The LPL Difference: Maximizing Revenue and Growth

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This is the second article in a series of executive interviews with LPL Financial. To view the previous article, Integrated Technology Centered Around the Advisor with Rich Steinmeierclick here.

As advisors know, growth is often the main motivation for making the transition to another platform. In today’s competitive landscape, advisors must continually differentiate themselves and meet increasing client expectations, while ensuring their business is on a path of sustainable, long-term growth.

AdvisorHub continues its LPL series with Ken Hullings, senior vice president of Sales Strategy and Enablement. Here, Hullings explains a vertical integration model unique to LPL that allows the firm to leverage its scale to benefit advisors. Because LPL is a broker-dealer, custodian, and clearing firm, it influences the entire ecosystem in which advisors work. LPL’s scale allows the firm to reduce its costs and pass along cost reductions to advisors. That, in turn, allows advisors to use those savings as capital to increase the scale of their practices and provide a great experience to their clients.

For its part, LPL invests a significant amount of capital towards capabilities that support advisors’ business-building efforts and end investor relationships. According to Hullings, one such resource is the firm’s Business Consulting Service, in which LPL professionals meet with advisors one-on-one to help them define business goals for their practices, create their go-to-market strategies and execute the tactics needed to meet those goals. Here, Hullings provides more details about how LPL helps advisors use its vast resources to differentiate their service to investors and grow their business.

AdvisorHub: What do you see as the main challenges for advisors in growing their business and their bottom line?

Ken Hullings

Ken Hullings: The demand for what advisors do is increasing, and a big challenge they face is having the time and ability to invest in creating an amazing client experience. It’s hard for advisors to achieve scale and stay competitive. They need a strong partner to help them with their non-client facing activities so they can maximize the amount of time they get to spend with their clients.

Clients want and deserve to work with someone who knows them really well and cares about them and their family. Even in an environment where there is price compression, they will pay for services from someone they feel has their best interest at heart. One way for advisors to provide this type of service experience is to offload all the non-client facing activities to a strong partner. This frees them up to deliver a differentiated and positive client experience that can drive loyalty, result in higher quality referrals, and help them continue to grow their business.

AH: When an advisor is looking to transition firms, what are some of the areas they should pay attention to for a better understanding of what their payout will be over time?

KH: We’ve worked with many advisors who have weighed their options between several firms. The industry is mature and very competitive so most of the top-line payouts that you’ll see are within one or two percent of each other. However, the top-line payout is not the only thing to consider. Especially for advisors that focus on fee-based business it is important to understand what each firm charges for administrative or platform fees. This is where you might see a big delta between firms. Advisors should also focus on transaction fees, account fees, and other affiliation costs like technology, business insurance, etc.The biggest area we see advisors overlook as it relates to what their payout will be over time is what resources each firm has to help them reach their growth goals. At the end of the day, payout is important, but if a firm can help you grow at an accelerated rate compared to other firms, that is a significant thing to consider.

AH: What are some of the specific ways the LPL model has helped advisors remain competitive?

KH: Our vertically integrated business model where everything functions in one ecosystem, allows us to provide a more elegant experience to advisors at scale, build differentiated capabilities, and reduce costs for advisors, which positions them to be very competitive.

The business model also allows us to reinvest capital into the platform and continually add greater capabilities.

Over the past two years, we’ve invested over a quarter of a billion dollars into technology tools. We’re focusing on integrations that streamline key workflows within the advisor’s practice. We’ve partnered with some of the industry’s best solution providers to integrate their tools within our ecosystem. With the acquisition of AdvisoryWorld, we’ve revamped our proposal generation and analytics capability. In addition, we’ve rolled out a simplified new account opening process, an improved experience for moving money, and an in-house CRM solution—all offered at no cost to our advisors. We’ve also introduced a new digital advice platform, and we are helping advisors build better relationships with their clients by launching our mobile app and texting solution later this year.

To support the growing trend of implemented a models-based practice, we’ve introduced technology that allows advisors to build and rebalance portfolios in minutes instead of hours.

All of these solutions help increase an advisor’s capacity to scale by delivering new capabilities for digital client servicing, planning, and managing money.

We’ve also been able to add a suite of business solutions that allow advisors to outsource their daily operational and management tasks to us so they can focus on what matters most to their clients.

At the same time, we’ve reduced the fees across all of our advisory programs, because one of the best ways we can help advisors remain competitive is by simplifying and reducing their pricing.

The aggregate effect of our continuous reinvestment back into our advisors’ businesses, combined with their ability to offload activities that do not provide direct value to their clients, has a significant impact to their business. It allows them to offer a differentiated experience to the families in their community at a very competitive price, which helps them grow their business and their bottom line.

AH: Do you think other firms are focused on providing the same benefits of scale?

KH: Scale does not come from just having a large number of advisors. That is a common misperception. Our scale is a result of the number of advisors we support, but also because we are self-clearing, influence the entire ecosystem in which our advisors work, and generate significant capital that we reinvest back into the platform. Many other firms in the industry serve just one function. They are only a broker-dealer, only a custodian, only a clearing firm, or only an investment platform.

If you are an advisor at a firm with a non-integrated model, you are dealing with multiple for-profit entities and this can drive your costs up. Because of our business model, we can provide our advisors with scale and flexibility and help them drive efficiency and effectiveness into their business. The industry recognizes that scale is important as it allows us to invest in the capabilities advisors and clients need today while also innovating into the technology and services they will want in the future.

AH: You’ve listed some of the ways LPL helps advisors grow and scale their business organically by maximizing their revenue. How does LPL enable inorganic growth?

KH: One of our biggest initiatives at LPL is making it easier than ever to do business with us and removing the barriers that can get in the way of advisor growth and potential. Allowing advisors to have access to our capital is a big initiative. Advisors can get that access at interest rates that are extremely competitive, and a lot faster than what they would experience using a standard bank.

One of the fastest, most reliable ways for advisors to grow their business is to acquire other practices. We have set aside more than $100 million to help our advisors with capital solutions. We are committed partners to our advisors throughout their business journey. We have a marketplace that connects buyers with sellers, a service that offers free practice valuations, and a dedicated team that can manage the whole process.

We also provide access to our capital for things other than acquiring a practice, too. For instance, if an advisory firm wants to make a significant investment in its business for a marketing initiative, to hire staff, or to purchase an office building, we can provide capital for those uses as well.

AH: What kind of transition support does an advisor receive upon joining LPL and how do they customize that for each team?

KH: We look at every advisor and practice individually, and underwrite a transition package according to the advisor’s business mix and specific needs. Typically, a transition package has a few different components. The first is an upfront forgivable loan that many advisors use to cover the costs associated with the transition.

The second part of the package is a working capital loan, typically at a very competitive interest rate.

The third part of a transition package is the people and process that will help the advisors and their staff prepare for and execute the transition. This expertise is critical.

Our Business Transitions group is comprised of more than 65 experienced professionals who are experts at bringing advisors onto our platform. All they do, every single day, is help advisors and their staff members prepare to make the move. They help them get familiar with the technology, work with them to map over their existing business onto our platform and into our product offerings, and then they go on-site to help with the account opening and the re-papering process. Over the last year, the team has spent more than 33,000 hours in advisors’ offices helping them transition. We know how important transitioning to a new firm is for our clients, and we have the expertise that an advisor needs to create and execute a customized plan that is right for their business.

AH: From a product standpoint, are all the investment options that advisors can access at a full-service firm available on an independent platform?

KH: The Business Transitions group includes an investment product mapping team. Before any advisor joins or affiliates with LPL, we do a full review of the products they use to  determine what platforms or products might apply with us.

AH: How has LPL improved its platform and offerings in recent years to attract different teams and sizes?

KH: We support more than 16,000 advisors, which represent about 4,500 small businesses, and that gives us a unique viewpoint into what it takes to run different types of advisory practices successfully.

That success is based on the advisor choosing what support and capabilities they need to run their small business.

We have a very competitive value proposition for all advisors because of our enhanced capabilities. We offer a Private Client Services group, for example, which is a dedicated team that helps our advisors win and retain relationships of over $5 million investable assets. The group works in conjunction with the advisor and acts as the quarterback for all the different resources available at LPL.

We also have an amazing research team that many of our advisors find valuable, as well as a financial planning and insurance group that gets involved in a lot of complex cases. We own our own Trust company and some very advanced consolidated reporting software, and those tools are widely used by the more sophisticated teams.

Finally, our business allows advisors to choose the level of support, there are many things that we can do through our scale to help teams with the launch and set-up of their business. Our Business Solutions team can help them with their administrative needs, their digital marketing strategy, and work with them to create a secure office network from hardware to software to connectivity. We also have a CFO Solutions service to help them optimize the growth, scale, and profitability of their business. Many of these teams also need some help with real estate sourcing and build out, branding and public relations support, and human capital assistance. We can help them with all of that.

At the end of the day, our culture is firmly rooted in the success of our advisors. We are here to understand what they need and solve their problems. We design everything we do to empower advisors so they can deliver an amazing client experience and grow in a way that helps them maximize their enterprise value. Their success is our business.

Ken Hullings is a senior vice president of Sales Strategy and Enablement at LPL Financial, Member FINRA/SIPC.

Want to learn more about the LPL difference? 

Read “Integrated Technology Centered Around the Advisor”, an interview with Rich Steinmeier, managing director and head of business development.

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