LPL Financial has made headlines this year in the wealth management industry. Its acquisition of Commonwealth Financial Network - which officially closed on August 1 - has dominated the airwaves. CEO Rich Steinmeier has doubled down on LPL's goal to retain 90% of Commonwealth's financial advisors, and on August 4 the company named Emily Field as its new chief people officer to oversee the personnel integration.
Under the hood, LPL continues to take an innovative approach to equip its advisors with the best resources and technology to serve clients. InvestmentNews caught up with Jeremy Holly, LPL's EVP of Business & Lifecycle Solutions, to chat about the approach the firm continues to take around liquidity and succession.
JEREMY HOLLY: The past three years have been amazing. There is a big demand in our industry for this type of offering – a recent Cerulli report showed nearly 40% of advisors retiring in the next 10 years are unsure of their succession plan.
When we started out on this journey, we saw a huge need. Advisors were getting a lot of pressure from external sources, such as private equity firms, getting calls every day – sometimes multiple times a day – with offers to buy their business. One of our top advisors came to us and said, “Hey, I've got five offers from these firms. They're all fantastic offers for me, but they don't solve for my clients, and they don't solve for my staff. If it doesn't solve for the holy trinity of my clients, my staff, I don't want to take the deal. LPL, I need you to solve this for me.”
It was an ah-ha moment for us that we can help advisors with the entire plan – it’s so much more than just the money.
So we introduced the Liquidity and Succession program that solves for all three – clients, staff, and the valuation needs of our advisors. We have a market-competitive valuation and we're protecting the thing that makes our advisors special – that entrepreneurial spirit, that local flavor.
We keep their brand and their staff in place, maintaining their local presence. We take on all the middle- and back-office elements so they can focus on their clients, keeping clients front and center. The change for advisors is seamless.
We have done over 50 deals, and our pipeline only continues to grow. And with this momentum, we continue to learn what advisors need so we can expand our offering.
HOLLY: One of the industry's greatest ironies is that advisors do such a fantastic job of helping their clients plan for their future and their retirement goals, but they don't always think about themselves.
We have heard from so many of our advisors that exit-planning for their clients jump starts their own need to start planning to protect their business and create a vision for transition in the future, including monetization. For many advisors, their practice is their greatest asset, so they want to protect it and maximize its value.
As advisors work with our certified business exit planners for their own clients, it’s also helping them to lean into what this can look like for themselves and focus on protecting their business and unlocking the value in the future.
HOLLY: Advisors know their businesses are valuable and are asking us for creative solutions to transition.
We have been working to develop a series of solutions for different needs. “Partial book sales” is an example and is a particularly powerful tool as it not only provides partial liquidity, but also helps optimize an advisor’s business, potentially increasing its value for a future sale.
Our advisors are highly tenured and have been in business for a long time. They've developed strong client relationships and have evolved their service model. Many have moved up market to expand with high net worth and even ultra-high net worth clients. With expansion comes the need to balance and optimize. Our partial book sale offering can help them segment their book of business, identify those households that may not be generating as much revenue, but taking up capacity, and helps them sell these client relationships to LPL. They feel confident the clients will be well cared for as they transition to working with our in-house team of W2 advisors, and it’s a win-win for both the clients and advisors. Clients will continue to get top-notch service, and the advisor has more capacity to continue to move up-market.
The advice I have for advisors planning for the future comes down to two words: book hygiene. Your business is continually evolving and there may be clients that could be limiting your flexibility to do more. Regularly monitoring your book and selling off a subsets of clients that no longer fit your model is a great way to optimize your business – it improves business valuation and uncovers capacity and capital that can be redeployed for growth.
We're also thinking about what we might do as a step towards a full sale. We’re working on a solution that would be more staged, a step-up transaction, where there's a little bit of the liquidity up front, a growth period, and then the rest of the liquidity comes later.
HOLLY: Our size and scale has big benefits. We already have a number of solutions that are in the market to meet advisors’ needs, and we have the ability to innovate and develop new solutions consistently. That's one of the values of partnering with LPL, we have solutions available right now to support advisors, and if we don’t have something that works for you now, we can create it quickly.
We are committed to helping solve our clients’ needs in a collaborative way. If an advisor comes to us with a problem, we create a solution to solve it and then figure out how to apply that to more advisors. We have a large ecosystem to learn from with a lot of advisors that provide feedback. Our size, ability to innovate and commitment to advisors is truly what sets us apart and allows us to serve advisors better than many of our competitors.
Advisors who partner with us get expertise to build and optimize their businesses so that they receive maximum value and the best fit for their ultimate succession.
This interview was conducted in partnership with LPL Financial, Member FINRA/SIPC. For Financial Professional Use Only.
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