This year, LPL Financial aims to build on its recruiting success in 2009 after “experiencing record levels of recruiting growth,” said Bill Morrissey, executive vice president of business development for LPL Financial, in an interview.
“We added 750 net new advisor relationships for the full year,” he said, giving LPL Financial, an independent broker-dealer, a total of 11,950 affiliated financial advisors as of December 31, 2009.
The ’09 growth figure excludes attrition related to the three affiliated broker-dealers acquired from Pacific Life in 2007, Mutual Service Corporation, Waterstone Financial Group and Associated Financial Group.
LPL Financial follows a national recruiting strategy that includes all major advisor channels. Historically, about one-third of its recruiting prospects come from the wirehouses, one-third from independents and other broker-dealers, 20 percent from insurance firms, and the remainder from banks and other financial institutions, according to Morrissey.
What type of advisor did LPL Financial attract in 2009? “This industry is cyclical. In 2009, the churn in the marketplace was dominated by small wirehouse advisors looking for a home,” Morrissey said. “We were fortunate to recruit a disproportionate share of the wirehouse advisors looking to go independent.”
The movement of these advisors was very strong in the first half of last year, he explains, and then it slowed down in the second half. “This is when the big firms began awarding retention bonuses to their advisors, and they suspended some of the more draconian changes they had made to compensation programs for smaller advisors,” noted Morrissey.
The recent weakening in the movement of wirehouse advisors means that LPL Finanicial’s recruiting prospects are now increasingly coming from independent and regional broker-dealers, and this includes advisors with robust businesses.
“Last year, brokers — particularly — in the wirehouse space felt a need to change broker-dealers and did so in the first and second quarter,” explained Morrissey. “At the same time, many larger producing advisors and those that were either already independent or were at a regional firm focused on their clients. With the market’s recovery, these advisors are examining their options.”
In the past year or so, the majority of LPL Financial’s recruited advisors have wanted to launch their own business, the broker-dealer executive says. However, “We’ve seen an increase in the number of advisors that did not want to go alone, so they were recruited into existing branches. This trend is continuing into 2010.”
LPL Financial has 4,000 branches across the country. “Recruited advisors are able to meet with several branch managers to find a good fit,” said Morrissey.
Just as LPL Financial recruits across various advisor channels, it also gives prospective advisors a choice of channels to join if they come over. “The registered rep, hybrid and the RIA offerings all experienced strong growth in recruiting last year,” said Morrissey.
Advisors coming out of an employee model may join the registered-rep model on day one, since that is what they’re most familiar with, he explains, and then they eventually may evolve their business model into one of LPL Financial’s other options. “As an advisor’s business model evolves … their client account numbers move with them, and other elements do not change.”
While some wirehouse executives are celebrating the slowdown in the movement of “breakaway brokers,” managers at independent broker-dealers like LPL Financial remain confident about recruiting from the major Wall Street firm in both the short- and long-term.