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Industry Spotlight > Mergers and Acquisitions

LPL's Steinmeier: Why We Bought Atria and What's Next

By Victoria Zhuang

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What You Need to Know

  • LPL had been courting Atria for some time and finally found its opening last year when talks about a sale began, the executive says.
  • The Atria deal gives LPL the chance to expand in the enterprise market, as well as other channels, he says.
  • LPL has improved its integration technology recently and plans to further develop it to support transitioning advisors.

LPL Financial’s announcement Tuesday that it is buying Atria Wealth Solutions, which has about $100 billion of assets under management and around 2,400 advisors, marks its second-largest acquisition to date. The deal includes an initial payment of about $805 million and the potential for a second payment of up to $230 million, based on a retention rate of 80% to 100%.

Buying Atria and preparing to integrate it in 2025, along with bringing on 2,600 advisors from Prudential Financial this year, will be a big lift. Overall, though, the deal seems to make sense for Atria and its advisors, and the acquisition should help LPL solidify its competitive position at a time of intense consolidation and as BDs’ profit margins are squeezed, according to executives and industry observers.

San Diego-based LPL’s head of business development, Rich Steinmeier, told ThinkAdvisor in an interview Tuesday that the independent broker-dealer’s wish list of acquisition targets is focused on firms that value “independence and book ownership by the advisors,” with similar business lines to LPL’s. “Atria has been at the top of that list for a very long time,” he said. 

LPL had been eager to stay in front of firms like Atria, according to Steinmeier, and “keep ourselves relevant… as they think about the evolution of their business,” he said. ”For firms that are like Atria, so well aligned, we will try to do that more frequently and just make sure that we can get into those conversations when appropriate.” 

Last year, Steinmeier said, LPL finally caught a break. “We were able to get into conversations with [Atria's leaders] that became fruitful,” he said.

Momentum With Atria

Adding Atria could accelerate LPL’s plans to make further inroads with a big growth market: outsourcing wealth management services for enterprise clients such as banks, credit unions and insurance companies.

CEO Dan Arnold said on an earnings call earlier in February that he saw a combined $2.5 trillion opportunity in that marketplace, as those institutions seek to match the pace of tech and service evolution needed to win clients in today’s crowded field. 

Arnold called the enterprise business “an interesting, durable growth opportunity” for LPL. 

To that space Atria brings innovations and user-friendly tools, already tested on its existing client base of around 150 banks and credit unions, that other LPL advisors could benefit from in scaling their practices, the firm’s executives say. 

“There’s so much of what goes on inside of their homegrown CRM that we want to be able to ingest,” Steinmeier said, adding that Atria’s CRM “helps their advisors manage their clients in ways that are really client-centric, and specific to wealth management.”

Atria also had an impressive notification system to help advisors understand things occurring within client accounts, and a “performance dashboard that is really outstanding,” he added. 

Plus, “they’ve done some novel things in the way that they partner deeply with their financial institutions and credit unions” to share data between those institutions and advisors, said Steinmeier. “We love the way they ingest data and represent it from TAMPs.”

Finally, Atria had “tremendous talent in the home office team,” which LPL stands to benefit from, he noted. 

Industry consultant Alois Pirker, the CEO and founder of Pirker Partners, said in a LinkedIn post on the news Tuesday that he expected Atria’s Unio advisor platform to be of particular interest to LPL in the deal. Atria could help LPL “gain additional scale across a number of their business lines,” he wrote.  

Atria declined to comment for this story. However, its CEO and founding partner Doug Ketterer said in a press release Tuesday that he believed “LPL represents the best opportunity for a financial professional, bank or credit union to grow their practice or investment program.” 

The firm’s wealth management subsidiaries include broker-dealers CUSO Financial Services and Sorrento Pacific Financial, which service banks and credit unions, and independent advisor-supporting firms Cadaret Grant, NEXT Financial Group, Western International Securities, SCF Securities and Grove Point Financial.

Atria’s sale is expected to grow LPL’s enterprise channel 11% and its advisor channel 6%, according to an investor slideshow. 

Consolidation Games

Recruiter Louis Diamond, the president of Diamond Consultants, said in an interview that Atria’s sale shows how difficult it’s become to operate a broker-dealer business in an environment where RIAs and many other competitors have gained ground. 

“The first thing I thought was, another one bites the dust,” Diamond said of the news in an interview Tuesday. “It makes sense that Atria was being sold because they were, from the jump, private equity backed.” 

Atria was known to be supported by Lee Equity Partners. After acquiring several firms, Atria “extracted extra value for their private equity sponsors and now are looking to make a return,” he said.

LPL seemed a logical answer as a strategic acquirer, instead of a new financial sponsor, because “if you’re not one of the top five or 10 BDs, a lot of capital behind you, it’s really hard to keep scaling,” according to Diamond.

Many big broker-dealers have sold in this environment, he noted. “Lincoln’s being sold to Osaic, Securian being sold to Cetera … the list goes on and on.”  

(LPL is a client of Diamond Consultants for recruiting moves but did not work with them on this deal, he says.)

Jodie Papike, CEO and managing partner of the recruiting firm Cross-Search, agreed that the market had seen “a tremendous amount of consolidation over the last several years,” which Atria’s sale illustrates. 

However, LPL’s record of handling such deals could provide comfort for incoming advisors, she said in an interview: “They’ve already proven that they can stand up and deal with large acquisitions.”

(Papike also has worked with LPL and Atria for recruiting but was not part of the recently announced deal.) 

More Advisors, More Services

Industry consultant Joel Bruckenstein, CEO of T3 Technology Tools for Today, said scaling up in this fashion can benefit LPL by helping it manage fixed costs. “The more advisors you can spread those costs over, the better off you are,” he said in an interview. “The margins in that business are not what they used to be. And so if the margins are small, then you need to do more volume.” 

More incoming advisors can also mean more money from the firm’s fast-growing service lines, according to Bruckenstein. “Where they can make more money is by converting essentially — they won’t call it that, but it’s upselling people more goods and services … you want to start a new office, they’ll lay out the office for you… that improves their margins.” 

New Retention Tools

The firm’s largest deal by AUM was National Planning Holdings, an LPL spokesperson said in an email. When that was announced in 2017, NPH’s four BDs had around $120 billion of assets and around 3,200 advisors — but when it closed in 2018, LPL had moved around 2,000 of those advisors and $75 billion of client assets, a retention rate of around 70%. 

Since then, LPL has added significantly to its toolkit for facilitating deals, Steinmeier said — an investment that it expects to pay off through improved cost efficiency over the long run.

“When we brought over NPH, we didn’t even have a dedicated conversion team,” he said. Today, the firm has created such a team which is staffed by hundreds of “transition specialists,” he said. 

The firm also “understands how to make it easy for advisors, meaning very little to no repapering, doing a tape to tape conversion,” according to Steinimeier.

In this case, the Atria custody transfer from primarily NFS/Pershing (with a minority of assets at Fidelity and Schwab) to LPL’s platform will still have “limited” repapering, a firm spokesperson said in an email. 

LPL also rolled out several new integration upgrades in the past two years, Steinmeier said, including an advisor transition portal that was live in the past nine months, a tool for live training introduced about a year ago and a resource to help advisors with handling data for their conversions, which he said was “probably 18 months old.” 

The firm will “continue to refine” those tools, Steinmeier explained. “I can tell you we’re making the data [transitioning] tool more real time and the ability to edit it.” However, “if you look at the core foundational building blocks required to make it easy to join this firm, I think we’ve put [them] in place.” 

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