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In largest hybrid exit following RIA changes, $9.5B OSJ to leave LPL

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LPL Financial’s closely-watched hybrid channel is losing one of its largest practices, as Bill Hamm’s Independent Financial Partners bolts to launch its own broker-dealer.

With $9.5 billion in assets under management and $48 billion in assets under advisement, the Tampa, Florida-based office of supervisory jurisdiction represents the biggest exit from LPL since Ron Carson’s departure last year. Hamm expressed gratitude to LPL, though, in announcing the move on April 6.

LPL “has allowed us to grow IFP into something special,” Hamm said in a statement. “But with that growth comes the need for us to transition to an environment where we can control our own destiny and address our more complex needs.”

His OSJ expanded more than fivefold under LPL, from 100 advisors when LPL acquired its prior IBD in 2007 to more than 520 advisors this year. The loss of IFP could shave an estimated 5 to 10 cents off LPL’s earnings per share, according to an analyst note by Ann Dai of Keefe, Bruyette & Woods.

IFP’s departure, which is slated for the next 12 months, will make it at least the fourth hybrid practice to leave LPL since the No. 1 IBD made changes to its RIA policies in January. LPL cut fees for its corporate RIA while requiring new advisors to have at least $50 million in AUM before joining a hybrid practice.

LPL’s hybrid channel spans 420 practices with 5,200 advisors, and its largest hybrid RIA, Pat Sullivan and John Hyland’s Private Advisor Group, has topped $14 billion in AUM. A three-way merger among hybrid LPL practices in the fourth quarter also yielded a super OSJ with $2.6 billion in client assets.

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Andy Kalbaugh, the divisional president of LPL’s national sales and consulting unit, noted the firm’s appreciation for its decade-long relationship with IFP. LPL is “delighted to have been a part of their growth,” he said in a prepared statement.

“In discussing our respective futures, it became evident that our firms’ directions are not strategically aligned,” Kalbaugh said. “We wish them all the best in this new venture. We’ll continue to partner closely for the next 12 months to ensure a thoughtful separation.”

LPL did not comment beyond the statement, and Hamm was traveling this week and not immediately available for an interview about the reasons for the parting of ways.

IFP’s upcoming new BD will support its brokerage business while allowing for new programs to help advisors, including proprietary technology, according to the firm. Advisory assets make up about 80% of the firm’s total client assets, with most of them attributable to employer retirement-plan business.

Asked in late December about LPL’s new RIA policies, Hamm said that the custody rule for new advisors could affect recruiting, but his firm’s appeal would “stand up to those changes.”

He also said he understood LPL’s effort to help its margins by placing more assets on its corporate RIA. At the time, Hamm shared no imminent plans to leave LPL but said the firm was assessing its options going forward.

“We do tell advisors that we’re constantly looking at what’s best for them and us,” Hamm said.

The loss of IFP’s OSJ could cost LPL an estimated 4 to 8 cents in earnings per share, and the cut in retirement-plan monitoring fees could cost an additional 1 to 2 cents, Dai of KBW wrote in her April 9 note.

Dai also noted that while the loss of a major practice is never positive, KBW’s forecasts include some expected attrition.

LPL’s suite of services for RIAs “becomes more compelling the greater their size and scale,” according to Dai’s note, but the economics for LPL “tend to be less attractive for these large hybrid relationships as the more sizeable RIAs utilize less platform capabilities.”

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