From the May 2007 issue of Research Magazine • Subscribe!

May 1, 2007

Retiring MSC Chief Reflects on LPL, Future of Small Broker-Dealers

Retiring MSC Chief Reflects on LPL, Future of Small Broker-Dealers

Mutual Service Corporation, the largest of the three Pacific Life broker-dealers being acquired by LPL with 1,300 advisors, is saying good-bye to John Poff. The former president and CEO of MSC will serve as a consultant through the end of 2007, and MSC Chairman John Dixon is stepping in as the CEO. Poff served as chair of the Financial Services Institute in 2006.

"I'm retiring after 22 years," says Poff. "I will fulfill my responsibilities through December."

Poff says his desire to retire is based on age - not LPL's acquisition of MSC. "I'll be 60 in December as well."

He intends to stay on the board of FSI through the end of the year and "be out of the industry in 2008." He'll likely split his time between Florida and Colorado.

What's his reaction to the LPL deal? "MSC has been in negotiations and discussions for some time," Poff explains. "And there were several potential buyers before LPL. The management team is very happy with the ultimate decision. It's good for the advisors, employees and Pacific Life. It keeps MSC's reputation intact and allows Pacific Life to get out of distribution."

And what about MSC's ongoing arrangement, which will continue after the acquisition, to clear through Pershing rather than clear through LPL? "It's not a surprise. LPL recognizes the value of flexibility for the representatives. This can help them in future recruiting."

"This issue was, of course, discussed in detail. It's a committed, meaningful strategy that's been well thought out by LPL," Poff adds.

LPL is gaining very experienced management in the process, he explains. "MSC managers know all aspects of the business and are not pure specialists. LPL wanted to grow the depth of its management team."

MSC's current goals, as Poff sees them, are to continue to work with FAs and give them as much information about the transaction with LPL as possible, so they feel they are participating in the integration."

Pacific Life acquired MSC in 1989, Poff says, and MSC's generated some handsome returns, to the tune of a more than 20 percent rate of return on equity. In '89, MSC had sales of about $20 million vs. $220 million today. The average MSC advisor has been with the firm for 12 years.

"The cost of compliance, in the past 10 years, has added a lot to the small broker-dealers," the retiring executive says. And this takes its toll on the small firms. "That's why Royal Alliance recently bought a $10 million shop," Poff explains. "The small firm couldn't cover its costs otherwise. I expect further consolidation."

"But you have to have the right strategy," he notes. "LPL sees the value and got a great firm, in terms of profits, management and stability. And now, it can grow with more opportunities in a new direction."

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Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.

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