Advisor Group to end ‘rep-paid’ ticket charges amid tough recruiting fight

Advisor Group CEO Jamie Price speaks at 2020 ConnectEd conference
Advisor Group CEO Jamie Price speaks at this week's virtual ConnectEd conference.
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In a move Advisor Group CEO Jamie Price predicts will be followed by the entire industry within a year, the firm is eliminating ticket charges paid by financial advisors.

“We think the ticketing structure is an old model,” Price said this week at the firm’s virtual ConnectEd conference. “There could be a conflict in a rep-paid ticket, particularly when you take into consideration, should I be more active in account or less active in account? So is it holding me back from managing the account because I have a ticket charge?”

Price added that sub-transfer agency credits paid by fund companies to advisors through Advisor Group’s no-transaction-fee platform represent another potential conflict of interest. The Phoenix-based firm plans to stop offering new accounts with advisors paying the transaction fees at the beginning of 2021 and to end them entirely by the middle of next year.

During the same time frame, Advisor Group will cut fees in half for wrap accounts, also known as advisor-managed portfolios. CEOs don’t usually devote much time to conflicts of interest in their speeches at large wealth managers’ annual conferences. Price’s remarks come as the firm attempts to repel a recruiting onslaught by rivals, including self-clearing firms like LPL Financial.

“If we were self-clearing, this would be a very difficult thing for us to do because of the clearing credits coming back from the mutual fund families,” Price said. “We do not have that conflict.”

Advisor Group lists other common industry conflicts in disclosure documents for the 11,000-advisor independent broker-dealer network’s largest firm, Royal Alliance Associates. The examples on the firm’s BD brochure include product sponsor revenue sharing payments of up to 30 basis points of assets, bank cash sweeps and promotional items, meals or entertainment.

As new disclosures under the SEC’s Regulation Best Interest highlight such conflicts and those from transaction fees, rivals are peeling off advisors from the network’s four legacy firms and the five Ladenburg Thalmann IBDs it purchased in February for $1.3 billion. Advisor Group is also folding the three smallest ex-Ladenburg firms into its largest, Securities America.

Publicly traded appeal

While it’s normal for M&A deals to bring changes to staffing levels and prompt some advisors to exit, Advisor Group’s recruiting losses are piling up. Practices of more than 230 advisors with $11.6 billion in client assets, many of them from the former Ladenburg firms, dropped Advisor Group in 2020, according to company recruiting announcements tracked by Financial Planning.

After 17 years with one of the shuttering IBDs, Securities Service Network, and six more with Royal Alliance, the father-son team led by Michael and Patrick O’Reilly affiliated with LPL in September. The St. Louis-based practice managed about $150 million with Securities Service Network.

“LPL’s size, financial stability and ownership structure as a publicly traded company really appeals to us,” Patrick O’Reilly said in a statement.

Citing its status as a private firm in an interview withFP, Price declined to share any of Advisor Group’s exact recruiting metrics for 2020. He also declined to say whether the new transaction-fee policies will reduce client expenses. Price acknowledges that M&A deals result in advisor departures, though he says the firm’s Ladenburg retention is “much better than anticipated.”

Ladenburg acquisition boost's Advisor Group's annual revenue above $3 billion.

The firm has announced at least 22 newly recruited advisors this year with $1.6 billion in client assets. Another father-son team with $146 million in client assets left ProEquities for Royal Alliance in September as well.

“We are especially excited to have access to a robust, open-architecture platform that can help us better serve our clients and grow our practice,” Adam Lampe, CEO of Houston-based Mint Wealth Management, said in a statement.

The phaseout of advisor-paid ticket charges could be a factor in future moves. Although Price didn’t state the exact amount of the ticket charges, he says advisors who currently use rep-paid accounts can shift to wrap accounts or client-paid accounts. Price also emphasized that the firm hasn’t found evidence that the potential conflicts have influenced advisors’ recommendations.

At the conference, Advisor Group also unveiled new M&A capital for advisor successions and other transactions, and an online mentoring program for the firm’s representatives. Price told some 8,000 advisors in virtual attendance that economic and demographic drivers make it “pretty easy to think about” doubling the size of their practices in the next five years.

“The question is, can you do it scalably?” Price said. “This is where I think our partnership with you comes most into play.”

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