LPL Financial confirmed industry speculation by announcing that it recently bought Jackson National Life-affiliate National Planning Holdings’ four broker-dealers: National Planning Corp., Invest Financial, Investment Centers of America and SII Investments.
While LPL Financial has about 14,300 advisors and $540 billion in assets, the four NPH broker-dealers have about 3,200 advisors with $120 billion of assets — putting the combined group at potentially 17,500 reps and $660 billion in assets. LPL Financial is a self-clearing and custody firm, while three NPH BDs rely on Pershing and one on Fidelity.
(Related: 5 Big IBD Deals Dwarf RIA Mergers in 2017)
“The demand for financial advice continues to grow, and the independent model is the fastest-growing part of the industry,” said LPL President and CEO Dan Arnold in a statement. “We are committed to being a leader in our core markets, so we are excited to announce our purchase of NPH, which brings us together with one of the largest U.S. independent broker-dealer networks.”
The initial purchase price was $325 million, though LPL says it could pay up to $123 million more for the four BDs in the first half of 2018, based on how much of the advisors’ revenues move onto LPL’s platform. No contingent payment will be paid, however, if less than 72% of the advisors’ production (fees and commissions revenue) onboard, “and the amount of the contingent payment increases on an interpolated basis for onboarded production in the range of 72% to 93.5%,” it explained.
Arnold and CFO Matt Audette spoke with equity analysts about the news the day after it was made public. At $325 million initially and with a possible contingency payment of up to $123 million, Arnold says the independent broker-dealer is paying “a price that is attractive to us.”
Industry observers agree. “The price seems both reasonable and tied to success in moving the financial advisors, their assets and their revenues,” said Chip Roame, head of Tiburon Strategic Advisors, in an interview. “Somewhere between $325 million and $448 million seems very reasonable. I doubt that there were many other legitimate bidders.”
William Blair analysts Chris Shutler and Andrew Nicholas said in a note: “It is hard not to like the financial implications of this deal, given [the] reasonable purchase price of about five times post-synergy EBITDA, and up to 16% EPS accretion on top of our existing 2018 estimate … .”
The NPH advisors will be moved onto LPL’s platform in “two onboarding waves” by March 30, 2018. According to LPL, that will entail costs of between $40 million and $60 million in account-transfer fees, clearing expenses, technology expenses and the like. The company also has budgeted about $100 million for forgivable loans, with three- to five-year time horizons for this “onboarding assistance.”
On the conference call, Arnold said: “Historically, we see 70% … as a solid number for transitions. We have spectrum from past deals … and 70% is a good average retention level.” The NPC and ICA reps will be moved in early December, while the Invest and SII advisors will be transferred in mid-February.
Raymond James moved some staff and operations due to Hurricane Irma, but soon returned to “normal operations” and pledged support for general relief efforts and staff needs. “I’m happy to say that our planning and exercises anticipating a variety of crisis situations paid off during Hurricanes Harvey and Irma,” said CEO Paul Reilly in a statement.
As Hurricane Irma approached Florida in September, Raymond James announced that it was relocating critical business operations out of the St. Petersburg area. Some personnel went to Memphis, Tennessee, as well as to Detroit and Denver, where the company has facilities. “We smoothly transitioned to our business continuity protocol and experienced no operational support issues during the evacuations and relocation of associates. And most importantly, we’ve heard of no injuries among our associates from the storms,” Reilly explained.
Some other steps taken by the firm, which has more than 7,000 advisors, include the following: a donation of $500,000 to recovery efforts in areas affected by Hurricane Irma; matching up to $100,000 of donations to Friends of Raymond James, which supports associates coping with hardships, by Reilly’s family and matching an additional $135,000 by the firm’s Executive Committee; and over $1 million of financial help tied to the cost of evacuation, travel and other storm-related expenses for non-management/senior advisor branch professionals and non-executive level corporate associates.
“I’m incredibly proud of the dedication and performance of our associates during this emergency,” Reilly said. “We’ve received dozens of communications from our advisors across the country, their clients and our institutional partners expressing their satisfaction and gratitude.”
Meanwhile, two Raymond James advisors helped rescue at least 75 people recently in the wake of Hurricane Harvey. Weston Keenan, an employee advisor in Austin, and Kyle Hawthorne, who recently joined the employee channel of Raymond James from Wells Fargo Advisors in Baton Rouge, Louisiana, participated in volunteer-organized relief efforts that saved the lives of those affected by flooding along the Gulf Coast.
“Weston Keenan … took his small boat and trailered it to Houston, where he and a friend rescued some 50-plus people,” according to Pat Allison, director of Raymond James & Associates’ Western Division, while Hawthorne “didn’t hesitate to help where he could.”
Working with two friends and support from their church community, Hawthorne traveled about eight hours to the Houston area with other volunteers and their 129 boats. One day, the advisor, Cody Smith, and Jeramie Anderson, an active member of the National Guard, rescued between 25 and 30 people, ages 6 to 86, some of whom had never been on a boat.
Their first effort involved saving three people who were stranded in a tree after their boat capsized. The following day, they rescued a 76-year-old woman from a flooded nursing home.
“On behalf of all the Raymond James associates and clients who have been impacted by this devastating storm, we are truly grateful for the assistance and support provided by volunteers and relief organizations from throughout the area — including several of our own employees who were able to lend a hand,” Allison said in a statement. “I am so proud of them all.”
Hawthorne is no stranger to floods, having survived one in the Baton Rouge area a year ago, when his father was rescued by volunteers. At the time, the advisor pledged to return the favor when he could. “My father, who has since passed away, needed a blood transfusion the day after the flood. With the help of the ‘Cajun Navy,’ he was taken to the hospital,” the advisor said in an interview. “From then on, I said I would pay it forward when I got the chance.”
That chance came when he saw a group of volunteers organizing a trip from Baton Rouge to Houston on Facebook and signed on to offer his support. After he returned home, Hawthorne discovered that his wife had been sending him text messages about some friends of a co-worker who needed his assistance in Houston. Though the advisor never received the messages, he did in fact help rescue these individuals.
“It was divine intervention,” he said. “We couldn’t check our phones for texts with addresses and even photos because of the hard rain, wind and the swift current. It was a white-knuckle situation.”
TD Ameritrade said Peter deSilva, who now leads Scottrade’s retail distribution work, is joining its senior executive leadership team after the two firms complete their planned merger. Tom Bradley, the current head of retail distribution for TD Ameritrade, is departing.
Bradley has spent the past 31 years at TD Ameritrade, much of it at the helm of the firm’s institutional business, building its relationships with independent registered investment advisors. He became head of TD Ameritrade’s retail business in early 2012, and Tom Nally took over as head of the RIA unit.
“It was a very difficult business decision, but it was the right one, considering the implications of the integration ahead of us, as well as the plans we have for the long-term growth of this company,” said TD Ameritrade President and CEO Tim Hockey in a statement. “What Tom has done for TD Ameritrade and, arguably, the broader wealth management industry is incredible. I’ve known him for many years, and I know he will be missed. We are grateful for his service and wish him the very best.”
Now leading Scottrade’s retail business, deSilva has more than 30 years of financial services experience. He joined Scottrade in February 2016 and has worked with company founder Rodger Riney.
Meanwhile, IBD Commonwealth Financial Network says it recently upgraded its client portal so investors can view all their accounts in one place. The enhancement of the account aggregation tool for Investor360° means information about investments held at and beyond Commonwealth are centralized. The broker-dealer, which has about 1,700 affiliated independent advisors, worked with Quovo on the project.
“Clients want to see their complete financial life in one place,” said Darren Tedesco, managing principal of innovation and strategy at Commonwealth, in a statement. “Investor360° provides that information — updated daily — for both advisor-managed and held-away assets, along with performance data, a document vault and paperless statements, and secured messaging via the advisor’s website or smartphone app.”
“When Commonwealth first rolled out account aggregation in 2007 to advisors and their clients, we knew that the future of planning would require advisors to know their clients’ holistic financial situation,” Tedesco added. “With our migration to Quovo, we are confident we’ve found the most frictionless implementation of aggregation available.”
— Read Commonwealth Financial Boosts Account Aggregation on ThinkAdvisor.