Four Merrill Lynch advisors managing $420 million have bolted to launch a boutique practice under LPL Financial after its CEO predicted the movement of advisors and assets under the fiduciary rule.

LPL CEO Dan Arnold told analysts in late April that the nation’s largest independent broker-dealer expects the Department of Labor rule to “create disruption” in coming months and years. The Choice Group Wealth Management of Melville, New York, registered with LPL the following day.

LPL assets

Ira Katz, Daniel McNicholas, John Scala and Bryce Wilinski joined both LPL’s broker-dealer and hybrid RIA platforms in a typical setup for the company’s licensed advisors, an LPL spokeswoman said Tuesday. The ex-Merrill brokers chose LPL to get better flexibility under the fiduciary rule, according to Katz, who is 42 years old.

"We’re in full growth mode, and we see that [joining] LPL really opened the door to a lot of opportunities," he says. "There are things we can bring to old and new clients, and we can actually be on the side of change.”

A spokeswoman for Merrill Lynch didn’t respond to a request for comment on the team’s departure.

Slideshow
Breakneck pace for breakaways in first quarter
HighTower and Dynasty added big platform clients as wirehouse brokers continued to flee.

RESEARCHING LPL TOOK EIGHT MONTHS
The team has worked together since 2008, when Katz, Scala and Wilinski met during prior tenures at Bank of America’s retail brokerage, Banc of America Investment Services. Katz began his career at Citigroup in 2001, while Scala claims the most experience, having started at Gruntal & Co. in 1993.

Scala eventually moved in 2004 to Banc of America, where Katz and Wilinski came aboard in 2006. All three of them switched to Merrill Lynch in 2009, following its acquisition by Bank of America. McNicholas joined their team, which is based in the Long Island suburbs of New York City, in 2011.

The Choice Group Wealth Management, LPL

The team took longer than a year deciding where to go after Merrill, according to Katz. Their research on LPL’s structure alone stretched eight months. They will be able to shave their clients’ fees by making the move, he says.

“In doing so, we were able to not only save our clients money, but also better our own lives by going independent,” Katz says.

RECRUITING IN THE FIDUCIARY ERA
The remarks by Arnold ran parallel to those of executives at competing firms during first-quarter earnings calls. All wirehouses reported net drops in their brokerage forces, either year-over-year or sequentially, and Morgan Stanley CFO Jonathan Pruzan said the DoL rule has hurt recruiting.

Merrill Lynch in particular has seen its headcount buffeted. The company pledged to end commissions in retirement accounts, though executives have since walked that back. In late April, an ex-Merrill team in San Antonio with $150 million in assets also cited fiduciary principles as a factor in their exit.

Disruption has hit LPL as well. The company disclosed that it will lose at least 210 advisors in the first half of the year after the departure of three major offices of supervisory jurisdiction. Its brokerage force of 14,354 advisors remains far above those of Ameriprise (9,668) and Raymond James (7,222).

Representatives of LPL may offer clients both advisory and brokerage services as a result of the company's separate hybrid RIA and BD platforms, according to its latest Form ADV. Teams choose among many outsourcing support menu options and custody levels in the firm’s open architecture, a spokeswoman said.

The firm, which has headquarters in Boston, San Diego and Fort Mill, South Carolina, comprises more than 7,200 independent advisors, 420 hybrid RIAs and 700 banks, credit unions and clearing-client firms. LPL’s stock has jumped 12% in value to $43.27 since the firm reported earnings April 27.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access

Tobias Salinger

Tobias Salinger

Tobias Salinger is an associate editor of Financial Planning, On Wall Street and Bank Investment Consultant.