"His questions were a little leading," recalls Armstrong, the managing director of Monument Wealth Management. "I knew what he was getting at. He was asking, 'I want to know a little about the firm you have behind you.'"
That would be the country's largest independent B-D, LPL Financial and not one of the wirehouses who still have greater name recognition among the investing public, particularly those in the high-net-worth category.
In response, Armstrong called up John Moninger, the LPL executive vice president who heads up the company's effort to expand its HNW business, and asked, "How do we impress" the client with LPL's capabilities?
"By me getting on a plane and being there tomorrow," Moninger responded before grabbing a red eye. In a meeting with the man a few hours later, Moninger told him, "I'm here as a director of LPL to demonstrate our commitment to this [HNW] space."
Whether or not LPL wins this particular client remains to be seen, but Moninger's overnight flight illustrates just how seriously the company known for more middle class mass affluent investors takes the opportunity to work with the wealthiest investors.
"It's a question I ponder almost every day," says Moninger, who spoke on the subject at LPL's national conference this week in San Diego. "The independent [B-D] exposure to NHW historically has been lower. But, as markets have evolved and brand recognition has shifted, the HNW investor is increasingly looking for objective advice. Many [wirehouse] brands have disappointed those investors. The opportunity for the independents to win the business of the local HNW client has never been better."
In fact, a recent McKinsey study projects that 80% of revenues in wealth management space will come from HNW clients in the next three years. Furthermore, wirehouses, which managed more than half, or 55.5%, of all HNW assets back in 2005, is expected to see its share of that business drop to 42.4% by 2014, according to Cerulli & Associates.
To speed that shift, LPL is determined to help advisors like Armstrong to up their games in order to be able to serve those clients who are generating new wealth or coming into possession of it.
"What's interesting," Moninger says, "is you are finding this [new wealth creation] in the Midwest as much as you would in New York City or California. The local strawberry farmer or the person who runs the lumber yard and sells their business for $10 million, they are looking for a local, trusted relationship. They no longer believe they need to go to a big brand name."
To that end, in April LPL acquired Rockville, MD-based Fortigent, which serves family offices, because of the firm's specialized tools for wealthier clients.
Before Armstrong had the chance to pitch this prospective $100 million client, he says, his largest client was $30 million. In putting together the largest proposal of his career, he says, he leaned heavily on LPL's new HNW division to assemble a much broader array of alterative investments than he was capable of assembling on his own.
"Now all of a sudden I needed ten [alternative investment strategies]," Armstrong says. "I didn't have the knowledge about the breadth of products. Just to be frank with you, it's great from a compliance strategy [working with LPL]. If I didn't have LPL to lean on I would have had a lot of difficulty checking that box."
Right now, LPL has 1,152 advisors with clients who have assets of $5 million and up, Moninger says. Clients with $100 million are still somewhat rare. And that's fine with LPL. Moninger says the firm is targeting clients of $5 million and above where he thinks the greatest opportunity for expanding HNW market share exists.
"It's probably not a huge number but many of our advisors have the capability to compete in that marketplace," he says. "That's kind of our sweet spot."