- On September 4, 2017
LPL indeed keeps getting bigger. With the $325MM acquisition of National Planning Holding (NPH) LPL will be jumping from 14K+ advisors to a 17K+ advisor force.
The LPL acquisition of NHP highlights:
- NPH acquisition includes National Planning Corp, Invest Financial Group, and SII Investments who combined have 3,200 advisors.
- NPH has lost at least 141 advisors in last 3 years.
- LPL has set aside $100MM in onboarding support and forgivable loan budget to offer NPH advisors (and their subsidiaries) a transition packages.
- Combined, NPH firms generates $909MM in annual revenue. Divided by 3,200 puts the average revenue per advisor at $284K.
- The $100MM in recruiting transition deals LPL is offering only represents 11% of the total revenues being acquired.
- LPL believes their “negative consent capability” instead of a typical repapering of clients, paying for all account closure and transfer fees, payout and capabilities, and offering a forgivable loan transition to 11% of the total revenues being acquired is a compelling offering.
- We see this acquisition as a strong recruiting opportunity for firms growing through tuck-in advisor recruiting and IBDs direct.
- The vast majority of NHP advisors will not be receiving a transition deal.
- We spoke to an SII advisor doing $350K annual GDC who told us he was offered a 5% total deal.
- The average size advisor at NHP can get 10% to 20%+ deals with other IBDs.
- The giant bureaucracy of the LPL will not appeal to many of the NPH “boutique-minded” advisors.
- Negative consent ability or not, NPH advisors will need to share with their clients why they want to stay at LPL instead of using this as an opportunity to go somewhere else.
Reasons why NPH advisors may bolt elsewhere:
- When NHP advisors call LPL advisors to see what they think of LPL and how they like being at LPL they may not get a great response. According to the findings of WealthManagement.com 2017 IBD Report Card. When LPL advisors were asked, “How likely are you to still be affiliated with your current broker dealer two years from now?” Less than half, 49%, of LPL advisors would be “very likely” compared to the 85% IBD average.
- The same Report Card shows LPL scored poorly on being ready and prepared for DOL.
- LPL service ratings by their advisors have plummeted from the top of the scale years ago to the bottom of the scale.
- LPL has quadrupled in size in the past 15 years and about to take another 3,000 advisor jump in size.
- LPL has had tremendous turnover in upper management over the last couple of years.
- LPL well publicized compliance problems over the last few years resulting in over $70MM in fines.
- LPL advisors have seen a steady increase in general and administrative costs over last few years.
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