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DOL Rule Behind $4B RIA’s Move to LPL

By Murray Coleman December 22, 2016

After nearly 13 years with Lincoln Financial, Waltham, Mass.-based Integrated Financial Partners has decided to join LPL Financial. FA-IQ caught up with the 20-year-old firm’s founder and president, Paul Saganey, earlier this week. The hybrid independent RIA oversees about $4 billion.

Q: Why did you feel a need to move?

A: The primary reason is that our firm’s expertise is to partner our advisors with accounting firms. We do this as a firm by setting up revenue-sharing relationships with more than 100 different accounting firms around the country. So a new FA can come to IFP and step into an already established professional network of CPAs with access to a large quantity of high net worth clients – normally, these are clients with 10 to 20 times-plus in net worth compared to the typical families they serve.

Q: How did switching to LPL enhance those relationships?

A: By having our own RIA, it allows us to build more individualized investment and wealth management models. So instead of registering our RIA under Lincoln Financial, we’re now registered through our own firm, not anyone else’s company. We’ve subsequently joined LPL’s hybrid platform for self-registered RIAs who still want access to that large network’s support and services. It gives us a whole new level of flexibility in establishing not only new partnerships with CPAs, but also in managing the upcoming DOL rule’s impact.

Q: How so?

A: Under the DOL rule and the current regulatory environment, we think that a wealth manager who is able to register as their own RIA will have a competitive advantage going forward. When we were at Lincoln, for example, they would determine policies and procedures that would benefit a large group of different advisors. Now we can set up our own RIA in the exact image of our own advisors’ business models.

Q: How are your clients’ fee structures going to be impacted?

A: Typically, we’re going to be able to offer more competitive fee structures since we now have the freedom to set our own pricing, both for services and products. But just as importantly, we can also work together on revenue sharing programs with CPAs who are also acting as their own RIAs. For larger accounting firms, we’re seeing more and more movement towards this type of business model.

Q: Do you see moving to LPL’s hybrid platform helping in terms of recruiting new advisors?

A: Yes, significantly – especially with advisors coming out of the wirehouse environment. We’ve done very little in terms of recruiting in the past, simply because it was more challenging to welcome tuck-ins in a more corporate structure. Now advisors will be able to bring a book of business and we’ll be able to accommodate their needs very effectively since we can tweak our operating model with the flexibility of running our own RIA.

Paul Saganey

Q: Do you plan to become active in mergers of rival firms?

A: Yes, but more acquisitions than mergers. We’ve already started talking to more than a dozen smaller firms, generally with $500 million in assets or less. We’re looking for advisors who are uniquely qualified to work with accountants and are looking to grow. We’ve developed a highly specialized staff to support advisors dealing with complicated estate planning issues and business owners who want help with succession planning strategies. Under our own RIA, we’ve also developed a training program to help our advisors keep up with these sorts of issues and to help new professionals joining our firm get up to speed.

Q: Was it difficult to set up your own RIA?

A: No, we’re large enough now to put a staff in place to manage this whole process. We also worked with a third-party consultant who was very knowledgeable about all the ins and outs of compliance and regulatory rules. In our case, we used AdvisorAssist out of Massachusetts. They’re experts at helping advisors set up their own RIAs. For a smaller firm, establishing your own RIA might not be as realistic a goal. But for us, it seemed like a natural progression as part of our long-term growth plan.

Q: Why did you pick LPL as your services network?

A: We looked at a number of different hybrid platforms, but we found LPL’s management and staff to be really impressive in terms of their attention to the specifics of how a firm should be managed under the DOL rule. The policies and procedures they’ve built really stood out to us. They’ve invested a lot of money and resources in their effort to help RIAs comply with the new rule.

Q: What about reports that LPL might be swallowed by a larger firm like Charles Schwab?

A: Of course, we’re aware of all of the rumors swirling about LPL being sold. But at the same time, we’re not particularly concerned since we feel confident that any changes that take place will only enhance LPL’s value proposition. We feel the company’s top executives have already built such a strong foundation and put so much emphasis on growing their hybrid platform that it will continue to be a significant part of LPL’s growth story in the future.