What to Make of LPL's Loan Forgiveness Pledge for Commonwealth Advisors

“Concerns I hear from Commonwealth advisors aren’t about the Commonwealth name,” he said. “It’s about the service teams and Commonwealth way of doing business, which is much harder to 'guarantee' and wouldn't necessarily be assured by this structure if the brand kept its name only.”

LPL framed its latest retention move as "a reflection of LPL's deep commitment to preserving the Commonwealth experience,” according to a statement. The firm “guarantees that it will continue to use the Commonwealth brand name as a community delegation and service tier within its ecosystem.

“If LPL shifts away from this promise,” the firm added, “Commonwealth advisors may accelerate the maturity date of their term agreement with the company."

(The news was first reported Wednesday by CityWire, which cited an internal memo written by Commonwealth’s CEO, Wayne Bloom.)

Generally, Commonwealth advisors are looking at retention compensation of 40 to 50 basis points of advised assets for smaller practices, and 60 to 75 basis points for larger practices — potentially more for practices that push harder to negotiate the figure.

While sources have noted in conversations with ThinkAdvisor that rival firms are working to attract Commonwealth advisors, they emphasized the difference between transition and retention. Making a decision solely based on basis points without considering the full picture could be short-sighted, they added.

Recruiter’s Reaction

Simon Hoyle, a recruiter and founder at RIA Choice, largely agreed with Kitces’ take on the issue.

“Brands are living entities,” Hoyle said in written comments shared with ThinkAdvisor. “You’re only as good as the latest customer reviews. When you buy a premium brand company, you hope and expect to profit from it. It would seem unlikely a brand name would have to be actively promoted, but simply maintained. Clearly it makes sense for LPL to leverage the marketing opportunity of a golden goose.”

It may also provide comfort to incoming Commonwealth advisors, the recruiter explains, as name continuity hints at continued culture.

“Retention is the litmus test at the end of the day,” Hoyle said. “Setting trends, attracting advisors, and being notably innovative, LPL is well perched — helped by the vision and trust of senior management. If LPL keeps Commonwealths’ look and feel, the purchase may run parallel to the success of practices catering to high-end clientele.”

Also notable, in Hoyle’s experience, is that such forgivable loans are often “paid back” years before maturation.

“That’s because broker-dealers try to ensure relationships have some level of profitability at contract end date,” he said. “Moreover, transitioning advisors may have lower flight risk because they are aging out of interest in multiple transitions over the next five to 10 years. And with LPL’s size, advisors’ succession planning opportunities grow even thicker.”

One Advisor’s Take

Commonwealth advisor Vance Barse, who became aware of the service agreement modification Thursday morning, said he found the news to be positive.

“There are two reasons that I am with Commonwealth,” said Barse, a Commonwealth advisor since 2015. “The first is the culture, which is truly one of a kind, and the second is the community we have. A lot of us have decades-long relationships with our fellow advisors and the home office team.”

It’s “good news” that big strides are being taken to maintain the brand and experience that Commonwealth’s people have valued, he added.

“The fact that I can call the cell phone of any of the C-suite leadership at Commonwealth and they call me back the same day and provide insight, that’s immeasurable as an advisor,” Barse said.