LPL hybrid RIA grabs dozens of advisors from Bill Hamm’s exiting OSJ
Bill Hamm's office of supervisory jurisdiction is planning an exit, and one of LPL Financial's other major enterprises is reaping the benefits.
The upcoming departure of Independent Financial Partners from the No. 1 independent broker-dealer is yielding a bumper crop of recruits for Independent Advisor Alliance.
At least 34 IFP advisors are in the process of joining the firm, according to CEO Robert Russo. There are 11 other defecting advisors who have verbally committed and nearly 50 others in ongoing talks about possible moves, he says. Hamm disputes Russo’s figure and says the launch of his IBD next year is going ahead of schedule.
A recruiting fight among some of LPL’s largest OSJs is playing out after Hamm announced in April that he would form the new IBD out of his OSJ, which has 520 advisors and $10 billion in assets under management. CEO Dan Arnold promised a “compelling offer to stay with LPL” for IFP’s advisors.
LPL is offering IFP’s advisors about 10% of their annual trailing 12-month production, according to Russo, who describes the offer as “disruption assistance” that is more break-even than profitable for the advisors. Russo and Hamm discussed the situation at LPL’s recent Focus conference, Russo says.
“I have a ton of respect for him, his family and his practice. I know advisors think very highly of Bill, and his move away from LPL has been difficult for some of the advisors because they love Bill but they were very happy at LPL,” Russo says. “I’m here if the advisors would like to stay with LPL.”
Russo’s commitment to LPL — along with the option of a flat fee instead of an override based on production — is what made joining IAA attractive, says IFP advisor Jason Norton of Carrollton, Georgia-based Norton Financial. Norton's practice manages $153 million in client assets, including $116 million in advisory accounts.
The No. 1 IBD has completed the NPH acquisition, but CEO Dan Arnold unveiled further growth initiatives amid challenges to its dominance.May 4
Independent Financial Partners’ CEO predicts the firm will retain about 80% of its business, despite a daunting series of challenges.May 17
Bill Hamm’s Independent Financial Partners has grown more than fivefold in 10 years with the No. 1 IBD.April 10
Russo’s RIA and OSJ, which is based a few miles from LPL’s corporate headquarters in the Charlotte, North Carolina, area, spans 82 producing advisors and nearly $6 billion in client assets. Norton praises Russo’s team for the ease of the transition, but he notes he didn’t have any issues with Hamm’s firm.
“We ultimately decided it would be a massive disruption to us and our clients to do a full broker-dealer change,” says Norton, whose firm is scheduled to leave IFP formally in October. “It wasn’t necessarily a rejection of them by any means. It was really finding the right path for us and our clients.”
The number of IFP advisors going to Russo’s OSJ is much less than 34, according to Hamm, who says he has commitments to retain at least 240 advisors with 60% to 65% of his OSJ’s business. He expects to keep 70% to 75% of production and add new recruits before the launch of his IBD next April, he says.
Advisors departing from IFP include some who recently came to LPL and don’t want to make another switch. A few are approaching retirement, and others are “taking a path of least resistance,” according to Hamm. A lot of the advisors leaving are smaller producers as well, he says.
Hamm named Russo’s network and Private Advisor Group, LPL’s largest hybrid RIA with $16.8 billion in AUM, as among four or five OSJs actively recruiting from IFP. The majority of LPL’s OSJ networks are abiding by an agreement not to recruit from each other’s ranks, he says.
“Apparently that changed, once we decided to leave,” Hamm says. “But I understand it. I just know that, if the shoe were on the other foot and I was staying and they were leaving, I wouldn’t be going after their people. That’s just the way I look at it.”
Private Advisor has a number of IFP advisors coming on board, according to co-founder John Hyland, who declines to state a specific figure. Hyland’s team had initially decided to be “very passive” about recruiting from IFP, but they began getting a lot of calls from interested advisors, he says.
“For whatever reason, this isn’t a knock on Bill, they just didn’t want to depart LPL,” Hyland says. “That would be a shame for us not to engage with those folks who have raised their hand and said, ‘We want to stay with LPL.’”
LPL has lost at least seven other hybrid RIAs out of more than 420 after saying it would require incoming advisors to have at least $50 million in AUM with the corporate RIA. IFP advisors choosing to stay with IFP may have expenses relating to marketing materials and going to a new RIA, according to LPL.
“All IFP advisors have the opportunity to choose the affiliation model that makes sense for them and their clients,” spokeswoman Lauren Hoyt-Williams said in an emailed statement. “LPL hopes to minimize that impact and offset costs by offering some financial assistance.”
Russo expects to add 55 new recruits by the end of 2018, he says, calling it a low estimate considering the ongoing talks with other IFP advisors. LPL serves as the custodian on more than 98% of his firm’s assets, and the OSJ has a “very strong” partnership with the No. 1 IBD, he says.
In considering the recruitment of advisors, Russo’s team conducts a full background check in regulatory databases and ensures the prospective advisor’s personality wouldn’t make the group dread a phone call from them, he says.
“We call it the cringe factor and the compliance factor. Those are the two big ones for us, more so than assets and production,” Russo says. “We are connected with LPL. We believe in what they’re doing. I have the confidence that this is the place to be.”