LPL CEO Tweaks Wirehouses, Custodians as Firm Looks to Grow Beyond Its Indie Roots
LPL Financial Chief Executive Dan Arnold on Wednesday kicked off his company’s annual advisor conference with some barbs for his competitors from full service wirehouses to custodians for registered investment advisors.
“They continue to treat advisors as the cost center and are simply trying to lower their cost of labor,” Arnold said of so-called wirehouse firms. “At the other end of the spectrum, custodians see you as more like a sidecar at best and at worst are trying to replace you with digital advice.”
Arnold did not mention any of the firms by name, but his remarks come as LPL has been looking to directly compete with wirehouse firms and RIA custodians by offering more support and affiliation options outside of its independent broker roots.
The strategy is aimed at expanding LPL’s recruitment options and targeting larger producers. The average LPL broker generates $314,000 in annual fees and commissions and manages $58.2 million in client assets, according to its second quarter earnings.
Those figures are up 39% and 30% year-over-year, but still pale in comparison to million-dollar-plus averages at wirehouses. UBS Wealth Management Americas’ roughly 6,000 brokers, for example, generated annualized revenues of around $1.6 million per broker in the second quarter, up 9%.
In outlining the shifting business model for LPL, Arnold and Rich Steinmeier, LPL’s head of business development, pointed to its recently launched affiliation options that allow brokers to join as employees, independent contractors or simply custody assets at LPL as an independent RIA. (A wirehouse-like independent model, launched in April 2020 as its first new offering, added its 10th team last month.)
“Our firm has historically been viewed as an independent broker-dealer but as we have reimagined how we evolve, we see ourselves as much more than that,” Steinmeier said.
Steinmeier, who joined LPL in 2018 from UBS, where he had been head of the emerging affluent segment and its Wealth Advice Center for mass affluent customers, contrasted that with a more defined career path for brokers at his prior employer.
“At the firm I came from, we didn’t have personalization—no matter who you were, everyone was treated the same,” Steinmeier said without mentioning UBS by name. “It didn’t feel right.”
Steinmeier also laid out new services that LPL would be launching that resemble those at the wirehouse. LPL is introducing investment banking referrals and enhanced banking products and lending capabilities that would appeal to brokers serving the high-net worth segment, he said.
Lending and other banking products have been offered and heavily pushed by bank-owned wirehouse firms for years, although sometimes have created conflicts for brokers who felt compelled to pitch clients on checking and savings accounts rather than their investments.
An LPL spokeswoman said that it did not yet have additional details on where the broker-dealer would source its investment banking referrals or how it would allocate leads to its independent network.
LPL is also looking to compete more directly with large custodians such as Charles Schwab Corp.’s Advisor Services unit and Steinmeier said it is expanding its multi-custodial platform to appeal to investment advisors who want to hold customer assets outside of LPL.
Other executives, including Burt White, LPL’s head of investor and investment solutions, touted some additional services, such as a call center of experts that advisors can call to get advice for customers on planning topics such as taxes or Medicare.
“Traditional wealth management is just the beginning of all the stuff that your clients need and want from you,” White said. “More and more clients are demanding advice on specialized areas like taxes or estate planning, banking services or Medicare.”