LPL - Why so many weak producers?

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Oct 1, 2008 11:11 pm


Why is it that 50% of LPL producers gross less than $100,000?



After expenses what are they really bringing home?



Oct 1, 2008 11:22 pm

Ask the top producers what their secret is.  

Oct 2, 2008 12:05 am

Seriously, I don't know where these people hide.  I've never met a producer with LPL under 100K.  In Chicago this summer, I'd bet there were 3,000 producers there and I don't recall running into anyone with that little production.  All I can guess is that these people are (1) semi-retired or part-time, (2) producing assistants, or (3) CPAs and attorneys licensed and registered under the partners program who have little, if any production of their own and simply revenue-share in their referrals.  That's my guess, but again, I've yet to meet one of these people at a regional or national event, so I have a hard time believing than many of them are actually in production in any meaningful, independent sense.  Somewhere I read something to the effect that LPL doesn't consider many of the numbers of licensed reps affiliated with LPL to be "producers", which tells me that there are probably many folks who fit one of my three possible scenarios listed above.  That help?

Oct 2, 2008 10:06 am

Indy, I think you're dead-on.  Most of the lower producers aren't the one's that would be at the conference anyway.

 
As a large indy firm, I don't think average production is really a relevant measure.  I think you have to look at real numbers of large producers to guage a firm's ability to service big producers (which is really the ultimate question).  I think LPL has allowed many small (as you said), part-time, work-out-of-the-house producers at their firm.
 
Like the "attrition" question in another post, sometimes average production can be misleading.  I read about the top 100 wirehouse producers the other night.  Although most of the top 100 have $1B+ in AUM, when you dig deeper, you see that many of those prodcuers are simply the head of a very, very large team.  For example, there was a guy with like $3B AUM.  He had a team of 14.  He has to PAY all those people.  So yes, he's a big producer, but you can't really compare that to a "solo" indy or even another wirehouse advisor that's not on a team.  From a financial standpoint, who makes out better - a $1mm producer that take 100% of the production, or a $5mm producer that has to spread it among 10 people (I'm making up numbers).  Not good or bad, but you have to keep things in perspective when you look at raw numbers.
 
To the original question - maybe you are a guy working 20 hours per week out of your house, taking home 70K.  Not bad for a few hours.  Or maybe you also charge for plans.  Or maybe you are also a CPA or attorney...
Oct 2, 2008 4:25 pm

I've met and know plenty of LPL brokers doing pretty light numbers. Why? Very fast growth, let about anyone in, little structure.  Here's an example.  A guy I know rather well was at a small bank on the RayJay platform. Did $120-$150k for a few years. Did not do so well and instead of looking at himself, blamed the bank management, lack of opportunity, etc. Went to LPL to get $10k in start up assistance and a little marketing money. Chased the big payout. Though he'd do much better on his own.  Today, about a year later his book has flamed out, he's out looking for his next gig and he's virtually unmarketable.   It was not LPLs fault by any means, but this situation plays out pretty often there. People who are not ready to go indy do it and LPL seems to be the magnet right now.

Oct 2, 2008 4:32 pm
burtonfinancial1:

I've met and know plenty of LPL brokers doing pretty light numbers. Why? Very fast growth, let about anyone in, little structure.  Here's an example.  A guy I know rather well was at a small bank on the RayJay platform. Did $120-$150k for a few years. Did not do so well and instead of looking at himself, blamed the bank management, lack of opportunity, etc. Went to LPL to get $10k in start up assistance and a little marketing money. Chased the big payout. Though he'd do much better on his own.  Today, about a year later his book has flamed out, he's out looking for his next gig and he's virtually unmarketable.   It was not LPLs fault by any means, but this situation plays out pretty often there. People who are not ready to go indy do it and LPL seems to be the magnet right now.

 
 
I'd imagine his timing wasn't exactly ideal, either. There are scores of people who are "flaming out" from a variety of firms right now.
Oct 2, 2008 4:46 pm

What is the total admin and haircut at LPL, (not pay out), a mark-up factor of like .75 or something? $150/.75, he's grossing 200k, maybe managing 20m. Why is he going to a broker dealer, he could be taking home maybe 140k after expenses by being RIA. With no cold callling.

Oct 2, 2008 4:58 pm
walking9:

What is the total admin and haircut at LPL, (not pay out), a mark-up factor of like .75 or something? $150/.75, he's grossing 200k, maybe managing 20m. Why is he going to a broker dealer, he could be taking home maybe 140k after expenses by being RIA. With no cold callling.

 
For fee-based, it's about 82% and for brokerage, I average about 88%.  That's after ticket charges and override.
Oct 2, 2008 6:31 pm

Not a terrible payout, assume override is "admin" on the wraps?

Oct 4, 2008 12:12 am
walking9:

Not a terrible payout, assume override is "admin" on the wraps?

 
Yes...about half is admin and half is what LPL retains on everything.  Both average about 9bps.  This assumes you are a series 24.