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LPL Rolls Out Employee Advisor Model

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LPL Financial launched its employee advisor channel on Wednesday. The news comes about 15 months after CEO & President Dan Arnold described plans for the independent broker-dealer’s affiliation model during an investor presentation.

It also takes place “a year and four days after we closed the Allen & Company acquisition, which helped facilitate this move,” said Rich Steinmeier, head of business development, in an interview. 

LPL says that it offers advisors looking to work as employees payouts of 50% to 70% of their revenues and charges no platform, transaction or administrative fees. 

More Details

While some broker-dealers pay little to nothing for “small households,” meaning those with asset levels under $250,000, LPL will give employee advisors payouts for these accounts, according to the executive. 

In some cases, Steinmeier says, these smaller households can make up 10% to 20% of an advisor’s production and about 20% to 35% of their client base.  

Also, the firm plans to give employee advisors access to a network of some 1,500 offices across the country, where they can work on an “as needed” basis. Currently, LPL has employee offices in Florida and Boston. 

As for the book of business, employee advisors will “own it and get to sell it,” he explained. Plus, sales of their practices can be treated as capital gains and not ordinary income under LPL’s structure for the model. 

“This is huge as advisors think about transitioning [into retirement]. Often, their business is their single biggest asset,” Steinmeier said. 

In order to add an employee channel, the IBD had to add mandatory training programs and develop the payout structure and real estate options it wanted to offer W-2 advisors. “And we wanted the advisors to be able to make pretax contributions for their business,” he explained. 

“This [model] should resonate with those advisors that have about $500,000 and up” in yearly fees and commissions, the executive said. “And we could see some larger advisors moving over to us,” including those from its own independent channel. 

Needs of Pre-Retirees

One advisor that LPL has been speaking with about the channel has her eyes on retirement and “no longer wants to … pay staff and take out a 10-year lease,” for instance, Steinmeier said. “She wants to take some risks off the table.”

In other words, those advisors in late stages of their careers could view the employee model as a way to “back off from some responsibilities,” he added.

LPL said it ended the second quarter with 16,973 independent advisors, up 812 — or about 5% — from the year-ago quarter, and up 251 — or about 1% — from the prior period.

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