Industry Spotlight > Broker Dealers

LPL, Country’s Largest IBD, Grapples With Its Own Success

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As LPL Financial prepares to announce fourth-quarter 2012 earnings Wednesday, the country’s largest independent broker-dealer is grappling with the consequences of its success—including rapid growth, operational complexities and hiring decisions that favor technology and research.

“LPL isRobert Moore, LPL Financial president and COO on a journey. We’ve been the leader in the IBD space, but being the leader in 1995 was a very different experience from what it is now in 2013,” Robert Moore (left), LPL’s president and chief operating officer, told a crowd of about 200 affiliated advisors at the firm’s alternative investments symposium in New York on Thursday.

Moore said a new level of competition and complexity requires LPL Financial (LPLA) to help registered reps and financial advisors understand issues such as:

  • What regulation is coming out of Washington
  • How to use alternative investments in client portfolios
  • Where changes will occur on LPL’s platform
  • Why advisors need to embrace social media and branding

LPL currently numbers 14,000 affiliates, and while Moore said there are no restraints on how many more can join, he also spent some time assuring attendees at the alts symposium that LPL “will not sacrifice” the values it has built over time.

Plans for 150 New Hires

Moore fielded questions during his Q&A that involved frustrations over increased regulatory paperwork, conflicting opinions from compliance officers and operational delays. He acknowledged that LPL is looking to hire new talent in those areas as well as finding ways to “do a better job of harnessing content.”

In a separate interview after his presentation, Moore said LPL plans to hire 150 new staff members, within “thematic areas where we’re hiring human capital.” He pointed to LPL’s December hiring of ex-Dell executive Victor Fetter as its chief information officer. In addition to serving as CIO, Fetter will be managing director of the company’s business technology services unit—called Tech Town East, in Charlotte, N.C.—and serve on LPL’s Executive Management Committee.

Sixty positions are now open in Charlotte for tech talent, while 90 positions are available in areas such as research, digital marketing and human resources.

Moore’s comments at the symposium conflict with an Investment News story, also reported on Thursday, that LPL plans job cuts in the second half of 2013, with a focus on outsourcing back-office ops performed by employees who don’t deal directly with reps and advisors. “It is unclear how many of the company’s 2,900 employees face losing their jobs,” the story reported, citing a letter to reps earlier in January from LPL CEO Mark Casady.

Company spokeswoman Betsy Weinberger responded by saying that LPL’s position of industry leadership and serving advisors “requires that we continually refine our own business practices.”

Smaller IBDs Wilt Under LPL Shadow

As LPL grapples with growth, the larger IBD community is reeling from a report that Cerulli Associates discussed Tuesday at the FSI One Voice Conference. Cerulli reported that while IBDs such as LPL and Raymond James have the base of scale and can make the necessary investments in packaged platforms to keep advisors at their firms, smaller broker-dealers are getting crushed.

“From a general market stance, we are seeing IBDs lose headcount and market share to dually registered reps and RIAs,” said Tyler Cloherty, Cerulli’s associate director, in San Diego on Tuesday.

However, LPL officials on Thursday were quick to point to Cogent Research’s October report, “Advisor Channel Migration Trends, 2012,” which finds that LPL along with Raymond James “earn the highest consideration overall and are well liked by both advisors currently working for the firms, as well as current prospective advisors.”

The Cogent survey of about 380 advisors likely to move to a new firm in the next two years found that 43% of potential breakaway advisors gave LPL their highest consideration as the firm of choice for wirehouse advisors currently dissatisfied with their existing firms.

Yet LPL is selective in choosing among breakaway candidates.

“Growth for growth’s sake is not an aspiration of ours,” Moore said Thursday. “In any given year for every two advisors who wish to join, only one is asked to join.”

Check out where LPL and other broker-dealers ranked in the 12 Best & Worst Broker-Dealers: Q3 Earnings at AdvisorOne.