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- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
LPL Financial and Advantage Financial Group announced Thursday that AFG’s equity partnership of 63 independent advisors with $2 billion in client assets will now affiliate with LPL. Joe Russo, chairman of the Financial Services Institute (FSI), is AFG’s founder and will continue to lead the firm.
Before its transition to the LPL Financial broker-dealer platform, AFG was affiliated with the broker-dealer National Planning Corp., which is owned by Jackson National. AFG was NPC’s primary office of supervisory jurisdiction (OSJ), with a total of 54 branch offices. The 63 AFG-affiliated indie advisors are now transitioning their securities registrations from NPC to LPL Financial, bringing client assets of approximately $2 billion.
In an interview with AdvisorOne, Russo (left) described the move to LPL as a two-year-long process that AFG undertook as it created a philosophy reflecting “the strong currents that are sweeping through the industry.”
The FSI chairman said AFG, which is based in Cedar Rapids, Iowa, has evolved a structure akin to a law or accounting firm that abides by fiduciary obligations. In its search for a partner, AFG had hired a consultant, Gladstone, which introduced the two firms.
“We had conversations with what we felt were every player in the industry,” Russo said. “In the final analysis, it was very obvious that LPL’s size and capabilities made for a very compelling strategic partner. They can accommodate our hybrid practices as well as our subsidiary, the RIA firm Advantage Investment Management.”
For San Diego and Boston-based LPL Financial, this move represents a significant step in its efforts to become the go-to provider of broker-dealer and custodial services for producer groups nationwide, said Bill Morrissey, LPL’s executive vice president of business development.
“AFG is a large, sophisticated and successful group of advisors,” said Morrissey (right). “They started this process two years ago as they evolved as an entity. That analysis led them to a broker-dealer change and a custodial change, and they were looking for a strategic partner that had the right infrastructure and resources to help them in that evolution.”
Under the terms of the deal, the LPL Financial RIA Platform will become the primary custodian for Advantage Investment Management, or AIM, which will continue to provide fee-based solutions to the advisor members of the AFG producer group.
AFG provides professional services to its independent financial advisor members in the Midwest, Great Lakes and Southeast regions. Structured as a professional partnership, the firm is owned by its advisor members, who share an equity interest in AFG as a separately managed professional services firm. AFG, which has generated trailing 12 month revenues of $11.2 million, will affiliate with LPL under its current producer group structure and continue to grow under its own existing brands and organization.
The professional partnership model is an effective structure for intergenerational succession planning, Russo said. Used more commonly in the 1960s and 1970s by firms such as Merrill Lynch, the structure allows retiring partners to pass on their equity stakes to younger partners, he said.
Read about LPL’s addition of 223 advisors in Q2 at AdvisorOne.