While LPL Financial has been grooming itself to go public for a long time, the move announced June 4, is bound to bring changes, both to its advisors and to its recruiting efforts. What might those be?
Jonathan Henschen of Henschen & Associates in Marine on St. Croix, Minnesota, said it might lead to higher expenses and lower payouts. “In my view,” he explains, “publicly traded broker/dealers are trying to get upwards of 15% out of the B/D to drive the stock, whereas privately owned B/Ds, if they can run the firm, pay advisors, and come out 3% to 4% ahead, are content. Do the math.”
Publicly traded companies, he says, also have more miscellaneous expenses, and while they can offset some of those expenses because of economies of scale, “they have higher expenses than many B/Ds I work with.”
Mitch Vigeveno, of Turning Point, Inc., in Safety Harbor, Florida, points out that such might not be the case with LPL. While he says that running an independent B/D is “fundamentally a small-margin business … they do as a self-clearing organization pick up all the ancillary revenues that all the others have to give to Pershing and [others]. They make money on debit accounts, margin, and money market accounts.”
Two possible lures in recruiting, says Vigeveno, may be the value of stock options and the fact that LPL’s goal of paying down debt “may put them in a financial position to do things that some of the smaller independents can’t do.”