Not all of the LPL advisors roaming the halls of the San Diego Convention Center, where the firm is holding its three-day annual conference, are reporting to and seeking services from the same back offices in Boston, San Diego or Charlotte.
In fact, a large number are dealing with branches — OSJs, or offices of supervisory jurisdiction — that function under their own RIA, which may be based somewhere else entirely, such as Solon, Ohio.
That is the location of a network of advisors doing business as Stratos Wealth Management, and the more than 150 LPL advisors who are Stratos partners are getting a smaller payout than advisors serving under LPL’s corporate RIA. So the question is, why are they voluntarily taking a pay cut?
“We plug in resources and support mechanisms. Where the broker-dealer stops, we step in,” says Jeffrey Concepcion (left), Stratos’ president and CEO, in an interview with ThinkAdvisor.
“We create old-line partnerships like accounting and law firms have,” adds founding partner Charles Shapiro, who also sat in for the interview. That means not just the camaraderie of sharing ideas and expertise, but also a sharing of profits.
“We are structured as a partnership,” Shapiro says. “There’s an equity plan where we’re distributing 25% of the firm to the advisors. It definitely goes to strengthening the relationship.”
Concepcion adds that Stratos distributes 60% to 70% of net income to shareholders, based on members’ profit contributions, each year.
While the shared equity creates a sort of economic glue binding the partners, the two Stratos executives point to their service offering as the key added value.
Shapiro says Stratos does more to support advisors’ transition, maintenance and growth than is commonly found in the industry.
For example, he says, “processing transfer paperwork is not supported well in the world of independence. We have a team to prepare and process that business so that a transition that might take six months we bring down to three months.”
Once the advisor is on board, Stratos’ team not only helps with negotiating leases, telecom and the like, but has in place a chief investment officer, head of financial planning, IT, marketing, supervision and compliance.
“All of this infrastructure is there to help them with the support of their business, which is especially valuable for formerly wirehouse advisors used to having all that support,” Shapiro (left) says.
But again, getting back to the financial aspect of whether a paycut from LPL’s standard payout can be justified, it is in the area of business growth that Stratos believes its advisor partners most benefit.
“We’ve been given statistics from LPL that … Stratos advisors on board 24 months have grown at 5 times the rate of a normal advisor going independent,” Shapiro says.
Part of this may be the ability to delegate the “noise” of being independent to Stratos’ staff, but Concepcion illustrates how his executive team members roll up their sleeves to help their advisors secure new business.