$1.3B hybrid RIA to exit LPL in bid for growth under TD Ameritrade, PCS
An LPL Financial hybrid RIA with more than $1.3 billion in client assets is changing its custodian to TD Ameritrade Institutional and its broker-dealer to Private Client Services in an effort to simplify its compliance and boost its technology.
Bob Fragasso’s Fragasso Financial Advisors has spent 22 years with the No. 1 IBD, expanding its staff to 50 employees this year from only 11 when he first joined LPL in 1996. The RIA, which has four offices and a corporate headquarters in Pittsburgh, will leave LPL next month, the firm announced July 11.
LPL’s hybrid channel includes roughly 420 practices with 5,200 advisors out of the firm’s more than 16,000. Fragasso’s BD and custodian switch marks at least the eighth hybrid RIA practice to leave LPL since November, when the firm announced it would start requiring incoming advisors to bring at least $50 million to the corporate RIA.
Private Client Services also grabbed one such departing firm’s brokerage business last month, after adding another hybrid practice from Cambridge Investment Research in the spring. Fragasso says LPL’s new hybrid RIA policies didn’t figure into his decision, though. He calls LPL a “fine firm.”
Rather, the impending move stemmed from the practice’s structure. Fragasso’s firm serves clients collaboratively in 15 teams consisting of a lead advisor, a planning analyst, a portfolio management representative and a client account specialist. Advisors earn salaries and a firm-wide bonus.
The team-based, technology-driven approach means the firm has to “rely heavily on the systems provided by our custodian and our broker-dealer,” Fragasso says. He praises LPL’s efforts to upgrade its tech platforms but says his practice needed enhanced tools right away in the fast-changing space.
“By having the brokerage and the custodian in one place, we’re at a bit of a disadvantage because the compliance considerations on the brokerage business are different from the compliance considerations on the advisory business,” he says, also citing TD Ameritrade’s low transaction fees and tech. “We’re immediately leapfrogging into the technology environment that we need right now.”
Representatives for LPL didn’t respond to requests for comment. On July 9, the firm announced a breakaway team from Merrill Lynch had aligned with LPL in March as the firm’s first-quarter profits jumped 94% to $93.5 million and its head count expanded beyond that of all wirehouse firms.
Fragasso, a 45-year veteran of the financial services industry, came to LPL after two years at then-wirehouse firm Smith Barney and tenures with Lehman Brothers and PaineWebber, according to FINRA BrokerCheck. He owns the RIA, alongside a 30% stake for employees through a stock ownership plan.
President Daniel Dingus and COO Christine Erimias make up the rest of the executive team. The firm’s moves to TD Ameritrade as its new primary custodian and Private Client Services on the brokerage side will become official on Aug. 2.
The hybrid RIA, which recently completed an acquisition of another practice and plans to complete two more deals soon, is actively searching for more practices and advisors to bring into the fold.
Fragasso, who served in the Marines and leads his firm’s participation in the Animal Friends Pets for Vets program, which trains shelter animals to be emotional support animals for veterans, offers a caveat on the firm’s acquisition and recruitment plans, though.
“They have to fit into our culture. There’s only one book of business and it’s allocated among the financial advisory teams,” he says. “The Tom Cruise fighter-pilot mentality is not going to want to be part of this. We need a collaborative, special ops-type mentality.”