LPL buys National Planning Holdings with eye toward 17,000-advisor firm

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The nation’s largest independent broker-dealer just got a whole lot bigger.

LPL Financial closed Tuesday on the purchase of National Planning Holdings, one of the largest networks of IBDs with 3,200 advisors, the firms announced. The transaction, structured as an asset purchase, has an initial price of $325 million. The overall cost of the transaction, though, could rise to as much as $508 million based on how much of NPH’s business carries over to LPL and other costs, the companies said.

LPL and NPH parent Jackson National Life Insurance signed the deal after receiving regulatory approval. The transaction requires current NPH advisors and their client assets to join LPL’s platform, rather than integrating NPH’s, in a process slated to be completed by early next year.

“The demand for financial advice continues to grow, and the independent model is the fastest growing part of the industry,” LPL CEO Dan Arnold said in a statement. “At LPL, NPH advisors and their clients will benefit from our scale, strength and breadth of services, including the advantages of our self-clearing platform.”

The firm has already standardized its variable annuities and alternative investments and is working toward doing the same for mutual funds as well as indexed and fixed annuities.
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NPH executives and those of Prudential plc, the English company that owned NPH and still owns Jackson, confirmed the purchase and the terms in their own statement. By the end of next year, all NPH firms plan to wind down their businesses and withdraw their BD registrations, according to NPH.

The firm pledged to maintain necessary infrastructure during the transition period. NPH includes big IBD players National Planning, Invest Financial, SII Investments and Investment Centers of America, a network which amassed $909.4 million in revenue last year.

“Given the similarities in LPL’s independent model to the NPH model, we believe LPL is the ideal acquirer to ensure continuity of the quality service and support for our clients and their financial advisors,” NPH CEO Scott Romine said in a statement.

LPL plans to add the new advisors to its force of more than 14,000 advisors in two waves between now and the first quarter of 2018, according to the company. The buyer will pay no more money to the seller if less than 72% of NPH production goes onboard and up to $123 million more if 93.5% of production transfers over.

LPL expects to spend between $40 to $60 million through the middle part of next year in additional costs during the transition, including closure and transfer fees and technology. The firm paid the initial price with cash from its balance sheet.

Reports dating back to last month had identified LPL as the frontrunner to buy NPH. The IBD sector has seen widespread consolidation in recent years, with gathering momentum.

Earlier this month, a new wealth management services holding company backed by a private equity firm bought CUSO Financial Services and its sister company Sorrento Pacific Financial. Kestra Financial acquired 600-advisor firm H. Beck the following week.

After being plagued for the past several years by regulatory issues, management upheaval and a declining stock price, LPL made a splash with the big buy. Its stock surged 9% to $50 per share in after-hours trading on the news.

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Independent BDs Independent advisors M&A Business development Dan Arnold LPL Financial National Planning SII Investments