Add Commonwealth Financial – a blockbuster – to the list of potential LPL targets

LPL Financial and Commonwealth Financial Network, two of the of the most prominent firms for independent contractor brokers, have been discussing a potential deal for LPL to buy outright or take a significant equity stake of Commonwealth, according to multiple market sources inside and outside the firms.

Chatter about LPL, a behemoth with 29,000 financial advisors and $1.7 trillion in assets, buying Commonwealth Financial Network, a boutique with more than 2,345 advisors has been building all week, with some anticipating an announcement by the end of Friday or the beginning of next week.

A spokesperson for LPL declined to comment. A spokesperson for Commonwealth Financial did not return a call Thursday to comment.

Commonwealth Financial is a closely held partnership of more than a dozen executives, owned and controlled by Joseph Deitch, one of the forerunners of the independent contractor and registered investment advisor business model for advisors. Deitch has been the owner of Commonwealth for more than 40 years.

Many of Commonwealth’s partners have worked at the firm since the 1980s, and the market has been rife with speculation for the past year that those senior partners are looking to cash out, particularly as the demand from Wall Street investors for wealth management business has never been stronger.

Both firms are also based on both coasts, with offices in or near Boston and San Diego.

It's not clear what the price tag for Commonwealth Financial Network, with $344 billion in client assets, would be.

But it would most likely be steep.

LPL Financial last year paid more than $800 million for Atria Wealth Solutions, and the financial advisors at Commonwealth Financial are among the highest in terms of generating annual revenue and also fee revenue. Atria’s advisors produce much less revenue per year.

And then there’s the cultural differences between the two. Commonwealth Financial is still a private partnership that has shied away from buying other firms while LPL Financial has been a listed, public company since 2010 and a high speed acquisition machine.

“The shock and awe of this deal, for the Commonwealth advisor, is that LPL could be buying the firm,” said one senior industry executive who spoke privately to InvestmentNews about a potential LPL and Commonwealth deal. “LPL is a huge shop and has always been thought of as antithetical to the Commonwealth culture.”

One speed bump in a potential acquisition of Commonwealth by LPL could be the former’s current battle with the Securities and Exchange Commission over $93 million in penalties related to SEC claims related to the firm’s revenue sharing practices, other sources noted.

InvestmentNews this month reported that, after recently announcing the potential sale of up to $4 billion in stock or debt, LPL Financial Holdings Inc. could be gearing up internally for another deal to quire financial advisors.

Some notable purchases of broker-dealers and networks by LPL include the 2017 acquisition of the Jackson National Holdings broker-dealers, the 2020 pickup of Waddell & Reed’s wealth management and financial advice business, and last year’s deal to acquire Atria Wealth Solutions. All transactions involved moving hundreds or thousands of financial advisors to LPL.