Commonwealth advisors, employees, let it all hang out on Reddit

When a behemoth in any industry buys a boutique, considerable ill will and grievance will follow. Employees will feel betrayed and cry bloody murder.

And that’s what’s happening in the aftermath of LPL Financial Holdings Inc.’s announced $2.7 billion, all cash purchase of Commonwealth Financial Network. In this instance, the former is the giant, working with close to 30,000 financial advisors, while the latter is the high-service, whiz bang tech shop working with 3,000. 

Mergers, spinoffs and acquisitions happen in the wealth management industry all the time. There are hundreds of such transactions per year, for any number of reasons.

In the case of LPL and Commonwealth, the deal was spurred by the aging of Commonwealth Financial Network’s founder and chairman, Joe Deitch, and his coterie of minority partners. It was time for them all to get paid for running a firm teeming with successful, high revenue producing advisors that has been open since 1979.

What’s different about this transaction is the bad feelings it has created since its announcement at the end of March.

While industry executives have commented privately on the considerable animosity felt by Commonwealth Financial Network’s advisors, there is no better place to see and hear the vitriol about the deal than on Reddit, the website for all kinds of chats. Think about endless comments regarding Fortnite or anime, not broker-dealer mergers and acquisitions.

But messages on Reddit by anonymous writers claiming to be Commonwealth advisors or employees mirrors those made privately to InvestmentNews about the deal.

Commonwealth Financial Network “principals don’t owe us (advisors) anything,” wrote distribution 184 near the end of March. “But it’s still fair to call them out for being full of shit when touting culture and a family-like company all this time.”

And that’s just one of the more than 850 comments posted under the title Commonwealth/LPL on the website. The comments are anonymous and obviously made by advisors and employees unhappy with the deal.

“Devastated and betrayed of who did this deal and how,” wrote FishermanHuge6972.

For decades, Commonwealth Financial Network’s partners and management team have preached that they are the antithesis of LPL Financial, which is often painted with a broad brush by its competition as having lousy technology and weak service for advisors. Complaints to this reporter about LPL’s technology have declined dramatically over the past decade.

“To sell out to the company we’ve long used as the example of who we are not, is shameful,” wrote Sleepy_Tuna22. “Nothing about this seems to have been done ‘in a Commonwealth manner.’”

To be fair, a lot of the Reddit posts came when the LPL and Commonwealth deal was not yet officially announced, so there is bound to be some misinformation and inaccuracies in many of the posts. Also some of the writers could be imposters, recruiters at other firms looking to stir up trouble as the transaction inches forward.  

What makes this chat room different is the bitterness of its tone about the LPL purchase for Commonwealth, several industry executives noted. It’s typical for advisors to use Reddit to ask each other questions about compensation, technology and service at various firms. But here the antipathy for both LPL and Commonwealth’s management clearly stand out.

“It’s like a soap opera,” said one senior industry executive who spoke privately to InvestmentNews about the matter. “I can’t believe how candid people are being, both advisors and home office employees.”

“It’s a feeding frenzy for these advisors right now, but it’s rare to see advisor betrayal and emotional intensity expressed like this,” said another executive.

Meanwhile, LPL’s message to the market is it’s trying to keep Commonwealth’s advisors, who control more than $350 billion in assets, happy. LPL well understands that recruiters from competing firms are trying to sway Commonwealth advisors to turn their backs on LPL and work with a different firm instead, with the competition dangling promises of better tech and bigger forgivable loans before those advisors.

LPL’s target is to have 90% of Commonwealth’s advisors move to LPL.

"The voices reflected in online chat forums, under the cover of anonymity, skew a lot more negative than the sentiment from the advisors and employees we speak with every day," said Wayne Bloom, CEO of Commonwealth and who will remain as the head of the firm within LPL. "For the most part, Commonwealth advisors are looking to the future of our community with optimism."

Recently, LPL made an unusual move to reassure nervous Commonwealth advisors that the firm’s brand will survive the merger.

LPL has guaranteed to keep the Commonwealth name intact or the loans they include in the Commonwealth’s advisors work agreement will be canceled, turning into free money for the advisors.

“As a reflection of LPL's deep commitment to preserving the Commonwealth experience, LPL guarantees that it will continue to use the Commonwealth brand name as a community delegation and service tier within its ecosystem,” an LPL spokesperson wrote in an email. “If LPL shifts away from this promise, Commonwealth advisors may accelerate the maturity date of their term agreement with the company.”

In the end, there will never be another broker-dealer built with the care and devotion that Deitch and his partners brought to Commonwealth Financial Network.

It would be too expensive and time consuming to make the effort in today’s digital age. And that’s why the firm’s advisors and employees are so pissed off about the sale.