As small firms face even more challenges, LPL buys family-owned IBD

Register now

LPL Financial is acquiring a family-owned independent broker-dealer, as the big players of the sector buy up vulnerable small firms.

LPL agreed to purchase Lucia Securities, which has 20 advisors and $1.5 billion in assets under management, the firm said on April 28. The No. 1 IBD by revenue will pay about six times the post-merger EBITDA, although the parties didn’t disclose the exact price at the expected close in the second half of the year. The agreement includes potential contingency payments, according to LPL.

The deal is one of many in the IBD sector. Advisor Group grew into one of LPL’s largest competitors with the two largest M&A transactions in the sector last year. LPL, meanwhile, has been making more modest acquisitions since 2017, when it snagged the assets of the National Planning Holdings IBD network.

Among recent deals, LPL bought an employee BD, Allen & Co., for $35 million last year. In December 2018, the firm purchased asset allocation software firm AdvisoryWorld for $28 million. With its advantages of scale and infrastructure, LPL points out it can offer small and midsize firms a remedy to falling revenues tied to equity values and interest rates.

LPL and Raymond James lead in recruiting as M&A deals and new appointments show coronavirus impact
The firms have grabbed some three-fourths of the announced incoming advisors, as the pandemic cuts into valuations and casts uncertainty.

Large IBDs can tap into much more cash than small firms in a time of lower earnings across the financial services, Moody’s Investors Services pointed out in a recent report. Firms caught without enough capital in a recession could be “ripe to be acquired by larger players,” Moody’s analyst Fadi Abdel Massih said last month.

Raymond James Investment Banking Asset & Wealth Management was Lucia Securities’ advisor in the agreement.

“I believe our wealth management platform, enhanced with LPL’s culture, technology and capabilities, provides the ideal environment for our financial advisors to exceed clients’ expectations,” Lucia Securities CEO Ray Lucia said in a statement.

Ray and Joe Lucia’s Lucia Capital Group includes the broker-dealer, an RIA, and two sub-advisory and modeling firms, according to the company’s SEC Form ADV brochure. Schwab Advisor Services and RBC Correspondent Services provide clearing and custody.

LPL will take over as the San Diego-based firm’s custodian following the deal, though any commutes to the new parent won’t be a trek. LPL has one of its three corporate headquarters in the city.

Lucia “has been helping individuals, families, and business owners manage their wealth for decades,” according to a statement by Ray Lucia on its website, which lists 15 offices. “I was born into this business, and there is nothing else in the world I would rather be doing. There is no greater honor or responsibility than being entrusted to manage someone’s wealth.”

In addition to M&A, LPL has pursued an aggressive recruiting strategy, adding a record $35 billion in client assets in 2019. The firm expanded its headcount by a net 355 advisors to reach 16,464. Last week, the firm unveiled a new suite of services for wirehouse breakaways ahead of launching its own W-2 employee channel.

“At LPL, Lucia Securities’ advisors and their clients will benefit from the strength and breadth of our capabilities, technology and services,” Rich Steinmeier, LPL’s managing director for business development, said in a statement.

For reprint and licensing requests for this article, click here.
Independent BDs LPL Financial Richard Steinmeier M&A Business development RIAs
MORE FROM FINANCIAL PLANNING