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Big Breakaway Team Aims to Take $592M to LPL

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Six Chicago planners have left Merrill Lynch to join LPL Financial and form an independent shop to lure other wirehouse breakaways.

The move reflects a desire to avoid the costs of coming settlements for Merrill's parent company, Bank of America -- and targets other breakaways with similar concerns, say the advisors.

"We feel there are a lot of advisors, especially in downtown Chicago, who like the service and capabilities that exist with the wirehouses, but who are looking to exclude some of the legacy costs that have built up in those firms," says Steven Dudash, founder of the newly formed IHT Wealth Management, which also includes four support staff. The group had $592 million in assets under advisement at Merrill.

By "legacy costs," Dudash says he's referring to the tens of billions of dollars that Bank of America has paid out in fines and settlement costs to the government in recent years. Talks recently stalled between the bank and the Department of Justice over a proposed settlement over a mortgage-related deal. While Bank of America is said to want to settle for about $12 billion, the government reportedly wants closer to $17 billion.

"Somebody's got to pay for that," says Dudash, who thinks some of these costs are being passed on to advisors.

And the money isn't his only problem with his former wirehouse. Over the years, he says, "I have had to apologize to clients for mistakes that firms associated with us have made."


At IHT's new location at an "A quality" office space in downtown Chicago, Dudash says, "Advisors can come in and not have to worry about how to turn the lights on and how to pay the rent -- and not have to apologize for their current firm being in the news every week, being fined for this or that.

"We are trying to maintain a high level of appearance down here to attract a high level of advisors," he adds.

Such an offering puts IHT in direct competition with HighTower, also based in Chicago and pursuing a similar group of wirehouse breakaways. That partnership firm says it secured $100 million in bank financing earlier this week; it has recruited four new advisor teams this year.

The IHT team is joining LPL under the independent broker dealer's hybrid RIA platform, which provides clients with consolidated statements displaying both their fee and commission business with the firm.


LPL spent nearly 12 months playing a "consultative role" as the Merrill advisors researched their options with more than 10 potential broker-dealers, says Steve Pirigyi, LPL's executive vice president of business development.

"It's a process we go through to, one, determine if independence is the right choice for the group and, two, to ask if LPL the right partner for their business," Pirigyi says. "The advisor had to make the ultimate choice," he adds.

Two of the determining factors in IHT's choice, Dudash says, were the hybrid RIA platform and LPL's scale. With more than 13,600 advisors, the IBD is one of the largest financial services companies in the industry, just behind the big wirehouses.

"I think it meant something to our group to be part of a major independent firm -- not just for credibility, but for a comfort level for our clients," Dudash says.

Since he and his team left Merrill two weeks ago, he says, advisors from all the major wirehouses have contacted IHT to learn more about their offering.

"The next group who walks in here," he says, "it is going to be plug and play for them."

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