While many LPL Financial advisors are cheering the broker-dealer’s IPO on Thursday, saying it will bring greater visibility for advisors and greater financial flexibility for the firm, some insiders remain skeptical about what the public offering means for its future.
“It gives the independent RIA channel equal status within the rest of the industry,” said Bob Fragasso, CEO of Fragasso Financial Advisors in Pittsburgh and a top LPL FA, in a phone interview. “LPL has gotten to the point of scale where they can do this, and it makes them more formidable.”
“I see this as a cold-blooded business evaluation – there’s nothing wrong with any of it. Everybody wins on this one,” added Fragasso, who was expected to sell 23,000 shares Thursday.
Another pleased advisor is Susan Kaplan, head of Kaplan Financial Services in Needham, Mass., which has $960 million in assets under management. It was anticipated that Kaplan would sell roughly 42,000 shares via the IPO.
She sees the move as a “reward for [her] being committed and loyal to LPL” for years, she said in a phone interview. “If there’s a diminution in care [from LPL], I would consider moving elsewhere – though I can’t really see that happening.”
Others advisors, though, are more concerned. “There a level of uncertainty among advisors that the culture might change,” said an FA in the Southeast, who’s been with LPL for five years and wished to remain anonymous, during a phone interview “Right now, LPL does everything it can to keep us happy – they don’t have to answer to shareholders.”
But LPL’s public presence should make life easier for its advisors, some advisors say. “It will become more of a household name –right now it’s a total unknown name…” said an LPL advisor in the Midwest, who’s been an FA for more than 30 years and preferred not to identify himself, during a phone interview.
For LPL itself, the move means more financial flexibility and “the ability to have stock and currency for broker acquisitions to build the firm at a much quicker pace,” said Donald Weidenfeld, a
Raymond James & Associates advisor in Boca Raton, Fla. “LPL has come a long way. And they did really well through the downturn as well.”
“Now smaller broker-dealers can become acquisition targets of LPL, because it has the stock in order to buy them,” noted Weindenfeld.
“Smaller B-Ds will have to merge and get scale, or they’re going to fall by the wayside,” shared Fragasso.
On the down side, being a public company means everybody “knows your business because you have to disclose everything,” said Weidenfeld.
But, the good news for many LPL advisors is that they are now shareholders. “The opportunity for shareholders is enormous,” Kaplan said. “LPL has grown like crazy ... and opportunities for further growth are great.”
Still, the IPO is no free lunch.
“This is going to be a taxable event. It’s a terrible disadvantage to those of us that have restricted stock,” said the LPL advisor from the Midwest.
From an industry perspective, “This is a fairly profound thing,” said Randal Langdon of Lindner Capital Advisors in Atlanta, in a phone interview. “It will give a new benchmark in terms of valuation to smaller B-Ds … And now LPL will have a currency that has a value set by the [Nasdaq] exchange that they will be able to use to grow further,” said Langdon, a former Merrill Lynch and Raymond James Financial executive.
In addition, the IPO should raise the bar for prospective LPL advisors, says Kaplan. “The level of production in order to be accepted by LPL will be set even higher,” she noted.