In a major retrenchment, LPL Investment Holdings Inc. of Boston is pulling the plug on the Pershing LLC clearing platform used by about 1,700 advisers on three broker-dealers it acquired in 2007, and moving those reps onto LPL's clearing platform.
LPL announced the change this morning.
The change is part of an “ongoing strategic business review,” the company said in a filing with the Securities and Exchange Commission.
With the roll up, LPL is cutting 215 jobs and will record a pre-tax charge of $67 million over the restructuring this year and next, the filing said.
LPL is anticipating annual cost savings of $21 million in the future from the roll up, with at least $6.3 million coming this year.
Betrayal described the emotion one adviser was feeling.
“We were not dealt with fairly,” said Frank Congemi, who is affiliated with one of the three firms, Mutual Service Corp., and is based in New York.
He questioned LPL management's quick change in philosophy from building a business using the Pershing platform to cutting it.
When LPL bought the three firms, Mutual Service of West Palm Beach, Fla.; Associated Securities Corp. of El Segundo, Calif.; and Waterstone Financial Group of Itasca, Ill., the firm left little doubt it was committed to keeping the Pershing platform for those reps.
To that point, William Dwyer, president, national sales and marketing with LPL Financial, said in an interview in March 2007: “Just to be very clear: It's our intention to be with Pershing and grow with Pershing.”
Moving the reps onto the LPL platform will begin immediately, and the company expects to have the rollout finished in mid-September.
Mr. Dwyer said many advisers were asking for the change, but acknowledged that some advisers would likely leave the firm.
“Change is hard,” Mr. Dwyer said this morning in an interview with InvestmentNews. “It's surprising and difficult to do.”
The advisers will now have direct access to LPL's research, marketing support and advisory services. The firm is incurring “substantial” costs in making the change, but expects to get some savings back in 2010, Mr. Dwyer said.
From an operations standpoint, he said the transition of accounts from Pershing to LPL will work with ease.
Advisers will see no fees in the transfers, and advisers trailing fees from mutual funds will not be interrupted by block transfers to from Pershing to LPL, Mr. Dwyer said.
The 1,700 brokers will convert to the LPL clearing platform by September. Many had been using LPL's broker work station, BranchNet, with Pershing providing the clearing and custody services.
Many advisers have been under extreme anxiety about potentially losing the Pershing platform (
InvestmentNews., June 29)
Some have already left the LPL network of broker-dealers, while others are aggressively shopping for other broker-dealers or even, in at least one case, toying with the idea of launching their own.
LPL and Pershing of Jersey City, N.J., have had one of the most contentious histories in the independent broker-dealer industry.
Formerly one of Pershing's biggest clients, LPL decided to become self-clearing in 2000. Since then, it has shopped its clearing services to other independent broker-dealers, and in December 2006 landed the clearing business of AXA Advisors LLC of New York.
LPL paid $97.1 million in cash to acquire Mutual Service Corp., Associated Securities and Waterstone from Pacific Life Insurance Co of Newport Beach, Calif.
At the time, the firms had about 2,200 advisers.
LPL Investment Holdings has more than 12,000 reps and advisers in its network of broker-dealers.
