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Hybrid RIA merger creates $2.6B super OSJ under LPL

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A three-way merger of LPL Financial practices should allow them to more than double their assets in the next three years and nearly quadruple them within five, according to the acquiring firm’s founder.

The partnership between Merit Financial Group, Botsford Financial Group and Financial Development Systems has created a super office of supervisory jurisdiction with 46 advisors and $2.6 billion in client assets, according to Rick Kent, founder of the suburban Atlanta-based Merit.

The M&A deal, which closed in the fourth quarter, resulted in ownership stakes in the super OSJ and management positions at Merit for executives with the two other practices, Kent notes. The firms will eventually operate under the Merit brand, although Kent says there is no timetable for the change.

The OSJ keeps custody of its advisory assets off LPL’s corporate RIA platform, which has seen new lower fees but more stringent custody requirements this year. The changes have turned off some advisors. However, LPL’s largest hybrid practices still manage more assets than many independent broker-dealers.

For instance, Pat Sullivan and John Hyland’s Private Advisor Group has more than $27 billion in client assets and Bill Hamm’s Independent Financial Partners has more than $53 billion.

This merger will help Merit grow to $6 billion in client assets within three years and $10 billion after five, Kent says.

“We’re really now starting to get some traction. It’s great having very talented people around me to help me focus on the future growth,” Kent says. “When something like this happens, it’s almost like coming over the top of a mountain, and now you have a different understanding of your potential.”

LPL's acquisition of National Planning Holdings' assets alone resulted in 10 moves of $744 million or more of clients assets.
December 18

Atlanta-based FDS had previously worked under Merit’s OSJ, which specializes in employer retirement plan-focused advisors. Botsford, which has offices in the Dallas and Atlanta areas, serves high-net-worth clients such as business owners and senior corporate executives.

“Rick and his leadership team recognize the need to create scale and deepen the service and value they provide to their clients,” Andy Kalbaugh, LPL’s divisional president for national sales and consulting, said in a statement. “This is an exciting partnership that will deliver on those needs. We look forward to continuing to serve as an enabling partner to Merit going forward.”

Kent and FDS owner Jody Owenby had been discussing a partnership, and Botsford President Kay Lynn Mayhue approached Kent last year after they met in a coaching group, according to Kent. The parties did not disclose terms, and the other firms referred all questions beyond the announcement to Kent.

Mayhue, Owenby and FDS COO Greg Gerhard received ownership stakes in the super OSJ under the deal, according to Kent. Botsford founder Erin Botsford has joined Merit as a strategic business development officer, while Owenby became a senior partner at Merit and Gerhard became a partner.

Owenby released a statement saying the deal will use “the combined strength of our organizations to create a new industry leader,” and Botsford said in a statement that she “could not have asked for a better partner” than Merit.

The three parties will discuss the best timeline for the transition to Merit’s brand in order to provide as little disruption to clients as possible, Kent says. The hybrid RIA uses Fidelity as custodian of its assets held outside LPL, but Kent says they will consider additional custodians following the merger deal.

Several of Merit’s “key advisors who had been with us a long time” also received shares in the firm under a second-generation ownership program, he adds. Kent planned the firm’s ambitious growth goals based on the potential for its RIA, its turnkey wellness platform for employers and M&A deals.

“I’m going to call it a dream team,” he says. “We just have a lot more capabilities now.”

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