May 6, 2008

LPL Makes New RIA, Hybrid-FA Push

LPL Financial says it plans to introduce an integrated advisor solution platform, supporting independent Registered Investment Advisors (or RIAs) as well as hybrid ( or dually registered ) financial advisors by year-end. To support this effort, the company has named Gary Gallagher, formerly of Fidelity Investments, as head of RIA services.

According to Mark Casady, LPL Financial's CEO, the move to support RIAs is an extension of LPL's other initiatives that have been designed to "redefine independence." "We've been a leader ... at providing any product with unbiased selection. We're a partner to FAs," and LPL sees advisors as business owners. "This step gives FAs an unbiased business structure," Casady explains. "It lets them take a new strategy and say, 'I want to do business as my own RIA.' "

Boston- and San Diego-based LPL Financial began considering ways to further work with RIAs two years ago, and immediately put Gallagher on its list of executives who could help the firm "make it happen." Gallagher was hired in November 2007. LPL Financial now includes some 11,800 advisors. About 10 FAs have been involved in the new RIA pilot efforts.

The broker-dealer expects up to a few hundred advisors to take advantage of this new offering in the near term. Some 8,000 already rely on LPL Financial's existing RIA business; this corporate-custody work includes some $75 billion in assets under management. (LPL's total AUM stands at about $285 million.)

But it also anticipates that it will be quite attractive to "breakaway brokers," financial advisors now with the wirehouse/full-service firms who considering a shift into independence. "We want to build this in as a model of new business growth," shares Casady.

"This is about refining the independent model," explains Gallagher, beyond the custodial, fiduciary roles. "LPL will let you build out your own RIA and do it all in one place." This should create an integrated experience for both FAs and clients, he says. "And this will be easier on FAs and clients. Investors' experiences will be more seamless."

Casady adds that this new offering isn't just about adding scale to FAs with LPL and those looking to come to LPL, "It's also about adding scale and capability to this marketplace."

In connection with LPL's announcement that it will soon be permitting its advisors to custody assets elsewhere, rival Raymond James says that it has offered this option for roughly a decade. Today, this model is part of Raymond James' AdvisorChoice program, which gives FAs a range of options to choose from when affiliating with the Florida-based broker-dealer.

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