LPL Financial Exec Rich Steinmeier LPL Financial’s Rich Steinmeier, head of Business Development

LPL Financial is going all out to retain Waddell & Reed’s 921 financial advisors as part of its $300 million purchase of the wealth business from Macquarie Group, which it announced Dec. 2. 

The deal, according to several recruiters and other industry sources, is equal to between 30 to 50% of an advisor’s prior year fees & commissions (or production) and was reported last week by Investment News.

When asked if the retention package being offered to Waddell & Reed’s advisors is generous, recruiter Casey Knight of ESP Financial Search said: “It’s almost unprecedented. It’s a more than generous offer that should yield better results than LPL likely expects.” 

What makes it so robust, according to the managing director, is that it’s above the historic average for acquisitions in the independent-advisor arena “and even in the full-service space.” 

According to Casey, retention deals “were not this big with Morgan Stanley and Smith Barney, for instance, or with Bank of America and Merrill Lynch.”

The retention packages also “likely were smaller” than those tied to other acquisitions, such as Raymond James’ purchase of Morgan Keegan, Baird’s addition of Hilliard Lyons, and Advisor Group’s deal to buy the Ladenburg Thalmann broker-dealers. 

As for the top level, “50% for any advisor is a really big number. At the bottom level, 30%, some lower producers probably think in general that they might not not do well [elsewhere] and need to transition [to LPL]. … 30% is already a good number,” Casey explained in an interview.

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Other recruiters agree in their assessment of LPL’s offer to the W&R registered representatives.

“They are being very competitive in what they’re offering, which is like those they offer to advisors coming from another firm, with no discounting related to the acquisition of W&R,” said Jodie Papike, president of Cross-Search, an advisor and executive placement firm.

“It’s very generous and attractive. They’ve done a good job at rolling a competitive offer to folks,” Papike explained, adding that it’s similar and perhaps “a bit” higher than that offered to National Planning Holdings’ advisors acquired from Jackson National in 2017.

How will the retention of the W&R advisor go? “I predict more success on this transaction that with the Jackson National one, because the offering at LPL compared to that of Waddell & Reed looks pretty attractive — in terms of payouts, technology … and the platform,” she said. 

In general, the W&R advisors should be thinking, “It’s a better platform, I’m getting good upfront money, and I have the incentive to stay –  because the paperwork to transition will be less than if I was going to another broker-dealer,” according to Papike.

According to LPL’s head of business development, Rich Steinmeier: “What we disclosed with this transaction is that our financial model and our financial expectations are built on 70% retention of assets. We would expect to be hopeful that we would outperform that,” he said in an interview. 

Another View 

Recruiter Jon Henschen of Henschen & Associates is optimistic about LPL’s plans to keep the W&R advisors once the acquisition from Macquarie Group is done: “Overall, the LPL’s retention package is very generous. Many acquired advisors were not offered as much in the past … ,” he said. 

For the W&R reps, “This is like signing on to a new broker-dealer and getting a full forgivable note. It’s really as if they’re changing BDs, since the amount is similar,” the recruiter explained. 

Advisors getting the high end offer (at or near 50% of last year’s revenues) are likely those with a strong level of advisory, or fee-based, business and active in other profitable areas vs. those at the lower end (at or near 30%) who have more sales of “packaged products,” according to Henschen. 

LPL should “have a low number of exits on the part of the  Waddell & Reed advisors given the improvements these advisors are likely to have [at LPL] and this generous retention bonus on top of that,” he said.

Steinmeier says the two groups had had “really positive discussions,” and he’s upbeat about it for several reasons.

“The continuity that we’re providing and the setting up of a Midwest service and operations center that will largely be staffed by Waddell & Reed employees, as well as explicitly keeping connectivity to the Ivy Fund portfolio managers through Macquarie, and then having a [client transition] event that really is going to be largely free of repapering for clients [via a negative consent process], it’s compelling offering for advisors,” he explained. 

In other words, “When you put that all together, we are bullish that we’ll do well,” the LPL executive added. “I can’t prognosticate, and there are competitors out there that are engaged [with the W&D reps]. So we’re working hard. We have a very organized approach, and we’re educating these advisors and hope to earn their business.” 

See: LPL Eyes Midwest Base with Waddell & Reed Deal