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LPL Considers Payout Cuts for New FAs at OSJs

August 14, 2017

LPL Financial is revamping its agreement with Office of Supervisory Jurisdiction firms on its network — a move that could see drastic cuts in payouts to new recruits, Financial Advisor magazine reports.

The company has already met with several OSJs to review the new arrangement, which could bring down payouts to new OSJ recruits from as high as 92% to as low as 72%, one source tells the publication. An LPL official, however, tells Financial Advisor magazine that the figures are inaccurate, although he acknowledges there will be payout changes this week. It’s unclear whether LPL will renegotiate terms with existing reps, the publication writes.

Some OSJs in LPL’s network say they’ll have to drastically revamp their business models as a result of the payout restructure, according to Financial Advisor magazine. Others are likely to consider moving to other broker-dealers, the publication writes.

But negotiating a better deal may be difficult for OSJs, according to Financial Advisor magazine. Firms that work with OSJs, such as the Advisor Group and Cetera Advisor Network, are typically owned by private equity firms that put an emphasis on cost efficiency.

On the other hand, if an OSJ succeeds leaving LPL for another company, it can easily poach its reps as there’s nothing in the current agreement barring them from doing so, according to the publication.

LPL is trying to tilt its arrangements with OSJs in its favor as it’s struggling to replace revenue lost as a result of the Department of Labor’s fiduciary rule and competitive pressure on fees, Financial Advisor magazine contends. Already, LPL earns less from ticket charges and platform fees, and will lose 12b-1 fees next year, according to the publication.

By Alex Padalka
  • To read the FA Magazine article cited in this story, click here.