LPL's record recruiting year came with a cost — signing bonuses skyrocketed in 2018

LPL's record recruiting year came with a cost — signing bonuses skyrocketed in 2018
The independent broker-dealer had $233.3 million in recruiting loans on its books, a 46% increase over 2017.
MAR 15, 2019

LPL Financial last month reported a record amount of assets recruited to its platform last year. In a recent filing with the Securities and Exchange Commission, the firm revealed that those assets came with a cost — recruiting bonuses on its books soared to $233.3 million in 2018, a 46% increase over the year before. Recruiting bonuses are typically called "forgivable loans" in the brokerage industry; while they are structured as loans, the adviser does not pay the firm back out of his pocket. Rather, he works the loan off over time by meeting certain productivity goals and in exchange, the firm "forgives" the loan. The loans are forgiven over a three-to-eight-year period, provided the adviser remains licensed with LPL Financial, according to the firm's 2018 Focus report, an annual audited financial statement that is filed with the SEC. LPL's increase in forgivable loans is significant as the firm last year ratcheted up its recruiting efforts. At times it offered one of the best deals in the recruiting market, and mid-year it hired a new head of recruiting, Rich Steinmeier, from UBS Global Wealth Management. At the start of last month, LPL reported it had recruited $27.3 billion in brokerage and advisory assets in 2018. "The increase [in forgivable loans] correlates to the record-breaking year we had in recruiting," noted Mr. Steinmeier in an email. "And it also reflects a shift from providing mostly cash to mostly loans to align with advisers' preference." "That amount of assets is a staggering number, so the amount of forgivable loans is not surprising," said Jodie Papike, president of Cross-Search, a recruiting firm. "LPL said it was going to make a big push in the market and be aggressive." Last April, LPL said it was focusing recruiting on advisers at select firms, and the offer was in the form of a three-year forgivable loan that pays an adviser 50 basis points on assets transferred to LPL, a potentially far more lucrative structure for the adviser than traditional recruiting deals. Like other independent broker-dealers, LPL traditionally offered advisers a traditional recruiting package of 25 to 35 basis points based on the previous year's production of fees and commissions.

Latest News

Want to get the most out of alts? You’ll have to do your homework
Want to get the most out of alts? You’ll have to do your homework

Advisors who expect an edge from alternatives' illiquidity premium – without understanding the underlying terms and explaining them to clients – have a world of learning to do.

'Finfluencer' Ponzi scheme defrauds investors of over $20M
'Finfluencer' Ponzi scheme defrauds investors of over $20M

The social influencer Tyler Bossetti pleaded guilty to wire fraud and aiding in the filing of false tax documents as a result of the real estate scheme, which ran from 2019 to 2023 and used platforms including Facebook and YouTube.

US annuity sales see sixth straight $100B+ quarter
US annuity sales see sixth straight $100B+ quarter

The latest LIMRA data release shows continued growth in RILAs, variable annuities, and FRD products, though researchers argue more education is still needed.

RIA moves: Thiel's Indivisible welcomes Ride Wealth Partners, $4B Beacon snaps up Astor
RIA moves: Thiel's Indivisible welcomes Ride Wealth Partners, $4B Beacon snaps up Astor

Indivisible Partners builds on its strategy to take turf in the independent space with its latest move in Colorado.

Advisor moves: LPL adds $425M Evermark Investment Partners, $300M Merril Lynch group hops to Ameriprise
Advisor moves: LPL adds $425M Evermark Investment Partners, $300M Merril Lynch group hops to Ameriprise

LPL's latest addition, a San Diego team defecting from RBC, represents a milestone for the broker-dealer giant's Strategic Wealth model for wirehouse breakaways.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave