LPL promises new employee channel is different. Do recruiters agree?
LPL Financial’s head recruiter has reassuring words for advisors who decide to leave its new employee channel now or in the future: Don’t worry.
“We'll help them move their clients to that new firm,” says Rich Steinmeier, LPL’s divisional president of business development. “We will not go after their clients. We will try to keep their business intact and help them move.”
LPL’s long-anticipated formal launch of its W-2 financial advisor program arrived on Aug. 5 with details like compensation and other aspects that Steinmeier describes as “challenging the status quo” of employee broker-dealers. While not every departing employee advisor faces court challenges for their clients, recruiters view LPL’s new channel as more independent.
Owning the book of business with the services of an employee model stands out to recruiter Jodie Papike of Cross-Search as a differentiator, she says. The pay grid rates of 50% to 70% are also competitive, according to Papike, who notes that LPL took its time to plan out its approach after buying Florida-based employee BD Allen & Co. last year.
“It's a completely different model from what they've done in the past,” Papike says. “What they've decided to do is take that burden off of someone and really get in the weeds of that infrastructure component.”
Fellow recruiter Frank LaRosa of Elite Consulting Partners agrees that the nation’s largest independent broker-dealer came to the employee channel with an attractive offer. LPL’s stated compensation rate of 60% for production of $1 million would be $60,000 more annually than the highest paying firm from the On Wall Street 2020 Best advisor pay for the $1M producer.
LPL’s employee channel is “a stepping stone into full independence,” according to LaRosa.
“It opens up the door for people that never thought there was an option to go do this,” he says. “Thats a scary thing for a lot of advisors sometimes. They get paralyzed in the fear of what that's like and end up staying in a bad situation.”
Advisors who join LPL’s new branch in Boston or start their own after dropping an employee BD will receive the same pay rates throughout their seven-year bonus loans, Steinmeier says. LPL also promises it won’t install “expensive sales management” in offices because it has no legacy real estate branch footprint, he says.
The firm will enable advisors to use their own branding for their practices and charge no other platform, transaction or administrative expenses other than a fee of 5 basis points on advisory accounts. The pay grid applies to all client accounts regardless of size, meaning there won’t be smaller rates for households below $250,000 in investable assets, Steinmeier says.
“There's no distinction about trying to have you run your practice the way we want you to run your practice,” he says. “There's no, ‘You have to do five new clients to achieve this grid.’”