LPL Adds 500 Advisors; Closes in on 13,000

For the second year in a row, LPL Financial said it had added 500 net new advisors.

That brings it close to crossing 13,000 in the total number of affiliates for a company chief executive Mark Casady calls an “outsourcing agent” for financial advisors.

LPL Financial provides an integrated platform of technology, brokerage and investment advisory services to independent financial advisors and financial advisors at regional and community banks and credit unions across the country.

When it went public in November of last year, LPL said it planned to add about 400 net new advisors a year, according to Casady.

Last year, it achieved that by adding 288 advisors organically, the company said in its annual report for the year, and adding 206 from the acquisition of National Retirement Partners, in December. That brought the 2010 total of net new advisors to 494.

That put the year-end overall total at 12,444.

In a presentation Wednesday at the Nasdaq OMX Investor Program held in London in conjunction with Morgan Stanley, Casady said the company had added more than 500 net new advisors in 2011.

That was through the end of September, suggesting that the firm may already have crossed the 13,000 mark, in its universe of advisors.

The company had 7,006 advisors at the end of 2006. A series of broker-dealer acquisitions pushed that to 11,089 at the end of 2007.

Casady said the 500 additions puts LPL “at number two” in the industry in 2011, behind Merrill Lynch. Last month, Bank of America said its “financial solutions” business had reached its goal of adding 1,000 advisers this year.

The additions of the new advisors, though, preceded LPL’s announcement that it was raising fees it charges to advisors for the services it provides.

“We just announced a couple of fee changes recently, one where we’re cutting charges for transactions and equities in our advisory business, from $15 down to $9,’’ Casady said. That cut in the transaction fee should lead to a “nice increase in volume,’’ he said, which would benefit advisors and “overwhelm the cut in fees.”

Meanwhile, he acknowledged the company is raising standing fees it charges to advisors, by about $1,000 a year.

The increases, he noted, included hikes in affiliation fees as well as errors & omissions insurance.

The fee changes, which take effect on the first of the year, include:

• Affiliation fees. An increase from $125 a month to $175 month, for advisor in branches with four or fewer advisers. In offices with five to 11 advisors, a fee of $600 a month is being replaced by a fee of $125 an advisor. In branches of a dozen or more advisors, the fee increases from $50 a month per head to $100.
• Errors & omissions insurance. This will increase to $2,750 a year per advisor, from $2,500.
• Compliance fee. Up $200, to $600 a year.
• Outside business activity fee. Up $100, to $600 a year.

“Importantly, we’re able to raise fees on our advisors about $1,000 per advisor for the entire system,’’ Casady said at the London investor program. “So, roughly 13,000 people have seen essentially an inflationary increase that’s come as a result of our examination of our costs and the need to charge a bit more in a number of areas, like affiliation fees, E&O insurance, in areas where we see costs going up.’’
Taking in $1,000 more from each of 13,000 advisers represents a boost of $13.0 million next year to LPL’s annual revenue. For the nine months ending September 30, 2011, the company reported net revenue of $2.7 billion.