Ten percent have exited to date; rival PrimeVest main beneficiary so far
LPL Investment Holdings Inc. lost brokers who generate about $17 million in fees and commissions annually due to the absorption of its bank-oriented broker-dealer, Uvest Financial Services Group.
Dan Arnold, managing director and divisional president of LPL Financial Institution Services, said that the consolidation was prompted by the accelerating number of Uvest brokers and advisers who have moved to LPL's platform.
“Most of the new recruiting for financial institutions was going to the LPL platform,” said Mr. Arnold, who was president and chief operating officer with Uvest before its acquisition. “We offered both LPL and Uvest, and most were going to LPL already. We have lost a small amount of institutions that have moved to other broker-dealers, but we've retained 90% of gross dealer concession from Uvest and are pleased with that.”
Gross dealer concession — or GDC — is an industry term for total fees and revenue generated by a broker.
A clear winner from LPL's decision is rival bank broker-dealer PrimeVest Financial Services Inc. So far this year, PrimeVest, a member of the Cetera Group, has picked up 73 Uvest reps, who oversee a total of $724 million in client assets.
According to the most recent InvestmentNews survey of independent broker-dealers, the average Uvest adviser's payout last year was $229,000 and the firm had $171.3 million in total revenue.
Back-of-the-envelope math shows that LPL has lost about 75 producing reps as a result of the consolidation, which it announced in March and finished in June.
LPL acquired Uvest in 2006 for about $90 million in cash and stock. When the deal was announced, Uvest had about 750 reps and advisers working at 290 financial institutions, such as banks and credit unions.
At the end of last year, Uvest had 568 affiliated reps. So, with the most recent round of departures, LPL has hung onto about about 85% of the reps and advisers who were affiliated with Uvest when LPL bought the firm.
Acquisitions of broker-dealers have the potential to be disasters if large numbers of registered reps flee, industry observers noted. However, taking into account the normal attrition of brokers, as well as LPL's production requirements that would cut low producers, hanging onto 85% of Uvest's advisers is “not a scary number,” said Larry Papike, president of Cross-Search, a recruiting firm that focuses on independent-contractor reps and executives that work at those firms. “That's not a concern at all. It makes economic sense to roll Uvest over to LPL.”
LPL, which will release its third-quarter earnings Wednesday, expects to save up to $12 million next year with the move of Uvest brokers from Pershing LLC's clearing platform onto its proprietary clearing platform.
One former Uvest rep, Mike Lott, joined PrimeVest in September because he felt more comfortable with a broker-dealer that focuses specifically on reps who work in banks. There are specific compliance issues, such as advertizing rules, that are unique to bank reps, he said.
“My perception is that, on compliance issues, there are guidelines about the bank and brokerage areas that have to be separate,” said Mr. Lott, who was provided by PrimeVest for this article. “PrimeVest was dedicated to the bank channel and LPL was not. We were interested in having somebody who's focused here on what we do in banks and compliance.
When asked about ex-Uvest brokers' comments about such factors unique to a bank broker, Mr. Arnold said that LPL is in the process of delivering technology to its bank reps that will lead the industry.
