LPL Financial is exploring a minority investment strategy in which it would buy stakes in affiliated hybrid registered investment advisors with an option to buy out the remaining stake at a predetermined future valuation.
The development was first reported by Citywire and was confirmed for ThinkAdvisor by Marc Cohen, group managing director of business strategy and innovation.
“We’ve discussed this partnership structure with a very small number of our client firms as a concept,” Cohen said. “We have not done any deals in this structure. Under this concept, LPL would make a minority investment in a firm with an option to acquire the remainder of the firm in the future at a predetermined valuation.”
Participating firms would have what Cohen described as “privileged access” to LPL solutions to support their growth.
“The concept was born from conversations with many of our large clients who needed access to more capital to support their growth objectives but didn’t want to give up the operating control of their business, which is emblematic of many of the private equity backed alternatives in the market,” Cohen added. “We realized we could offer a better solution with attractive terms from a partner they know and trust.”
The strategy resembles moves made by other big brands in the wealth management space, including Raymond James, Cetera and Osaic. Private equity firms have also grown increasingly active in the wealth industry via both majority acquisitions and minority stakes. In LPL’s case, the strategy is not expected to be a broad offering and is more likely to represent a bespoke strategy in select cases.
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