LPL Financial announced plans to add an employee model and boost what it will spend on technology in 2019 to $150 million to support this and other developments. The aim of the effort is “to create a new unique employee model for independent-minded advisors who do not want to manage every aspect of a business,” according to an investor presentation made by CEO & President Dan Arnold.
The independent broker-dealer sees this strategy and its related IT moves as a good way to “attract advisors who have more than a 75% mix of advisory business.” According to LPL, traditional employee advisors work with about $11 trillion in client assets, while advisory-oriented independent models encompass $5 trillion and traditional independent models $3 trillion.
LPL’s new 2019 tech budget is up from the estimated $135 million figure it shared several months ago. It represents a 25% increase over last year’s tech budget of $120 million — ahead of the 20% compound annual growth rate the firm says it has been on since 2015, when it had a $60 million tech budget.
Some areas for increased tech spending include adding capabilities to its advisory platform, so advisors can serve clients in more segments of the wealth management market; boosting the service experience of ClientWorks; and adding capabilities and organization to make ClientWorks Connected an “end-to-end solution.”
Ben Edwards’ News
St. Louis-based wealth firm Benjamin F. Edwards says it has opened a corporate RIA:
Edwards Wealth Management. In a nod to the growing RIA segment of the wealth business and hockey great Wayne Gretzky’s saying, “Skate to where the puck is going, not where it has been,” the firm debuted its new business with the arrival of two former pro-hockey players turned advisors: Blake and Connor Dunlop of Dunlop Investment Group, a father-son duo who manage $230 million in client assets.
“As our storied brand continues to grow and thrive, Edwards Wealth Management will be a meaningful complement to our firm’s mission of working with advisors and their clients to achieve their financial goals. We are a private company that can offer entrepreneurial advisory firms the stable brand, strong support and sound values necessary to grow their business,” said Tad Edwards, chairman, CEO and president of Benjamin F. Edwards.
The RIA formation is taking place about 10 years since Benjamin F. Edwards’ broker-dealer opened its first branch office. The firm now has $25 billion in assets, 67 offices in 26 states and about 500 employees. It is led by Tad Edwards, a former president of A.G. Edwards, which was acquired by Wachovia and later Wells Fargo; he also is the great-great-grandson of A.G. Edwards’ founder and the son of Benjamin F. Edwards III, A.G. Edwards’ longtime CEO.
(A.G. Edwards was started in 1887 by Albert Gallatin Edwards, who served as assistant secretary of the Treasury for five presidents, including Abraham Lincoln.)
As for the Dunlops, Blake played for the St. Louis Blues, Minnesota North Stars, Philadelphia Flyers and Detroit Red Wings. Connor, who went to the University of Notre Dame on hockey scholarship, played professionally in the U.S and overseas.
“My father and I initially joined the Benjamin F. Edwards broker-dealer almost 10 years ago … ,” Connor said. “Today, we are extremely honored to continue this partnership as the first advisors to affiliate with Edwards Wealth Management.”
Waddell & Reed Plans
Waddell & Reed is looking to move its headquarters to Missouri from Overland Park, Kansas, and expects to share an update on these plans by year-end.
“Over the past two years we have taken very deliberate and necessary steps to strengthen the foundation of our business,” according to CEO and Chief Investment Officer Phil Sanders. If the financial firm — which includes a broker-dealer — chooses to move to St. Louis, it would join several large rivals now based there, like Wells Fargo Advisors, Edward Jones and Stifel.
“As we look to the future, we must have a workplace environment that meets the needs of the workforce of tomorrow, enabling us to attract and retain top talent,” Sanders added. Waddell & Reed’s earnings fell 31% in the first quarter from the year-ago period to $32.1 million, while revenues dropped 13% to $259.4 million. For the full year 2018, profits grew 30% to $183.6 million; sales were flat at $1.16 billion.
In terms of its BD, Waddell & Reed has about $57 billion in assets under advisement.
Its affiliated independent advisors and associates number 1,367 as of March 31, when it did not give a specific figure for its FA headcount. In the fourth quarter of 2018, the firm said it had 1,060 advisors and 343 associates, for a total of 1,403 advisors and associates. A year earlier, the BD had 1,367 reps and 265 associates, or 1,632 in total.
BofA Merrill Robo Program
Bank of America recently added human advisors to its robo-advice platform, creating a hybrid offering aimed at the mass-affluent market. The platform, Merrill Guided Investing, now offers an option to work with a financial solutions advisor (or FSA), along with an improved digital platform.
“This new high-tech and high-touch offering is designed to serve clients who want both a ‘do it yourself’ experience together with help from an advisor,” according to Aron Levine, head of Consumer Banking and Investments for Bank of America.
For self-directed investors, the bank offers the self-directed Merrill Edge platform (since 2010). Clients who opt not to use an advisor still can use Merrill Guided Investing, launched in 2017, which includes some non-digital portfolio management services. The two programs had client assets of about $211 billion as of March 31.
Investors working in the new program with an FSA can discuss their long-term financial goals, develop a plan and track progress toward those goals using 25 investment strategies vs. 15 strategies with Merrill Guided Investing.
The new program has a $20,000 minimum and an annual fee of 0.85% vs. a $5,000 minimum and yearly fee of 0.45% with Merrill Guided Investing.
Merrill has about 2,700 FSAs and plans to add another 300 by year-end.
The bank’s introduction of a hybrid digital-advice model has been in the works for some time, says Gavin Spitzner, a wealth management and technology consultant. “It was fully expected given the success we’ve seen of hybrid models (vs. pure robos) across the industry.”
Personal Capital charges about 0.89% for its model. And BofA “sees that it can charge more for the hybrid” robo, according to the head of Wealth Consulting Partners.
The Merrill news broke around the same time that Vanguard shared more information on its plans to give all financial advisors the ability to use its investment modeling and related technology.
“We’re continually looking for new ways to enable advisors and expand our existing suite of services to our financial advisor clients,” the company said in a statement. “We often receive requests for access to methodologies that have been perfected in our Personal Advisor Services offering, and we’re in the beginning stages of building out those capabilities in order to help advisors improve end investor outcomes.”
PAS has about $130 billion in assets out of the $5.4 trillion in total assets that Vanguard manages. According to Spitzner, it’s unclear, though, if Vanguard’s move “is part of a push into [the] RIA custody space or more of a tech/asset management pure play.”
Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at firstname.lastname@example.org.