Just one month after saying it would leave LPL Financial, Bill Hamm’s Independent Financial Partners has taken a major step in laying the groundwork for its new independent broker-dealer by selecting Pershing as its primary custodian.

The hybrid RIA and office of supervisory jurisdiction will launch its new IBD in the first or second quarter of 2019, Hamm said in an interview. With 530 advisors and $10 billion in assets under management, the new IBD will offer expanded choices, lower prices and better technology, Hamm added.

Hamm’s April announcement that IFP would split from the nation’s largest independent broker-dealer marked the largest exit from LPL since Ron Carson’s firm left for Cetera Financial Group in early 2017. It also represented the largest practice to leave LPL since it began requiring new advisors to have $50 million in AUM before joining a hybrid.

LPL executives and Hamm have praised their 11-year relationship, even as LPL CEO Dan Arnold vowed to make a “compelling” pitch to IFP’s advisors. Arnold has also promised that the firm will continue to invest in both its corporate RIA and its hybrid channel, which has about 5,200 advisors out of its 16,000.

Independent Financial Partners AUM

IFP is “willing to compete” for advisors’ business every day against LPL and other BDs, Hamm says. His team has already tapped several outside tech vendors and started hiring new staff, and he predicts that 80% of IFP’s business will ultimately transfer to the new IBD from LPL next year.

Hamm says he’s unfazed by LPL’s recruitment efforts toward IFP’s advisors.

“I really don’t have a problem with them educating the advisors on their options. That’s the confidence that we have in what we’re building,” Hamm says. “We’re not going to be writing big checks. I think the value that we’re going to provide is draw enough.”

Some daunting challenges lay ahead. Starting a new IBD means grappling with compliance, business processing and relations with FINRA, among other issues, IBD recruiter Jon Henschen points out. Practices rarely do so because it “brings in a lot of new dynamics,” he says.

“Usually they’ll just go to a hybrid-friendly broker-dealer,” Henschen says. “Those are the type of things that they avoid if they stay a producer group.”

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IFP currently has about 55 corporate staff, and Hamm anticipates hiring 25 to 30 more to handle areas such as compliance, technology, operations and business relationships, he says. He has hired an outside compliance firm for the FINRA registration process and another vendor called Beam for supervision.

Pershing will handle custody of the new IBD’s brokerage assets and act as one of four advisory custodians, including Fidelity, TD Ameritrade and Charles Schwab. The primary custodian will boost IFP’s technology and give it a leg up for recruiting from among other firms in its client base, Hamm says.

On the tech side, financial software Agreement Express will automate the firm’s onboarding and document preparation processes. Integrations with other software such as Salesforce, Redtail CRM and Wealthbox will allow advisors to choose from the “best of the best offerings,” Hamm says.

“We’re creating an integrated technology stack that provides third-party technology to our advisors on a customizable basis,” he says. “The nice thing about what we’re doing is we’re able to build everything from scratch. We’re doing everything with the advisor and client experience in mind.”

The firm may have a tough recruiting fight on its hands, though. LPL has unveiled larger recruiting offers to prospective advisors, Arnold said earlier this month on the firm’s first-quarter earnings call. IFP and LPL mutually decided to part ways because they were not “strategically aligned,” he told analysts.

“In the meantime, we’re working with their advisors to help them understand their choices associated with affiliation,” Arnold said. “And we believe we have a compelling offer to stay with LPL, so we’ll see how that plays out over the next 12 months.”

Hamm gives LPL credit for its stewardship in the transition, although he notes that some smaller OSJs within the firm have been “pretty hot and heavy” after IFP’s advisors. On the other hand, competitive recruiting is “the nature of the business,” he says.

In fact, IFP has added six department executives from shuttered Tampa-based IBD Invest Financial, one of four National Planning Holdings IBDs whose assets LPL acquired last August. And he welcomes the fight, noting that IFP’s open architecture will actually make it easy for advisors to leave the firm.

“Any attrition that we have, I’m fairly confident that we’re going to replace with outside interest, based on what we’ve had already,” Hamm says. “By the time we pull the trigger, I believe that we’ll have a pipeline of people who are ready to come on board and be part of something new and exciting.”

Tobias Salinger

Tobias Salinger

Tobias Salinger is an associate editor for Financial Planning, On Wall Street & Bank Investment Consultant.