LPL Goes Upmarket – Private Wealth Division With increased Payouts

LPL Financial is making strategic moves in the wealth management arena by introducing a new advisor affiliation option called LPL Private Wealth Management. This initiative is designed to appeal to financial advisors who generate a substantial minimum revenue of $2 million and cater to high-net-worth clients. 

In a competitive landscape, LPL is following the trend of its wirehouse rivals, who have successfully marketed private wealth tiers to advisors specializing in ultra-high-net-worth clients. However, LPL is differentiating itself by addressing some common challenges faced by large brokerage firms, such as mandatory deferred compensation and annual alterations to pay plans.

To qualify for participation in the private wealth unit, brokers must primarily work with clients possessing at least $5 million in investable household assets. This eligibility requirement is set forth by Gary Carrai, the head of advisor business lines at LPL. Notably, advisors who join this unit will become employees of LPL, diverging from the firm’s traditional independent contractor model.

Gary Carrai highlights the appeal of LPL Private Wealth Management to teams from corner office wirehouses or private banking sectors seeking greater flexibility and control over their operations. This niche offering allows LPL to potentially move further upmarket, as its average annualized revenue per advisor currently stands at approximately $311,000, according to its recent earnings report. 

LPL had previously missed opportunities to attract high-end teams, including brokers from the now-defunct First Republic Bank who found new homes elsewhere earlier this year, as reported by recruiter Rick Rummage in Virginia, who specializes in placing brokers with the San Diego-based company.

The leadership of LPL’s new private wealth unit is entrusted to Anna Howard, who joined LPL in June from First Republic Bank’s private wealth group, where she held the position of head of family wealth services. Howard’s prior experience also includes roles as a fiduciary manager and wealth planning strategist at Wells Fargo, as indicated on her LinkedIn profile.

 Regarding compensation, advisors affiliated with the private wealth channel can expect payouts ranging from 64% to 70% of their revenue, according to a spokesperson. This payout structure aligns closely with the range LPL has proposed for its Linsco employee channel, where brokers have the opportunity to earn payouts ranging from 50% to 70%, as outlined on the firm’s website. LPL’s Linsco channel comprises 56 teams managing a total of $22 billion in assets, according to the spokesperson.

In contrast to Linsco, private wealth brokers will receive enhanced support, including access to a dedicated team of specialists who can facilitate investments in alternative asset classes such as private equity, private real estate, and private credit, as explained by Gary Carrai. As an example of the support provided, Anna Howard mentioned that LPL may host and finance guest speakers at high-end client events or assist advisors in organizing their own events.

This strategic move comes on the heels of LPL’s successful expansion efforts in the previous quarter, which included the introduction of Linsco and the Strategic Wealth fee-for-service unit. These new affiliation options, along with a custody offering for independent advisory firms, contributed to a record $5 billion in recruited assets in the third quarter. LPL attracted several former wirehouse brokers, reinforcing its position in the wealth management industry.

LPL’s CEO, Dan Arnold, highlighted the significance of diversifying their affiliation models, which has enabled them to attract a broad spectrum of advisors. Moreover, these advisors tend to engage in more advisory services when they join LPL, underscoring the success of the firm’s strategic initiatives in expanding its market presence.

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