of 85 offices, Wealth Enhancement Group has been a leading buyer of wealth management firms.

Branch offices like Wealth Enhancement Group pay broker-dealers and custodians fees for services such as trading, compliance, and technology. The larger the branch offices grows, the more it will flex its muscle looking to get the best pricing from its broker-dealer service provider. That may, at times, cause friction. 

After 17 years working with LPL, Wealth Enhancement Group is ending the relationship at the end of next June, a spokesperson wrote in an email.

“We have appreciated their partnership over the years and are working in close cooperation to smoothly transition the approximately 10 percent of our clients’ assets affiliated with LPL to other custodians and partners,” the spokesperson wrote.

“We remain committed to ensuring a smooth transition for Wealth Enhancement Group advisors and their clients, and we’re confident this shift will ultimately benefit and enhance LPL’s ability to support our valued clients,” an LPL spokesperson said. “This decision aligns with our previously disclosed strategy to focus on partnerships that reflect LPL's mission and model.​​”

The other hybrid to split from LPL was Alpharetta, Ga.- based Merit Financial Advisors,  which left LPL, its broker-dealer since 2010, in August but had been working for months prior on the change.

The firm had a total of $7.5 billion in RIA and brokerage assets at LPL. Merit’s new broker-dealer was specialty firm Purshe Kaplan Sterling, which focuses on firms and advisors that use custodians to house most of their assets and need a broker-dealer for a limited amount of customer assets.

Arnold did not name Wealth Enhancement Group or Merit Financial Advisors in his comments.

Instead, he said there were differences in philosophy between LPL and the two firms in working with independent financial advisors.

“We see in some cases where an OSJ may buy up their advisors’ practices, turn them into more of an employee-based construct, and ultimately, because of that alignment, that approach, it’s more of a captive type of model at that point, which again, is very different from the principles of independence and providing the flexibility for those advisors to move those assets where they want to or go where they want to,” Arnold said in a conference call with analysts to discuss second quarter earnings.

“As soon as they begin to lose the principles of independence within the model, we have a hard time with that sitting within our platform and within our ecosystem,” he added.

LPL Financial Holdings’ board of directors fired Arnold on Oct. 1 for making statements, not yet known publicly, to employees that violated the company’s code of conduct.