Seven months ago, at its annual conference, LPL announced its intention to launch a robo-advisory service, starting with a pilot program. Now the firm’s head of business development tells ThinkAdvisor that LPL expects to add the service this year.
“We anticipate rolling our own robo-advisor platform later in 2016,” Bill Morrissey told ThinkAdvisor today in New York. “It’s going to be different than what you’ve seen offered by other providers. We have no interest in having a B-to-C platform … going directly to investors. … It’s simply a way for us to help augment what our advisors are already doing.”
It’s also a way for LPL advisors to work with smaller investors —“emerging savers and the next generation of current clients,” including millennials, said Morrissey. “Anyone could qualify but typically an emerging saver has between $5,000 and $50,000 in assets.”
Morrissey expects the robo-advisor product will be especially appropriate for millennials who tend to like a “front-end dashboard” that gives them access to their financial information. He couldn’t say exactly when LPL, the largest independent broker-dealer in the U.S., will launch its robo-advisory product this year.
While many advisors are working to attract more younger clients, others are getting ready to retire because of their age – 43% are over age 55, according to Cerulli Associates – or at least join with another firm because of deteriorating margins and a complicated regulatory environment that is likely to get even tougher once the Department of Labor issues a finalized fiduciary rule, said Morrissey.
That “flight to quality” is helping LPL recruit advisors, said Morrissey, who oversees the firm’s recruitment efforts. It’s helping LPL attract a growing number of advisors who want to sell their firm but at the same time continue to work in the industry, he said.
To that end, LPL has been partnering with advisors who want to go independent or remain independent and help them find an acquirer for their practice at the same time. “We recruit and we help facilitate a succession plan,” said Morrissey. Such transactions usually involve an “earn-out period” during which time the seller brings existing clients to the new firm and works at the firm there for a period of time, earning a deferred portion of the sale price. The seller becomes a partner in the LPL advisor firm or even its employee.
Morrissey said he expects to see more consolidation in the industry at the advisor level and at the firm level, including more acquisitions by LPL. In 2012 LPL acquired Fortigent, an advisory firm serving high-net-worth clients, and in 2012 it acquired National Retirement Partners, which focused on retirement plans.
He said LPL will continue to cast a wide net to attract advisors from wirehouses, independent firms, insurance firms and banks and other financial institutions. He expects that LPL’s hybrid platform will remain the “destination of choice” for many advisors joining the firm. That platform accounted for about 50% of the advisors that joined LPL last year, said Morrissey.
As of the end of the fourth quarter of 2015, LPL had 14,054 advisors, which was 18 more than it had at the end of 2014. Advisory assets totaled $187.2 million, down 3.6% from the fourth quarter a year before. In January, LPL reported that advisory assets fell again, to $180.4 million. Brokerage assets totaled $278.3 million, down 3.5% from December. Total assets were $458.7 million, down from $475.6 million at the end of 2015. Earnings, after adjustments, were $36 million, or $0.37 per share, down 32% from the year-ago quarter and below analysts’ forecasts for $0.51 a share.
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