LPL Financial, the nation's largest independent broker/dealer, announced Feb. 19 that the Hybrid RIA platform it introduced last October had reached more than $1.3 billion in assets under management in its first three months of operation.
The impressive figure testifies to the expected migration of wirehouse advisors to the independent RIA channel and the corresponding need for custodians that can accommodate both fee-based and commission business.
But accommodating a hybrid book may not be enough.
LPL claims to be the first to provide independent advisors with a "truly single, integrated platform" for RIAs and hybrid advisors who want to effect a seamless merger of their fee and commission business. In addition to centralizing all aspects of an advisor's business on a single integrated platform, the program allows advisors to select which business model is appropriate for individual clients, "without pressure to steer them toward specific products, model portfolios or programs," says Gary Gallagher, executive vice president for registered investment advisor services. "They have access to an open architecture investment platform that provides a comprehensive range of investments.
Because our integrated platform supports both fee-only and fee and commission business, we can manage across their whole book," he adds.
The program also provides dedicated compliance support and technology and business solutions from LPL's Service 360 team. "Some of the advisors who joined us were RIAs before, some have evolved as a result of our ability to support them," Gallagher continues. "One of the things we do is to take a highly consultative approach to helping them understand what it takes to become an RIA, and to help them through that as well as transferring business onto the platform."
Ben Marks, president of the Marks Group Wealth Management in Minnetonka, Minn., spent 12 months on due diligence before leaving UBS last November to become part of the LPL platform's pilot program. "At UBS, we had a combination, a 70-30 mix of advisory fee-based business and traditional brokerage business," Marks explains. "Although we're concentrating on the advisory side--and the commission business is really more of a service--we didn't want to give up the ability to do the traditional business, which would make it inconvenient for our clients who were accustomed to both."
Because Marks's seven-person office operated under the UBS investment advisory umbrella, it was necessary for the team's four advisors to become registered. LPL, says Marks, introduced them to specialists who shepherded them through SEC registration and preparation of ADVs and investment agreements. And LPL compliance continually keeps track of the nuances. "We're very happy with the way this has evolved for us," Marks says.
LPL is equally happy: "Our recruitment--quarter over quarter for the last two quarters of 2008--saw a close to 55% increase," Gallagher reports.
While wirehouses--with their highly publicized financial problems--seem an obvious recruiting target for the hybrid platform, Gallagher is particularly pleased that "we've been successful recruiting from all three sectors: wirehouse, independent and the insurance segment. We've created a kind of melting pot," he says.
But he disagrees with pundits who claim the economy will push fee-only advisors toward the hybrid model.
"As firms look at what clients need, the hybrid model becomes more and more compelling, and the hybrid models are growing at a much faster rate. But fee-only is very viable and still a big part of the RIA marketplace today. As a custodian," Gallagher says, "we support both trends."