IBDs & Wirehouses Roll Out New Programs, Tech

LPL Financial: As the advice industry struggles to get more advisors to embrace succession planning, LPL has introduced Assurance Plan, a program that helps “protect the value of an advisor’s business in the event of an unplanned exit” due to death or permanent disability.

The plan also aims to prevent an advisor’s clients and family members “from being vulnerable to financial disruption,” according to the independent broker-dealer. Roughly 70% of indie advisors in the U.S. lack a succession plan.

Assurance Plan offers advisors a minimum purchase price for a practice, based on a multiple of the advisor’s recurring revenue (or fees and commissions). Also, LPL handles the sale of the advisor’s business to another affiliated advisor with no commission, “providing any additional proceeds above the guaranteed amount to the advisor or their family,” the IBD says.

“Advisors invest so much into serving their clients and building a business they can be proud of. But when it comes to protecting the value of their own greatest investment, there has been a lack of options,” Jeremy Holly, head of Advisor Financial Solutions, explained in a statement.

“With this new solution, advisors have a safety net in place, which gives them a layer of assurance as they explore the ideal plan they want in place to transition the care of their clients and monetize their practice when they are ready,” Holly added.

LPL Financial’s tally of affiliated advisors was 16,763 as of March 31, up 574 from a year ago and 299 from the prior quarter.

“It’s always been challenging for financial advisors to devote time and attention to succession planning,” according to Tim Wyman, CFP, managing partner at the Center for Financial Planning.

“But succession planning is critical, especially today … ,” Wyman explained in a recent blog on ThinkAdvisor.com. Sometimes “the unexpected happens, and it can be disastrous without a succession plan in place. Market risk is a given in our business, but we should all be thinking about personal health and planning for any eventuality.”

Raymond James

The St. Petersburg, Florida-based IBD has launched the Pride Financial Advisors Network to support advisors, clients and other business partners identifying or working with members of the LGBTQ+ community.

The group’s official debut comes about a year after the firm started introducing plans for the network at its advisor conferences.

“Our firm is about people. All people,” Scott Curtis, president of Raymond James’ Private Client Group, said in a statement. “Cultivating an inclusive environment where everyone’s perspectives and contributions are welcomed and valued is an extension of Raymond James’ culture.”

The Pride network, along with networks for black advisors, for female advisors and for associates, is “integral in our mission to further diversity and inclusion within Raymond James and our profession,” Curtis added.

The LGBTQ+ network’s formation has been led by advisors Tom Hake and Marta Shen, as well as members of the associated advisory council.

“A global pandemic and resulting travel restrictions may have postponed our inaugural in-person Business of Pride Symposium, but it has certainly not slowed our plans and efforts,” Shen said in a statement.

Other broker-dealers, such as LPL Financial, also have formed Pride networks. “The Pride Financial Advisors Network has shown incredible dedication, enthusiasm and heart in their support of LGBTQ+ advisors, their teams and clients,” said Renée Baker, head of Raymond James’ Private Client Group Advisor Inclusion Networks, in a statement.

Merrill Lynch

Some three months after it lowered some performance measures affecting compensation for its Thundering Herd, the Bank of America-owned wirehouse said in early June that it would further ease sales targets due to the COVID-19 pandemic.

The changes should lower the number of Merrill advisors likely to see their pay trimmed by about 1,000, according to a Wall Street Journal report that cited a senior Merrill executive.

As of March 31, the advisor headcount was 17,646, up 111 from a year ago and 188 from the prior quarter. Average 12-month fees and commissions per advisor were $1.14 million.

“We recognize that some practices have been impacted,” said Andy Sieg, head of Merrill Lynch Wealth Management, in a note to advisors. “In response, we’re implementing modifications to limit your downside while preserving the upside.”

For instance, advisors need to add one new household credit by June 30 to prevent their pay from being trimmed by 1%; earlier in the year, this figure was two. Over the full year, this target now stands at three credits vs. four earlier in 2020.

In 2019, the target was six household credits, which were awarded as follows: For client assets of $250,000 to $2.5 million, 1 credit; $2.5 million to $10 million, 2 credits; $10 million to $25 million, 3 credits; and over $25 million, 4 credits.

Advisors hit with a “growth grid” reduction in June can choose to push this pay cut back until Dec. 31, 2020. “This change allows you to avoid any near-term cash flow reduction and offers the opportunity to ‘course correct’ through the remainder of the year,” Sieg explained.

In March, Merrill Lynch pushed back its requirement that advisors have at least 30% of client households in three different financial programs to qualify for the enhanced team grid incentive program from July 1, 2020, to Jan. 1, 2021.

According to Sieg, Merrill’s 2020 growth grid “retains all upside awards originally communicated in which an advisor may achieve up to a +3% cash grid award for the achievement of stretch hurdles in gained households and net flows.”

The firm says its advisors continue to add about 1,000 new client households per week.

Also in June, Merrill Lynch said its advisors and client associates are getting new workstations. The Client Workstations, or CEWs, can be used to manage multiple clients at the same time, the firm says, adding that the platform has improved search and navigation abilities, along with other features to help remote and mobile users.

Also, the new Merrill technology includes Book 360, a dashboard with details on each advisor’s full practice of clients, metrics and priority items. The development comes about 18 months after rival Morgan Stanley introduced WealthDesk, its new advisor platform.

“In this environment, any enhancements that allow advisors to gain additional time to serve clients is extremely valuable,” according to a Merrill statement. The CEW platform has been in the works for the past 18 months. It replaces the Wealth Management Workstation (WMW), which Merrill launched more than a decade ago, and can be accessed via a desktop, laptop or tablet issued by the firm.

“While investments have been made in the platform and applications over this period, the workflow, core technology design and hardware requirement had remained largely unchanged,” the firm explained.

Advisors and associates started virtual training for the new technology in April and May. Some 5,500 Merrill Lynch employees used them in a pilot project late last year.

Merrill did not put a price tag on the workstations but said they were part of Bank of America’s $10 billion tech budget, which includes about $3 billion for new projects that aim to improve client experience.

Total client assets for Merrill Lynch were $2.2 trillion as of March 31. At the same time, the average 12-month fees and commissions per advisor were $1.14 million, compared with $1.04 million in Q1’19 and $1.1 million in Q4’19.

Morgan Stanley

This rival wirehouse says it plans to introduce an advisory 529 program later this year based on the goals-based approach of its Wealth Management unit, which has some 15,400 financial advisors.

Wealth clients who invest in the Morgan Stanley National Advisory 529 Plan “will not pay brokerage charges or commissions on their portfolios, but rather pay an advisory fee leveraging household pricing,” according to the wirehouse.

“This allows for differentiation from our peers. No one else has done this to date,” said David Rosen, head of Traditional Investment Products, Morgan Stanley Investment Solutions, in an interview.

“The industry as a whole is moving to goals-based planning, and this [529 product] ties in perfectly with that,” Rosen explained.

The North Carolina State Education Assistance Authority will serve as the plan sponsor for this education savings program.

“There’s been increased legislation around 529 plans in terms of K-12 education, paying back student loans and other changes governing them,” said Rosen, leading to “growing interest” in these savings vehicles.

For the new 529 program, wealth clients can choose between 11 different model portfolios that invest in Morgan Stanley Pathway funds, which have outside investment managers.

The Pathway Large Cap Equity Fund, for instance, has a net annual operating expense of 48 basis points. Its prospectus also says the associated annual advisory program fees can be as high as 2%.

This yearly charge, though,“is determined ultimately by advisors and their clients” as part of the wealth unit’s “overall relationship-based” (or fee-based) pricing, and many clients pay less than 1% a year, according to Rosen.

Wealth clients seeking 529 plans on Morgan Stanley’s brokerage platform, where commissions are charged, have some 20 plan options, he adds.

As of March 31, Morgan Stanley has 15,432 advisors. Their average yearly fees and commissions were $1.05 million, and average assets per advisor were $155 million.

Total assets for the wealth unit in the first quarter were $2.4 trillion, with fee-based assets at roughly $1.13 trillion.

Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at [email protected].

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