Booming markets have slowed recruiting, but the IBD's RIA custody unit will only get better as it affords itself more and more of Fortigent brainpower

June 19, 2013 — 1:34 PM UTC by Brooke Southall


LPL Financial LLC today announced the firm has reached $50 billion in total RIA assets under custody, doubling its total since the end of May 2012 — and the company is making no bones about its enthusiasm for those results. LPL started its hybrid unit in 2008. See: LPL to Wall Street types: We’re in phase three.

“Our recruitment efforts have been wildly successful, as the number of RIA firms on our platform, and their ability to attract assets, has exploded,” said Derek Bruton, a managing director for LPL Financial. See: LPL’s hybrid RIA platform is fast off the mark and names new leaders for 2010.

Virtually all recruits have been poached from fellow independent broker-dealers and wirehouses. Bruton says that his firm would likely attract a certain number of pure RIAs if it chose to compete in that channel. It chooses not to because the market of advisors who want to participate in both fee and commission platform under one roof is far more fertile.

“[Those pure-RIA assets] just aren’t in motion,” says Bruton.

Booming market casualty

The $50-billion milestone was being announced formally today. RIABiz has mentioned this success in other articles. See: Commonwealth and Securities America get into the RIA custody business and Wells Fargo is right behind them. ) The $50 billion includes commission-based assets held by advisory firms that maintain their own RIA and work with LPL. Bruton says that the “majority” of the $50 billion of assets are fee-based.

Bruton allows that his company’s front-running hybrid unit has also sustained a slackening in its recruiting pace — a casualty of a bull run in its fourth year. Advisors tend not to mess with prosperity by opening difficult conversations with clients when none are necessary. See: Why buy-high-sell-low-scarred retail investors are poised to catch the market wave.

“There’s most opportunity when there’s trouble,” Bruton says. “The sales cycle has lengthened.” In the first quarter, ended March 31, LPL recruited 25 net new advisers, down from 182 net new advisers in the previous quarter.

Closely wired to Fortigent

Despite a dearth of trouble, Bruton is confident that recruiting will continue apace at LPL as the underlying forces of migration to independence are still very much in place. See: How nature and nurture combine to encourage advisors to independence re-combine-to-encourage-advisors-to-independence.

In fact, LPL is likely to attract the next $50 billion to its hybrid RIA platform in shorter order than the five years it took the first time. “I don’t foresee it taking nearly that long [given that the assets grew at a 50% compounded annual growth rate during the past years],” he says.

Advisory firms like Bridgeworth Financial of Birmingham, Ala. that recruit on LPL’s behalf are also likely to keep the growth rate high.

Delynn Zell, managing principal of Bridgeworth, vouches for the platform. See: LPL vacuums up yet another $1-billion cluster of mostly RIA assets Alabama-style.

Sweet home recruiting

“It allows us to recruit different types of advisors. We have one advisor who joined us as a fee only advisor under the RIA. Since making the decision to join LPL, we have had added 4 new advisors in less than a year and are currently in discussions with others. Our referrals have increased both in number and in average net worth of the clients. We have been approached by a foundation, Fortune 500 CEO and other high net worth business owners and individuals.”

Another favorable factor will be RIAs’ benefiting from some of the acquisitions that LPL’s parent company is making. There is hope that retirement-oriented efforts will generate rollovers that will accrue to RIAs. See: Why a $1-billion Fidelity RIA is placing LPL at the heart of its 401(k) business.

But there are also plans to wire LPL hybrids much closer to the services and brainpower of Fortigent. See: “LPL Financial finds a starting place to bring Fortigent, LLC into its mainstream mix”:

Looking for trouble

RIAs are expected to benefit from Fortigent on behalf of high-net-worth clients in three areas: performance reporting and billing technology; manager research (particularly of alternative assets and illiquid assets) and turnkey asset management; and high-net-worth consulting, which will help in closing business from high-net-worth clients.

The number of LPL-affiliated RIAs using these services is still small — but growing, Bruton says. “We’re starting to see a lot more interest.”

Still, Bruton allows that it may take a more macroeconomic 'trouble’ to spur big recruiting growth to his platform.

So does that mean he’d like to see the stock market tumble this summer? “I’d settle for a leveling off,” deadpans the LPL executive.

Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Bill Morrissey

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