LPL expanding platform to include employee brokers

LPL expanding platform to include employee brokers
The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.
MAY 22, 2019

LPL Financial, which has grown into one of the largest brokerage firms in the country by hiring advisers who act as independent contractors, is creating a new model which would employ brokers working directly for the firm. In a presentation to investors in New York on Wednesday, LPL said a new part of its strategy would "create a new, unique employee model for independent-minded advisors who do not want to manage every aspect of a business." And it appears that the firm is already working to that end. On Tuesday, LPL Financial's parent company, LPL Financial Holdings Inc., said it was buying a small broker-dealer in Florida, Allen & Co., with 30 advisers and about $3 billion in assets. Those advisers are employees of the firm. As part of the deal, LPL will keep the firm's operations and brand. Terms of the deal, which is expected to close by the end of the year, were not revealed. LPL on Wednesday also said it was working to attract advisers who do a larger amount of advisory business as opposed to commission business. While LPL is an industry leader with 16,000 advisers and $5.2 billion in revenue last year, the percentage of revenue derived from fees is lower than its top competitors. According to InvestmentNews data, LPL in 2018 generated 34.6% of its revenue from fees. That compares with 70% for Commonwealth Financial Network and 56.2% for Cambridge Investment Research Inc. The contrast between an adviser who is an independent contractor and a brokerage firm employee is stark. Independent contractors keep a larger percentage of the revenue they produce — typically 80 cents on the dollar — from fees and commissions but foot the cost of running their own practice. A traditional employee broker or adviser takes home less revenue, usually 40 cents on the dollar, but the firm pays for the adviser's office, assistants and other support services. LPL competitors like Raymond James Financial Inc. and Ameriprise Financial Inc. already have dual models for brokers who are employees and those who are independent contractors. The employee model represents a huge, untapped market for LPL. One competitor said the company has a history of trying new avenues to increase its business. "It's proven tough for [LPL] to grow organically, so it's not surprising that they are trying other options," said John Rooney, managing principal with Commonwealth Financial Network, an independent broker-dealer. "They have tried different angles, like Nest Wise for trainees, but that didn't pan out." "Frankly, we haven't seen the groundswell of demand for the employee model," said Mr. Rooney. "Advisers are interested in the RIA model, which also attracts the larger producers." A spokesperson for LPL Financial, Lauren Hoyt Williams, declined to comment. LPL on Wednesday also said it was increasing its spending on technology this year by another $15 million for a total of $150 million.

Latest News

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.