Consolidation among financial advisory firms will not only continue in the coming years but also accelerate, according to LPL executives at the firm’s Focus 2015 conference in Boston. But as that industry trend continues, reducing the number of firms, LPL itself expects to recruit more advisors, especially in its RIA hybrid channel, its fastest growing.
The year 2016 will be one “of incredible growth” for the firm’s evolving RIA platform, said Matt Enyedi, executive vice president of LPL’s RIA and HNW Solutions.
LPL added 77 new hybrid RIAs to its RIA platform in the quarter ended March 30, boosting the total to 342 firms. That’s 29% more than the comparable quarter a year ago, and assets grew 51% to almost $105 billion — a “big leap” since LPL first established the channel in 2008, says Enyedi. (LPL’s next earnings report will be released Aug. 5 before the market opens.) Given that each firm has an average 10 advisors, according to Enyedi, that represents 3,420 advisors, or almost one-quarter of the firm’s 14,000-plus advisors.
“It makes sense to be a hybrid RIA,” says Enyedi. Hybrid RIAs, which combine fee-only service with brokerage, get access to LPL’s brokerage services and other resources while operating their own fee-only advisory, explains Enyedi. This structure is especially attractive to breakaway brokers because the hybrid model “helps them make the move without too dramatic a change in their business,” says Enyedi.
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Another potential benefit of the hybrid RIA: they’re well-positioned if Labor Department rules requiring brokers to act in the best interest of their clients take effect, replacing the lower suitability standard. Hybrid RIAs are already operating as fiduciaries, says Envedi.
Hybrid RIAs, as well as independent advisors affiliated with LPL’s own corporate RIA, will also have access to LPL’s planned robo-advisor platform, which will soon begin a pilot program. Access to this platform and LPL’s support services including performance reporting, trade order management and portfolio execution free up advisors to spend more time doing the things that matter most to their clients, namely financial planning, estate planning and investing, says Enyedi.