LPL poised for acquisitions

LPL Financial, the nation's largest independent-contractor broker-dealer, is on the lookout for plum acquisition candidates, although a top executive says growth through current advisers is the company's prime goal.
MAY 29, 2008
LPL Financial, the nation's largest independent-contractor broker-dealer, is on the lookout for plum acquisition candidates, although a top executive says growth through current advisers is the company's prime goal. Earlier this month, Boston-based LPL, which had $3 billion in gross revenue last year, acknowledged in its quarterly report that it is seeking to buy firms. Dated May 15 and appearing on the Securities and Exchange Commission's website last Monday, the report outlined the company's plans to focus on "strategic acquisitions." "We intend to strengthen our position in the industry through additional strategic acquisitions, and we believe that these acquisitions will enhance our ability to increase the number of [financial advisers] as well as broaden our portfolio of products and services," the company said in the report. "Future acquisitions may be funded through the issuance of debt, existing cash, equity securities or a combination thereof." Last Wednesday, however, a top LPL executive downplayed the significance of the company's statement in its report.
Acquisitions are not the first priority for LPL, said William Dwyer III, president of independent-adviser services for LPL. He said he would not comment about any potential deals to buy broker-dealers. Making the firm stronger by concentrating on its established advisers is LPL's first priority, Mr. Dwyer said, followed by recruitment and then acquisitions. Eighty percent of LPL's growth last year came from its advisers, he said. Industry observers generally believe the company's filing. "LPL has a very aggressive plan to get new brokers," said one industry executive, who asked to remain anonymous. "I think they'd take on anybody if the numbers made sense." LPL is looking for size in an acquisition, so it may target one or more broker-dealers owned by an insurance company, said another executive, who also asked not to be identified. "LPL has to buy large to get the capacity," the executive stated. "There's not too many of those left, but a big-insurance-company broker-dealer fits that bill." LPL, which has been the most prolific acquirer among independent-contractor broker-dealers of late, now has a head count of 11,100 reps and advisers. Last year, the company made five acquisitions, spending a total of $235.7 million. Four of the five deals were acquisitions from insurance companies. As recently as last month, there was intense speculation that LPL was trying to buy one or more of the broker-dealers in the ING Advisors Network Inc., said an adviser at one of the broker-dealers, who spoke anonymously. ING Advisors Network, which has 8,800 reps and advisers under its umbrella, comprises four firms: PrimeVest Financial Services Inc. of St. Cloud. Minn., Financial Network Investment Corp. of El Segundo, Calif., ING Financial Partners Inc. of Des Moines, Iowa, and Multi-Financial Securities Corp. of Denver. Many reps have heard the rumor, the adviser said. "I don't know what's going on at this point in time." LPL has a history of on-and-off discussions with some acquisitions, industry observers noted. In September 2006, broker-dealer subsidiaries of Pacific Life Insurance Co. of Newport Beach, Calif., told advisers in an e-mail that it was not in talks with LPL about a sale. Five months later, LPL acquired three broker-dealers from Pacific Life: Mutual Service Corp. of West Palm Beach, Fla., Associated Securities Corp. of Los Angeles and Waterstone Financial Group of Itasca, Ill. Valerie Brown, president of the ING Retail Annuity Market Segment and the former head of the ING Advisors Network, would not comment. "We don't get caught in the web of rumors," she said. "It's not helpful to anyone." E-mail Bruce Kelly at [email protected].

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