LPL enterprises add teams with $2.5B, get first outside capital infusion

Two of the major enterprises whose expansion is helping to boost LPL Financial’s record advisor headcounts will enter the new year on a trajectory to grow even more.

Private Advisor Group, a Morristown, New Jersey-based hybrid RIA and office of supervisory jurisdiction with 700 advisors and $30 billion in client assets, received its first ever infusion of outside capital from Merchant Investment Management, the firms said Dec. 17. Integrated Partners, a fellow LPL hybrid RIA-OSJ that’s based in Boston with 160 advisors, 140 CPAs and nearly $12 billion in client assets, added a 21-year veteran planner from Northwestern Mutual as part of a recruiting haul this year bringing in nearly a dozen different teams.

Each of the two enterprises uses LPL as their primary broker-dealer, along with 450 hybrid practices that have their own advisory firms in addition to the wealth manager’s corporate RIA. Firms such as Private Advisor and Integrated maintain complex ties with LPL that the two sides view as mutually beneficial. Other brokerages give practices less leeway to have their own RIAs and work with outside custodians, which reduces the assets serviced by LPL and rivals like Advisor Group, Raymond James and Cetera Financial Group. As OSJs take on more duties than their traditional compliance services, LPL and hybrid RIAs are in “friendly competition” with one another, said recruiter Louis Diamond, the president of Diamond Consultants.

“It's good for the advisor, because now the advisor has more options, and both organizations will keep pushing each other to be better,” Diamond said. “Competition is good for the advisor in the end.”

Private Advisor and other firms getting capital from a rising number of backers amid record consolidation in wealth management deploy it for recruiting, acquisitions, succession planning and investments in their technology and other infrastructure, according to Diamond. More wirehouse and employee-channel teams considering breakaway moves are mentioning hybrid RIAs and OSJ enterprises at independent brokerages, in addition to platform providers such as Dynasty Financial Partners and tru Independence, according to recruiter Samantha Sferas, vice president of business development for Terrana Group.

“We work with big teams,” Sferas said. “With the support structure, they put the blueprint together and it just expands the business where they were unable to.”

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For Private Advisor, the influx of capital from Merchant’s non-controlling, minority investment will leave the same shareholders in place without any monetization of their stakes in the firm, according to CEO Robert “RJ” Moore. Merchant’s infusion will enable Private Advisor to give its advisors more capabilities, assist practices with succession, recruit more teams and broaden the firm’s potential M&A deals, though it doesn’t plan to be a “serial acquirer,” Moore said.

“As a minority holder, they're unique in that they don't come to us in the form of a fund structure. They're not a private equity firm, they’re a true partnership,” Moore said. “It's all additive to us in terms of the growth capital that is being put forward.”

Merchant has purchased minority stakes in 40 wealth management practices and enterprises with more than $100 billion in combined client assets, according to Managing Partner Tim Bello. Earlier this year, the firm also struck a partnership with Concurrent Advisors, another large OSJ enterprise that uses Raymond James as its brokerage and RIA. The privately held firm is an operating company focusing on financial services, with its executive ranks composed of former senior leaders from firms such as Apollo Global Management, Goldman Sachs, Focus Financial Partners, Dynasty and Purshe Kaplan Sterling Investments.

“Private Advisor Group, across all aspects, embodies everything that we're looking for,” Bello said. “They've continually demonstrated the ability to evolve and execute throughout different aspects of the marketplace.”

Neither Moore nor Bello would comment on the amount of equity changing hands, the purchase price or revenue multiple of the transaction or the valuation of Private Advisor under the deal. At least two other hybrid RIAs, Carson Group and Wealth Enhancement Group, have received valuations of $1 billion or more under recapitalizations this year.

With infusions from outside investors adding to the record volume of M&A transactions and fostering more deals and recruiting in the future, they’re providing a separate line of business outside the corporate RIA for firms like Cetera and LPL that act as the primary brokerage. Hybrid RIAs like Integrated that haven’t received outside financing are, nonetheless, boosting LPL’s headcount of more than 19,600 advisors as well.

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In 2021, Integrated has recruited 11 teams with a combined $2.5 billion in client assets. The number of assets managed by the enterprise’s 60 offices in 24 states represents about three times its size five years ago, when it had $3.5 billion. Last month, advisor Kent Welborn, associate advisor Will Schoffelman and Director of Operations Allison Ellstrom of Phoenix-based Welborn Financial joined Integrated after more than two decades with Northwestern Mutual, where the team managed $130 million in client assets. Welborn dropped his FINRA registration and affiliated with Integrated’s RIA in the move.

“We wanted to find a partner organization that offered us the opportunity to grow but also mirrored our ethos,” Welborn said in a statement. “When we began talking to Integrated Partners, something clicked.”

Representatives for Northwestern Mutual didn’t respond to a request for comment on their move.

Not surprisingly, Integrated Chief Growth Officer Robert Sandrew and founder Paul Saganey have said they’ve grown used to hearing from potential investors in the firm on a near-daily basis. For now, they plan to keep expanding their footprint in the way that has proven successful in recent years, with recruiting of advisory teams and accounting practices referring clients through the firm’s CPA Alliance. With remote work during the pandemic, more wirehouse and employee advisors than ever are finding they “want more control, they want more flexibility, they want more freedom” in their practices, Sandrew said in an interview in late October.

“The advisors are seeing this situation where the resources in these firms are not necessarily there the way they used to be,” Sandrew said. “The education on the independent side has exploded. It’s very easy to research what it means to be independent and what capabilities are out there.”