LPL Financial plans to add at least 400 advisors this year as it increases its technology spending 50% as part of a strategy to attract and retain advisors.
“Historically we have added new 500 advisors per year and we plan to add net new advisors of 400 on a going forward basis,” Mark Casady, LPL’s chairman and chief executive officer, said Thursday afternoon during an interview at NASDAQ. “That is part of the mixture of how we will create growth for the company.”
LPL, which is the third largest broker-dealer by headcount and the fifth largest by revenue, has grown into a powerhouse of a financial services company over the past decade. Its advisor base has grown from 3,596 advisors in 2000 to 12,017 as of Sept. 30, representing an annual growth rate of 13.2%. In 2009, it added 750 advisors net new advisors.
Casady said 2010 was “a little bit slower” as 128 net new advisors joined the company through the first three quarters the year.
The majority of advisors that joined LPL in 2009 came from wirehouses, according to Casady, but 70% of the advisors that joined the firm last year came from other independent firms. On average, advisors joining LPL had at least seven years experience.
The company also plans to continue to look for ways to grow its business through acquisitions. Casady said. Over the last decade, 80% of LPL’s growth has come organically and 20% has come from acquisitions. Casady said the company continues to look for acquisitions that “make sense,” but most purchases going forward will be “add-on” deals.
“Most of our acquisitions in the past have been to add scale, but we are really through that phase,” he said. “Going forward we’ll look for add-on services. … We want to find services that we can bring to our advisors.”
He said LPL has the excess capital to make deals without using any stock to make acquisitions.
Casady agreed that there is an ongoing technology arms race between his firm and rivals, including Charles Schwab and Fidelity. To stay ahead of the curve, LPL plans to increasd its technology spending by 50% to $50 million this year.
“We want to put more money back into this business,” he said. “We want to do more things to provide systems and capabilities for our employees. … CRM was a big roll out last year. … We will roll out new advisory platforms and new technologies in 2011. … Our first mission is to increase spending on capabilities to drive more efficiency and drive more growth for our existing client base.”
The San Diego-based company made news in November when it raised $445 million from its initial public offering, but Casady said he doesn’t think the IPO “really matters one iota” to advisors.
“I mean it is nice. … But [advisors] come to us because we can offer more efficiency and more capabilities than anyone else in the industry bar none,” he said. “You can’t go to a custodian and get the efficiency of the platform we have, you can’t go to another broker-dealer.”
Casady said advisors that work with LPL run a more profitable and more efficient business. According to a study conducted by PricewaterhouseCoopers, advisors that worked with LPL have grown their business 15% to 20% more than other advisors and have 20% to 25% greater profitability.
“We have gotten bigger and we’ve gotten more effective for our advisors,” he said. “As we go through 2011 and beyond, we want to stay focused on what got us here.”
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