LPL Financial has announced an affiliation with Advantage Financial Group that will bring client assets of about $2 billion to LPL.

Company officials said AFG's 63 affiliated independent advisors are moving their securities registrations from their current broker-dealer to LPL. Also, LPL will become the primary custodian for AFG's sister company and RIA firm, Advantage Investment Management, which will continue to provide fee-based solutions to AFG's independent financial advisor members.

AFG, based in Cedar Rapids, Iowa, provides professional services to its member advisors in the Midwest, Great Lakes and Southeast regions. Those member advisors share an equity interest in AFG, a separately managed professional services firm with revenues of $11.2 million in the past 12 months.

"This agreement was not just a broker-dealer or custodian change," Bill Morrissey, executive vice president of business development at LPL, told Financial Planning in an interview. "This is about a group of seasoned professional advisors with a collective vision and a unique model who want to serve their clients better. We're pleased to welcome such high quality advisors."      

According to Morrissey, LPL's scale and financial stability helped to attract AFG. "We'll be able to help AFG's advisors outsource things we can do more efficiently and less expensively, such as branding and marketing, as well as provide hands-on practice management support." Morrissey described AFG as a hybrid client, for broker-dealer and custodial services, which can be fully integrated by working with LPL in both areas.

In a statement, Morrissey said that, "Our relationship with AFG represents an important step in our broader efforts to establish LPL Financial as the first-choice provider of broker-dealer, custodial, practice management, marketing and succession planning services for successful and sophisticated producer groups throughout the U.S."

Joe Russo, chairman of AFG, said that the agreement with LPL is the culmination of a two-year search that involved meetings with "all the leading players" in the industry, as his group sought the best way to grow enterprise value for its member advisors. "The transition to LPL successfully concludes an extensive review process for a broker-dealer and custodial partner that will help us preserve and enhance the equity value of the AFG partnership."

According to Russo, AFG has been moving to a professional partnership structure with a "partner track," similar in some ways to a law or accounting firm. Many of its member advisors have been in the business since the 1970s and 1980s, so intergenerational and business succession planning are becoming key concerns. "We plan to reach the stage where AFG might help a buyer with a down payment, perhaps, or one partner could buy out another member's interest. The scale of LPL dramatically enhances the value of our members' ownership in AFG."

Charlie Auerbach, a director of AFG, told Financial Planning that the concept of AFG is to give independent producers equity in a group, so they could put a tangible business value on their practice and have some liquidity to count on in their succession planning.

"We started as a corporation and we are now moving to a professional partnership with a hierarchy: associates, partners, managing partners, and so on," said Auerbach, who heads Wealth Strategies Group in Cordova, Tennessee. "This structure will enable us to build more value but one key ingredient had been missing: a strategic partner. After active searching and many conversations with industry leaders, we decided that LPL is the best fit for us."

Donald Jay Korn writes for Financial Planning.



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