LPL Financial has gone live this week with its new premium affiliation model, dubbed Strategic Wealth Services, for advisors coming out of the wirehouse and regional firms, and has released new details on the offering. WealthManagement.com first reported news of the new affiliation model, aimed at taking some of the more entrepreneurial tasks involved in starting and running a practice off advisors’ shoulders, this time last year; the firm now has a built-out operation in place to serve these advisors, who join as independent contractors.
Strategic Wealth Services will help established regional and wirehouse advisors who have high production and manage more than $200 million in assets under management. These advisors, according to LPL’s managing director and head of business development, Richard Steinmeier, are frustrated with the employee channel’s limitations, such as lack of autonomy, curbed ownership of their business and declining pay. They are looking to have more control of their practice, says Steinmeier, because they know exactly how they want to run it.
LPL brought in Steinmeier, a former UBS executive; Kimberly Sanders, the former managing director of business startup consulting at Schwab Advisor Services; and Marc Cohen, who joined from MarketCounsel, to design ways to attract advisors from employee models.
“We looked at the top four reasons that wirehouse advisors don't move to independence from Cerulli, and we've hit them all head on,” said Steinmeier. “The major challenge that they have is the time to run the business. So what they say is ‘wrap me as though I'm the business owner, but give me the staff, technology, and compliance and supervisory structure so that I can continue to deliver that client experience and have the spoils of running my own practice.’”
LPL provides SWS advisors with free transitional services that include planning for the exit from their current firm to onboarding clients to the LPL platform. Next, the IBD assists advisors with securing real estate, installing and integrating technology, being compliant ready, and developing the firm’s brand. After the advisor has transitioned, LPL then gives ongoing support with a chief financial officer consultant, a senior marketing strategist, tech support, remote administrative assistants and a service team.
One wirehouse breakaway transitioned to SWS on April 1, and Steinmeier said three more are coming down the pipeline. LPL declined to name them, but said the teams had assets in the $250 to $500 million range.
The payout is confidential and dependent on the complexity of the advisor’s practice. The average payout at a wirehouse is a conservative 40% to 50%, according to Louis Diamond, senior consultant and executive vice president of Diamond Consulting. Diamond is also recruiting for LPL. Steinmeier said SWS’ payout leans more toward the net payout of an independent advisor, except the rep is not paying for his or her own overhead costs. Instead, they’ll pay a flat fee encompassing a bundle of other fees.
“It's much simpler and I think more transparent the way that [LPL is] pricing this relative to how they typically price and how others in the space price,” said Diamond.
Diamond looks at SWS as a first in the IBD space. Large firms such as Dynasty Financial Partners, HighTower, and Focus Financial have similar models, but those are in the RIA space.
Kestra launched its Private Wealth Services several years ago, a division of the independent broker/dealer that helps wirehouse advisors go independent, providing office logistics assistance, consultative compliance support, a comprehensive platform, a transition plan and daily management support.