LPL Financial is rolling out a "partial book sale" service that helps advisors winnow their client base and focus on those that will fuel growth in their practices, firm executives said Wednesday.
The service will help move accounts that are smaller, less profitable or potentially a poor fit for an advisor's practice to a digital relationship that LPL manages and is part of the broker-dealer's overall strategy to add new advisors and deepen its relationship with its existing ones.
The firm is embarking on a “horizontal expansion strategy” to broaden its addressable market through its multiple affiliation models as well as a “vertical integration strategy” to provide solutions that help advisors run their practices more efficiently, said president and chief executive officer Dan Arnold Wednesday.
Speaking yesterday at LPL’s 2022 Investor Day, Arnold said that the firm's plan to stretch out across advisor model types lets the firm “potentially “compete for all 300,000 advisors in the marketplace by creating more flexibility and optionality, so that an advisor can create the perfect practice for themselves on our platform.”
LPL has six affiliation models, as reported: corporate advisor under a shared Form ADV, a W-2 model, a 1099 model, a registered investment advisor option, a hybrid RIA option and a financial institutions channel.
Deepening the tools, systems and support advisors rely on will help LPL stand out and "ensure that that advisor can run a thriving platform better on our platform than anywhere else,” Arnold said.
Last week, LPL began rolling out a service to help advisors — no matter the demographic, size or specific needs of their clients — seeking to reshape their book of business, according to Aneri Jambusaria, executive vice president of the firm’s services group.
“We created a partial book sales offering where LPL will acquire these generally smaller accounts from our clients as a service to them and then we will provide those end clients with personalized advice and service from our investor-focused solutions team, which is LPL’s in-house virtual advice team,” Jambusaria said during Investor Day. The accounts will generally be those with less than $100,000 in assets, and LPL will pay 1.5 times the recurring revenue to advisors who pass them over, according to an accompanying Investor Day slide deck.
Firms that subscribe to those services tend to grow 28% faster than peers, according to the presentation.
The transfer process is enabled by “an end-to-end digital experience that helps advisors identify, process and transfer those households to LPL all digitally,” she added.
The partial book sales service added this month, bookkeeping added in September and paraplanning service added in April join LPL's other outsource offerings, including M&A support, digital office, assurance plans, marketing solutions, CFO solutions and admin solutions. This litany of services has grown since 2018, when LPL first added marketing and CFO support. So too has the number of advisors using them. As of the end of the third quarter, about 2,900 advisors, or 14% of those working with LPL, subscribed to these services, the presentation deck shows. That's up from 150 advisors in 2018.
LPL’s 2023 strategic priorities for the services it offers are to grow its customer base, launch new services and evolve existing ones, and deepen relationships with advisors who use them, according to Jambusaria.
Jambusaria says growing the customer base is LPL’s first priority. “One of the big ways that we’re going to do that is through our second priority, which is launching new services. We believe that continuing to develop new services within this portfolio is going to help us unlock additional customers to our ecosystem as well as drive the third priority, which is deeper relationships with those clients,” she said during the Investor Day.
“We’re going to be focused on expanding the value propositions of our existing services as well as ensuring that advisors and enterprises who use our services have the opportunity to leverage multiple services where it makes sense,” she added.
Advisors who are new to LPL will play a key role in achieving those goals, according to Jambusaria. She said the firm offers attractive opportunities for newcomers.
“One is the affiliation models: Especially for advisors who are coming to LPL who are looking for a more supported version of independence, we’re embedding our services within that experience," Jambusaria said.
“Separately, we also see the experience of joining LPL as a great point to start adopting services, whether it be paraplanning or doing a partial book sale or starting to use the bookkeeping service. We’re increasingly positioning our services at the point of transition to LPL, and our perspective is that that will help drive adoption,” she said.