LPL’s Atria deal poses complexities: Report

Louis Diamond of Diamond Consultants and Jodie Papike of Cross-Search

Atria's financial advisors might be getting M&A 'whiplash,' one recruiter notes.

Bringing aboard 2,400 financial advisors from seven separate broker-dealers, as LPL Financial is doing with its acquisition of Atria Wealth Solutions Inc.’s network of firms, will be “complex,” even for a firm with LPL’s long experience with acquisitions, according to a March research note from analysts at JPMorgan Chase & Co.

In February, LPL Financial Holdings Inc. said it was buying the private equity broker-dealer aggregator Atria for $805 million, with up to another $230 million based on retention, or keeping advisors in their place. Atria’s advisors work with about $100 billion in assets, and LPL is aiming to complete the integration of the seven Atria broker-dealers by mid-2025.

“Preparations for onboarding/integration are underway,” according to the JPMorgan note. “While LPL does not expect to complete the full integration until mid-2025, the integration of seven separate broker-dealers will be complex even for an experienced LPL team that has a streamlined process to onboard advisor teams and enterprises within the banks/credit union segment.”

Atria was backed by private equity investors Lee Equity Partners, and Morgan Stanley veteran Doug Ketterer was its CEO. In roughly seven years, Atria bought two broker-dealers that focused on supporting banks and credit unions — CUSO Financial Services and Sorrento Pacific Financial – and five that work with independent financial advisors — Cadaret Grant, NEXT Financial Group, SCF Securities, Western International Securities, and Grove Point Financial.

LPL Financial is one of the most prolific dealmakers in the wealth management industry, and it has been buying up broker-dealers at a prodigious rate since 2005, when it sold a majority stake to two private equity managers. But hanging onto the financial advisors from the firms LPL has acquired has not always been easy. Its 2017 acquisition of the National Planning Holdings network of financial advisors resulted in LPL gaining about 70% of those advisors’ fees and commissions, a disappointing result for the firm, which is currently home to more than 21,000 financial advisors.

“LPL expects to retain about 80% of assets from Atria, or $80 billion, which falls within range for retention rates of select transactions such as NPH, 65-70%, and [Waddell & Reed Financial Inc.], 95% or more,” according to the JPMorgan Chase note. “Ultimately, LPL continues to expect a run-rate [earnings before interest, taxes, depreciation and amortization] contribution of about $140 million from the Atria acquisition when fully ramped.”

An LPL spokesperson did not return calls Wednesday to comment.

Industry recruiters underscored the complexities that LPL faces in moving or integrating seven broker-dealers at the same time.

“It’s seven different cultures, management teams, custodians, with common technology and ownership,” said Louis Diamond of Diamond Consultants, an industry recruiter. “This is much more complex than Osaic buying Lincoln Financial.

“Remember, all the Atria broker-dealers have already been bought recently,” Diamond said. “These are financial advisors affiliated with much smaller, boutique-type firms, and it’s one deal after another. The advisors might be getting whiplash, but overall LPL is a positive on scale and resources for them.”

“Moving to a new firm is a lot of work for financial advisors, and it’s tricky,” said Jodie Papike, CEO of Cross-Search, a recruiting firm. “They have to make sure they’re comfortable with the new business, the products offered, the third-party money managers.”