Commonwealth Financial

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Apr 8, 2007 5:27 pm

Looks very, very attractive.


Between LPL and Commonwealth, LPL has the resources and higher payout of a larger firm, but Commonwealth is private, more my style.


Any one like to comment?

Apr 8, 2007 6:49 pm
silouette:

Looks very, very attractive.


Between LPL and Commonwealth, LPL has the resources and higher payout of a larger firm, but Commonwealth is private, more my style.


Any one like to comment?



I'll comment.....You don't have a style.

Apr 8, 2007 9:49 pm

I take it you've visited Commonwealth?


Have you visited LPL yet?

Apr 9, 2007 1:15 am
Bobby Hull:
silouette:

Looks very, very attractive.


Between LPL and Commonwealth, LPL has the resources and higher payout of a larger firm, but Commonwealth is private, more my style.


Any one like to comment?



I'll comment.....You don't have a style.



I don't get it. You mean, I don't have style?

Apr 9, 2007 1:18 am
Indyone:

I take it you've visited Commonwealth?


Have you visited LPL yet?



No, I have not visited, and am thinking to rule LPL out, based on the rapid growth rate and my concerns about them going public (beyond the private equity group ownerships). I'm thinking, consider a private firm that looks to stay private, or choose a public firm that is firmly established in the public ownership realm. It is the potential transition that concerns me. What do you think?

Apr 9, 2007 2:18 am

With all due respect, make the trip.  I considered ruling LPL out after an excellent visit to Raymond James.  I'm glad I didn't.  These firms are all very good at selling themselves and truth be known, they all have a lot going for them.  Don't be at all surprised if your view is completely different after making the due diligence trip to LPL.  It may not be, but I'd be surprised if your opinion of LPL wasn't at a minimum, considerably higher after your due diligence trip to their offices.  Until you make the trip, you really don't know what they have to offer and you are making an uninformed (and possibly poor) decision.


Based on the tone of your post, I was 99% sure that you'd been to see Commonwealth, but not LPL.  Having been in your shoes, I know how you feel, but make the trip.  If then you ultimately choose Commonwealth, you do so with the knowledge that you compared them up close against a very worthy competitor and they were still the best fit for you.


As far as your concerns with LPL, I'm not here to tell you that they aren't valid...I've wondered some of the same things.  At the same time, there's no promise that Commonwealth may not get swallowed up/go public/whatever in the future.  Only time till tell how LPL makes the transition to public ownership, but thus far, I've seen very little negative in the transition.  If that changes, I've got options and that is what I believe will keep LPL on their best corporate behavior with the independent client reps they serve.


Good luck with your quest to find the best fit for your business...I certainly won't tell you that Commonwealth would be a bad choice.

Apr 9, 2007 2:27 am

On second glance, it looks like you haven't visited either firm...my mistake.  It doesn't change my advice...go look at both firms up close and personal and make an informed decision.  Your ultimate B/D choice deserves a little competition and you need a quality firm to compare it to.

Apr 9, 2007 11:09 am

Sorry I was not clear, Indy, yes, I have visited Commonwealth. You see, you have good instincts.


Very smart post about visiting LPL. I see your point about having more perspective - especially in terms of feeling better about the overall decision. I am convinced ( through career experience) about the private ownership thing, don't see how Commonwealth would be going public in the next couple of years.


It could not hurt to take the trip to San Diego for LPL - just a couple more days time, your input is shall  be carefully considered. Thanks.


Any more thoughts, anyone, on the public vs. private company issue? ( Not worried about payout difference and so on.)

Apr 9, 2007 11:31 am

One more quick thought - having visited Commonwealth some time ago, maybe I will take a quick trip to check out Commonwealth again AND LPL on the same trip (few hours at each).


I guess I should pay the travel expenses myself, of course that is no big deal, but just to keep things clear and control the schedule.

Apr 9, 2007 11:35 am
silouette:

Sorry I was not clear, Indy, yes, I have visited Commonwealth. You see, you have good instincts.


Very smart post about visiting LPL. I see your point about having more perspective - especially in terms of feeling better about the overall decision. I am convinced ( through career experience) about the private ownership thing, don't see how Commonwealth would be going public in the next couple of years.


It could not hurt to take the trip to San Diego for LPL - just a couple more days time, your input is shall  be carefully considered. Thanks.


Any more thoughts, anyone, on the public vs. private company issue? ( Not worried about payout difference and so on.)



LPL has significantly larger economies of scale than commonwealth, and the technology is just amazing and continues to evolve on almost a monthly basis.

Everyone is expecting that the private equity guys are going to seek an IPO or some other "Liquidity Event", that being the most popular euphamism for selling their stake at a profit.  If there's one thing I've learned over the years about this business, it's when some future event becomes universally accepted as being a certainty the majority often ends up being wrong.  Perhaps the ROE on the LPL stake is sufficiently high that the private equity guys aren't going to be in any hurry to liquefy their investment.

Either way, the bedrock of your business relationship with LPL is based upon the company's ongoing acknowledement that the advisor owns the practice and they are the service platform.  I think that the folks at LPL know that on all levels of management and operations.  As such, the strength of that paradigm in their culture makes it highly unlikely(not impossible) that they would ever make major changes in their operations that were unfavorable to the advisors who are their clients.  And, if they do, that very same core value protects you, because you have the option of folding up your tent and moving on.  If you're doing business under a DBA(which LPL supports and encourages) it obviously involves some paperwork, but not much in the way of a glaring cultural/branding shift for you clients as it would if you were moving from wire/wire, wire/bank, or wire/indy.

Just my 2 cents.....

Apr 9, 2007 12:27 pm

Great points, Joe. Just to summarize in my own mind:


1. Economy of scale at LPL allows reinvestment in top techology.


2. Along economy of scale line, and putting the advisor first, for that matter, it seems LPL is efficient, therefore, higher payout. Generally, a good sign.


3. Since the purpose of private equity is to obtain a higher ROE, LPL may not go public for a while.


4. If I create a firm called " Rabbit Run & Associates ", and my b/d changes, I'm still running rabbit to my clients. That is an excellent point which I had not considered. That can be done at either LPL or Commonwealth, but it lessons concern about changing b/ds again, under any circumstances.


5. LPL itself is built on putting the rep first, so there is no real advantage to going with a b/d that has 7000 reps, vs., say, 2300 reps.


Good stuff, thanks for investing your time and energy, any CFS affiliates have a perspective?

Apr 9, 2007 12:29 pm

so there is no real advantage to going with a b/d that has 7000 reps, vs., say, 2300 reps.


vv.

Apr 9, 2007 6:57 pm
silouette:

One more quick thought - having visited Commonwealth some time ago, maybe I will take a quick trip to check out Commonwealth again AND LPL on the same trip (few hours at each).


I guess I should pay the travel expenses myself, of course that is no big deal, but just to keep things clear and control the schedule.



I know that both firms would be happy to fly you out to their home office and meet with you.  You'll definitely want to do them on seperate trips, though.  Although both have offices in Boston and San Diego, LPL's main office is in SD and Commonwealth's is in Boston.  If you can spare the time you'll get a better picture of each firm.  And since this is one of the most important choices you'll make regarding your practice, I'd suggest making the time...

Apr 9, 2007 8:34 pm

You should check out Woodbury Financial Services. Hartford bot them a few years ago and they are now at a little under 3000 reps.

Apr 9, 2007 9:02 pm
FreedomLvr:
silouette:

One more quick thought - having visited Commonwealth some time ago, maybe I will take a quick trip to check out Commonwealth again AND LPL on the same trip (few hours at each).


I guess I should pay the travel expenses myself, of course that is no big deal, but just to keep things clear and control the schedule.


I know that both firms would be happy to fly you out to their home office and meet with you.  You'll definitely want to do them on seperate trips, though.  Although both have offices in Boston and San Diego, LPL's main office is in SD and Commonwealth's is in Boston.  If you can spare the time you'll get a better picture of each firm.  And since this is one of the most important choices you'll make regarding your practice, I'd suggest making the time...



In reality LPL does have 2 headquarters.  Many of the top execs and investment research people are in Boston.  The meat of the operational side of things is in SanDiego.

Apr 10, 2007 12:29 am

Thanks, e. b. .

Apr 10, 2007 9:50 am

I would also suggest checking out firms slightly smaller than the Juggernaut 4,000 + rep firms.


From personal experience, if a B/D is going to hand out high payouts to their reps like LPL does (up to 98%) then they are going to make it back somehow.


There is no way a B/D can survive no matter HOW big they are on 2-6% unless they are getting it back from somewhere else.


I would encourage you to check out a couple of B/D's in the 5,6,-900 rep range. Big enough to support your business and help you grow but small enough that you don't have to call in with a "Rep Number" for people to know who you are.


Just my 2 centavos.

Apr 10, 2007 3:56 pm

Sampson, you say you speak from personal experience. If you are correct, you bring up an interesting point.


The reason Commonwealth looks attractive is, first, an apparent fit with style of doing business.


LPL would be attractive to many others. It has been built up in the right way and puts the rep first. Scale may have some advantages, but my guess is an unbranded broker dealer likely hits diminishing returns of scale over fixed costs at about 1000 reps.


Beyond that level, it just has the potential to become a money machine.


But if the high payout will result in going public (sooner), that squares with giving the private equity and private owners an eventual reward for being patient. As far as public ownership knows, I think most of us here know that private ownership can have many benefits. To truly appreciate that point, you almost have to experience the benefits.


Is anyone aware of any broker dealer of reasonable size ( gross revenues) and tenure and integrity that comes anywhere near Commonwealth?


What I'm saying is, for example, Woodbury, being bought out by Hartford, becomes unattractive, again, for the ownership. I am also leery of headquarters in the Midwest - that may sound elitist, but I had a bad experience. Who wants to go live and work in Minneapolis?

Apr 10, 2007 4:02 pm

I don't know LPL, but I can say Commonwealth is an incredibly well run company, and as long as the founder is CEO I see them staying private.  The technology is great too, and they roll out updates regularly as well.  There is no hold time and the back office is very good.  Sometimes it seems like they forget that they are the ‘back office’ with their logo on everything, but they really are fantastic.  <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


Apr 10, 2007 5:17 pm

Happy to hear you are happy. I think the call the logo " branding ". Don't you have the option to have a lower profile " branding " package? What if you use your own firm name?