Size is important when it comes to LPL Financial’s efforts to win over thousands of National Planning Holdings advisors, but that’s not all that matters.
Compensation, technology and the fast-changing independent broker-dealer space all play a role. That’s the complex puzzle faced by LPL managing director for business development Bill Morrissey, the executive leading the onboarding. But he rejects critics who see LPL’s potential size after the deal as too big and unwieldy.
“Scale has certain advantages. Scale translates into financial stability,” Morrissey says. “It’s the ability to be a long-term partner.”
In an interview last week with Financial Planning, Morrissey laid out LPL’s pitch to the 3,200 advisors of the four IBDs that LPL purchased Aug. 15 from Jackson National Life Insurance. LPL aims to transfer the client assets of all NPH advisors to its platform within six months. Morrissey kicked off LPL’s outreach at NPH’s annual conference, with months of meetings planned for coming weeks and months designed to help advisors get a grasp on the transition.
The rapid expansion could push LPL’s headcount to 17,000 advisors — higher than any wirehouse firm — but the acquisition also gave the firm’s competitors the opportunity to cull advisors from NPH’s ranks. On top of the upheaval of such consolidation, IBDs also face challenges posed by the fiduciary rule.
Although some NPH advisors may see changes to their compensation, Morrissey called the firms’ payout models comparable and competitive. He also shared LPL’s plans for town halls and regional meetings with NPH advisors and why he thinks LPL offers advisors a better vision for the future than its rivals.
“I don’t want to be presumptuous. All these advisors need to make a choice, and we want to help them make the right choice,” Morrissey says. “We’re trying to take as much disruption out of the change as possible.”
BUSY MONTHS AHEAD
The change will take effect in two big waves on Dec. 2 and Feb. 17, according to Morrissey. National Planning and Investment Centers of America will go first in what he describes as an “overnight” movement of assets, followed by SII Investments and Invest Financial early next year.
LPL executives met with some 800 NPH advisors at their conference last month in Nashville, Tennessee, and the firm will hold more than 20 regional events around the country, Morrissey says. The firm’s transition team will also host several telephone town halls for NPH advisors as part of the process.
The acquiring firm has pledged to pay for any conversion fees associated with moving client assets into its fold as well. LPL will assume NPH advisors’ outstanding loan debts, sparing them of the necessity to repay them right away, and NPH advisors using a deferred compensation plan will go on LPL’s plan.
LPL has further promised $100 million in additional onboarding aid for NPH advisors, the bulk of it in upfront forgivable loans. However, company officials acknowledge that payouts for some loosely affiliated NPH advisors may change with LPL, depending on how each enterprise manages the transition.
LEG UP ON THE RIVALS?
Morrissey pushes back on the notion that BDs who use Pershing for clearing will have a recruiting advantage. LPL offers automated repapering and a tape-to-tape transfer of client assets, while shifting from one Pershing BD to another would require manual repapering, according to Morrissey.
He places LPL’s competitors in three categories: firms with insurance company parents, privately held companies and private equity-backed firms. Insurance companies have largely backed away from IBDs, private firms face questions about succession and PE firms monetize their investments, he says.
“No one likes change, but you need to be careful where you go because, given the landscape, I think you’re going to see more consolidation,” Morrissey says.
He declines to give any details about how long the NPH deal took to negotiate, who participated in the talks from both sides and who proposed the deal structure of the $325 million price tag with up to $123 million more in contingency pay.
Rather, he notes his firm’s “longstanding relationship with Jackson National” and LPL’s emergence as a “very good fit” when Jackson National executives made the strategic decision to sell off its BDs.
“Both firms want to make sure that they’re helping advisors make the right decision for their clients and their businesses,” Morrissey says. “We want to make sure that we become a good long-term home for the NPH advisors and for any advisor affected by the disruption in the space.”