Confronting fintech challenge, LPL buys software firm for $28M

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LPL Financial acquired a family-owned asset allocation software firm for $28 million, as the largest independent broker-dealer seeks to ramp up technology for its 16,000 advisors.

CEO Dan Arnold has pledged to spend $125 million on tech this year, under what he has described as a transformation of the firm’s culture and a quarter of a billion dollars in total investments into tech, recruiting and organic growth for advisors. LPL’s full move onto a new operating platform took about four years.

The firm acquired AdvisoryWorld on Dec. 3, with the intention of offering services to all LPL advisors and allowing the modeling and proposal generation firm to be an independent subsidiary for its existing 30,000 institutional and advisor clients. LPL also plans to retain the firm’s 20 employees and expand its services.

LPL followed other incumbents in choosing among three options to boost their tech: to scoop up tech firms, develop their own tech or team up with vendors. Earlier this year, Principal Financial Group acquired digital wealth startup RobustWealth, while UBS sold its digital business to its third-party robo advisor partner SigFig.

AdvisoryWorld President Mike Wilson, son of founder Philip Wilson, will remain in the same role under LPL while becoming an executive vice president with the purchasing firm.

LPL paid the purchase price in cash it says was available for corporate use on its balance sheet, and the firm's advisors will gain free access to AdvisoryWorld in January.

The acquirer will also work to embed it fully into the ClientWorks workstation platform throughout 2019, says Burt White, the firm's chief investment officer. The seller’s portfolio monitoring, investment analytics and other capabilities — along with its talent — made it attractive to LPL, White says.

“They are basically a firm that helps advisors’ business thrive; that’s what we are too,” White says. “AdvisoryWorld is in the business of helping advisors turn prospects into clients. And that’s the most important part of growth.”

Planners ranging from sole practitioners to the largest OSJ enterprises welcomed the CEO’s comment that the firm's culture was not aligned with its strategy.
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The elder Wilson launched the Carlsbad, California-based fintech company in 1987 when he noticed that retail advisors lacked many of the tech solutions already employed by institutional firms, according to AdvisoyWorld’s website.

Its senior officers have over 60 years of combined experience in financial services and tech. The firm's current client base includes other BDs, RIAs, custodians, insurance firms and turnkey asset management programs.

The deal makes sense for AdvisoryWorld because the firm will be able to “evolve our current offering” and “try a lot of things out that we wanted to but haven’t been able to” while unveiling new tools under LPL, Mike Wilson says. “I think it was the suitor. We’ve always had an excellent relationship.”

LPL responded to criticism from advisors by delaying the transition to ClientWorks from its prior BranchNet workstation this year, but White says the firm has now fully rolled out the new platform. LPL made 3,000 enhancements to ClientWorks this year and expects to make about the same amount next year, he says.

Neither White nor Wilson would say exactly how much LPL expects to spend in its support for AdvisoryWorld under the new arrangement. However, White promised the firm will continue its tech spending and third-party integrations, like the one announced in July with Riskalyze.

“You arm a trusted advisor with technology that allows them to grow efficiently and deliver better outcomes,” White says of the firm’s approach. “We believe that is the magic.”

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Fintech Independent BDs Asset allocations Portfolio construction Portfolio management Predictive analytics Burt White LPL Financial