LPL is Boosting FAs’ Value Proposition to Clients. Here’s How

Lending solutions and cash management are part of the strategy.

August 4, 2022

LPL Financial is using technology to reduce work friction for advisors while also investing in its lending capabilities to increase its advisors’ value proposition to clients, according to president and chief executive officer Dan Arnold.

LPL continues to develop ClientWorks, its integrated advisor platform, by expanding digitized workflows, Arnold said during the firm’s second-quarter earnings call with analysts.

In the second quarter, LPL made enhancements to its Move Money solution, making it easier and more automated for advisors to support deposits and withdrawals in client accounts, according to Arnold.

The firm also enhanced its client management workflow for advisors by integrating goal planning data into its Meeting Manager solution, enabling advisors to better prepare for client reviews and have more valuable dialogue during client reviews, Arnold noted.

“These enhancements help advisors operate more effectively and increase their scalability to serve more clients,” Arnold said.

LPL is also focused on improving its core clearing functions including money movement, account opening and account transfer, “which collectively drive the majority of our operational process,” he said.

“While we remain early in these efforts, we are seeing solid progress as we are now processing millions of transactions for our advisors through the applications of robotics and AI,” he added.

“By expanding the automation of these critical processes, we continue to increase the scalability and efficiency of our platform while also enhancing the client experience,” he added.

Lending Capabilities, Cash Management

LPL is also expanding its lending capabilities and resources, according to Arnold, who said that strategic direction enables the company to capture opportunities. Earlier this month, the company said it appointed Bill Sappington to the newly created role of executive vice president of banking and lending solutions.

Arnold said LPL advisors want to provide a “holistic approach to that overall advice spectrum, and so it's logical that we would think about bringing lending capabilities, cash management solutions and integrate those in as part of the client experience and to create those products and solutions to add value to the end clients.”

“What we did was go out to the marketplace and say, ‘Hey, if we're going to do this right, let's go get the experience and the insight and the leadership to do that,’” he said, referring to hiring Sappington.

“We had been experimenting for a short period of time and just learning enough about it to probably ask smart questions and better identify where our opportunities were, and then bring that leadership in to help us go operationalize and execute on that concept,” he added.

RIA Channel

LPL is also counting on growth in its registered investment advisor channel, according to Arnold.

The company “went to the marketplace in a more offensive posture relative to our RIA offering” about a year ago and aims to “be more intentional about how we go to the market and really establish ourselves as a differentiated strategic partner and a value-added partner and not just a custodian to RIAs,” Arnold said.

“We see the opportunity to be a more significant vertically integrated strategic partner than just a custodian,” he added.

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Fastest-Growing RIA Firms: Assets, Clients, Locations

SmartAsset ranked the top 50 fastest-growing registered investment advisor firms in the U.S.

August 4, 2022

The total client assets of the top 50 fastest-growing registered investment advisor firms ranked by SmartAsset have more than doubled over the past three years.

The top 50 had $344 billion in client assets as of March 2022, up 132% from the $148.3 billion that those in the list had in 2019, according to SmartAsset, a lead generation platform for financial professionals.

This year’s top 50 also have 260,000 more accounts, up 155%, compared with those in the list three years prior.

California and New York emerged as the states with the greatest number of RIA firms in this year’s top 50 ranking, having six each in those locations.

Using data from Securities and Exchange Commission filings, SmartAsset examined growth according to four metrics: the number of client accounts of RIA firms over one- and three-year intervals as well as assets under management over the same time periods.

Each firm's ranking for the four metrics were averaged, giving them equal weight. The report excluded firms which have taken part in mergers and acquisitions since 2019.

The headquarters of four of the top 10 fastest growing RIA firms are in Atlanta and the San Francisco region.

Specifically, these are Aprio Wealth Management and BIP Wealth in Atlanta and Fort Point Capital Partners and Main Street Research in the Bay Area.

Integrated Wealth Concepts was the fastest growing RIA firm for the second year in a row in SmartAsset’s ranking, reporting over $7.8 billion in client assets as of March.

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Video

What Does Freedom Mean for Advisors?

By Sam Del RoweAugust 4, 2022

Every advisor defines freedom differently, according to Robbie Moseley, Raymod James' head of advisor choice consulting.

The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.

SAM DEL ROWE, REPORTER, FINANCIAL ADVISOR IQ: I'm with Robbie Moseley, vice president and head of Advisor Choice Consulting at Raymond James. What factors should advisors consider in defining what freedom looks like to them?

ROBBIE MOSELEY, VICE PRESIDENT, HEAD, ADVISOR CHOICE CONSULTING, RAYMOND JAMES: When it comes to freedom, I think that advisors, as we know, there's been a trend towards independence. But what I have found is that advisors are really craving freedom. And with freedom, that's book ownership, the ability to build and structure your team to fit the needs of their clients. And so, so much of that is built into the advisor choice model and advisors really seeking this idea of autonomy, freedom and flexibility to run their business to best serve their clients while leveraging the resources of a firm, rather than just going full independent all at once and really being that true business owner.

SAM DEL ROWE: How does an advisor's definition of freedom impact different aspects of their practice?

ROBBIE MOSELEY: Yeah, I think that's one of the challenges, is that every advisor defines it differently, right? And so one of the things that a consultant really should do is partner with an advisor to define what that means to them. And for some people, that's really book ownership. That's the ability to own your book, sell your book, transition your book, build your practice the way that you see fit, serve the community in which you desire to make an impact. The really important element of the freedom conversation is not just book ownership, but really, what is your brand forward look like and how often are you revisiting that?

SAM DEL ROWE: Robbie, thanks for taking the time to chat with us.

ROBBIE MOSELEY: Of course. Have a wonderful day, Sam. Thank you for your time.

Wells Wins Appeal of Finra Arbitration Collusion Ruling

A Georgia appeals court reversed a lower court’s decision that vacated a previous award on the grounds that there was a secret agreement between a lawyer representing Wells Fargo and the arbitration forum.

August 4, 2022

Wells Fargo has prevailed with its appeal to overturn a lower court’s decision that the firm colluded with the Financial Industry Regulatory Authority's arbitration form, according to news reports.

In January, Judge Belinda Edwards of the Superior Court of Fulton County of the State of Georgia vacated a 2019 arbitration award, ruling that the company and its counsel, Terry Weiss, “manipulated the Finra arbitrator selection process” in a claim filed by investor Brian Leggett accusing the firm and one of its advisors of negligence, failure to supervise, churning and breach of fiduciary duty, among other claims.

According to court documents, the company and Weiss admitted that the industry’s self-regulator provided Weiss with a “subset” of arbitrators in which at least three were removed from the list provided to claimants. Edward wrote that “[p]ermitting one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum.”

On Tuesday, a Georgia appeals court reversed Edwards’ decision, ruling that Finra complied with the arbitration forum rules and that it was within the watchdog’s director’s rights to grant Wells Fargo’s request to remove arbitrators, Barron’s writes.

“Given the text of the [Finra] rule, we cannot find that he exceeded his authority in making that determination,” the appeals court wrote, according to the publication.

Moreover, the appeals court ruled that even if the alleged agreement between Wells and Finra’s arbitration forum existed, Leggett had not “shown that it impacted this arbitration,” according to Barron’s.

A Wells Fargo spokeswoman said the company was happy with the outcome, according to the publication.

“We are pleased with today’s [appeals] court ruling which overturned the court’s erroneous judgment and found in our favor,” the spokeswoman said in a statement. “We were always confident in the merits of our appeal and are pleased that the Georgia Court of Appeals completely validated our position,” the company told Barron’s in a statement.

As a result of the appeal court’s decision, Legget must now cover $83,000 in Well Fargo’s legal fees and arbitration costs that he was ordered to pay in the 2019 award, the publication writes.

Craig Kuglar, a lawyer for Leggett, didn’t respond to Barron’s request for comment.

Weiss referred comment about the appeal to Wells Fargo, according to the publication.

Edwards' ruling made headlines and attracted criticism from the Public Investors Advocate Bar Association, which called for an investigation of the arbitration process, as well as from Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., who in February requested information from Finra about the arbitrator selection in the claim.

Finra initially denied allegations of corruption but in February hired the law firm Lowenstein Sandler to investigate whether its arbitration forum complied with its own rules and policies on arbitrator selection in the Wells Fargo case.

In June, the law firm said that it found no evidence of collusion. Lowenstein had examined over 150,000 documents, emails and telephone records, reviewed the watchdog’s arbitrator database system and conducted 29 interviews.

The law firm also recommended several steps to bolster transparency about the arbitrator selection process, including updating the Dispute Resolution Services manual, mandatory training for DRS personnel, making any changes to the manual publicly available, providing written explanations for denying or approving “causal challenges” and more.

At the time, Finra said in a statement that its audit committee accepted the report’s findings and that it “recognized that there are nonetheless opportunities to improve the policies, procedures and training related to the arbitrator selection process, as the firm recommended.”

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Finra Proposes Remote Inspections Pilot Program

The self-regulator wants to assess the potential of extending remote inspections of all branch offices in light of the temporary change implemented for the Covid-19 pandemic.

August 4, 2022

The Financial Industry Regulatory Authority wants to adopt more changes implemented during the Covid-19 pandemic, with a proposal to study the possibility of remote inspections of all branch offices.

The industry’s self-regulator sent a proposal to the Securities and Exchange Commission last month about implementing a three-year pilot program letting member firms conduct branch inspections without on-site visits.

Finra said that a variety of technological shifts — such as a switch to electronic preservation of records, communications and account opening, as well as remote supervision of staff — have already changed “the practices that formed the original bases for an on-site inspection requirement.”

The watchdog adds that member firms have been questioning on-site inspections in light of the changes as well.

Moreover, the Covid-19 pandemic only “accelerated the use of a wide variety of compliance and workplace technology” as various entities had to adapt to remote working, according to Finra.

In November 2020, Finra temporarily allowed firms to conduct inspections of offices and non-branch locations remotely and last year proposed extending the practice.

“With the confluence of advances in compliance technology and the permanent shift to a remote or hybrid work environment, made more pronounced by the pandemic, FINRA believes that the optimal use of on-site inspections deserves further consideration,” the industry’s self-regulator said in its proposal.

“This program would provide FINRA with specific, structured data from member firm pilot participants to evaluate their experiences — positive and negative — and inspection findings,” Finra added.

The proposal was first reported by WealthManagement.com.

Last week, Finra also proposed regulating the use of home offices as non-branch locations. The number of homes serving as non-branch locations jumped by 53% to 37,290 at the end of April from 24,369 on Dec. 31, 2019. During the same period, the number of registered branch locations dropped from 152,682 to 151,463.

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New Senate Bill Aims to Give Crypto Oversight to CFTC

Securities and Exchange Commission chair Gary Gensler, meanwhile, has long pushed for the commission to regulate digital assets.

August 4, 2022

A new bipartisan Senate bill aims to give oversight of Bitcoin and other cryptocurrencies to the Commodity Futures Trading Commission rather than the Securities and Exchange Commission, according to news reports.

The latest legislation, being introduced by Senate Agriculture Committee chairwoman Debbie Stabenow, D-Michigan, and top-ranking Republican John Boozman of Arkansas, would give the CFTC the power to regulate spot markets for Bitcoin and Ether, the two largest cryptocurrencies, the Wall Street Journal writes.

Currently, the CFTC is empowered to oversee derivatives rather than the commodities underlying them, according to the publication.

CFTC chairman Rostin Behnam — who previously served on Stabenow’s staff — has been working with the senator “for months” on legislation giving the agency oversight of spot markets for some cryptocurrencies, people familiar with the matter say, according to the Journal.

In June, Sens. Cynthia Lummis, R-Wyo. — who sits on the Senate Banking Committee — and Kirsten Gillibrand, D-N.Y., who’s on the Agriculture Committee, introduced a bill that would put digital assets under the CFTC’s oversight by classifying them as commodities such as oil or steel.

In July, the House Financial Services Committee said it wanted to give the Federal Reserve more power over crypto tokens pegged to the dollar and other official currencies, known as stablecoins, according to the Journal.

SEC chair Gary Gensler, meanwhile, has long pushed for the commission to regulate digital assets.

Last week, Gensler took to Twitter to announce that he had instructed SEC staff “to work directly with the platforms to get them registered and regulated.”

“When there’s a topic as hot as crypto, everybody wants a seat at the table,” said Aaron Klein, a senior fellow at the Brookings Institution who focuses on financial regulation, according to the Journal. “The question is, are we going to have regulatory turf paralysis?”

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FAs Weigh In: Estate Plans Aren’t Just for the Rich

“Best practice occurs when the wealth advisor, trust and estate attorney and accountant collaborate in developing a plan for the client,” according to GYL Financial Synergies’ Gerald Goldberg.

August 4, 2022

FA-IQ reached out to advisors to ask: What are your clients’ top concerns when it comes to estate planning, and what are the challenges or hurdles they need to overcome to make sure everything is in order?

Gerald Goldberg, CEO and co-founder of GYL Financial Synergies. West Hartford, Connecticut-based Goldberg has been in the industry for 26 years and has about $9 billion in client assets.

“Most clients want to protect children and pass on assets in a tax-efficient manner. Everyone needs an estate plan, not just the wealthy. If they don’t direct how their assets should be divided, those decisions will be made in accordance with applicable state law.

Gerald Goldberg

They may not understand how assets are distributed and what is or is not included as part of their estate. Estate planning is not one-size-fits-all and should be designed for the client's and their beneficiaries’ needs and circumstances.

The clients should work with an estate planning attorney and their financial advisor for guidance. Gifts during their lifetime and setting up trusts may be appropriate, but they need to be properly administered.

I would keep in mind the following estate planning considerations:

Work with an attorney that is knowledgeable about estate planning and, especially, the new estate tax laws. Best practice occurs when the wealth advisor, trust and estate attorney and accountant collaborate in developing a plan for the client.
Having up-to-date estate documents including trusts, life insurance, retirement plans, medical and long-term care policy documents.
Make sure that your documents are current for the state in which you reside. Laws vary from state to state, and documents drawn up in another state may or may not accomplish what you want them to if your state of residence has changed.
Make sure planning takes place if you are the beneficiary of someone else’s estate."

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Wells Discloses DOJ Probe Into Diverse Hiring Practices

The firm has also disclosed that it’s facing a fraud class-action lawsuit related to the diverse hiring practices.

August 4, 2022

Wells Fargo has confirmed that it’s under investigation and facing a lawsuit over a “diverse slate” hiring approach that has recently put the company in the spotlight, according to news reports.

The company disclosed in a regulatory filing on Monday that government agencies, including the Department of Justice, are conducting “formal or informal inquiries or investigations” into its hiring practices, Compliance Week writes.

Moreover, Wells Fargo also disclosed that it’s facing a class-action lawsuit that accuses the firm and some of its executives of making “false or misleading statements” about the diverse hiring methods, according to the publication, which cites the complaint filed in June in U.S. District Court for the Northern District of California.

The complaint alleges that Wells Fargo and the executives “[m]isrepresented their commitment to diversity in the workplace,” conducted sham interviews to meet diversity hiring goals, harmed the bank’s reputation and put it under increased risk of regulatory scrutiny, according to Compliance Week.

The investigation and the complaint centers on a “diverse slate” hiring policy, implemented in 2020, requiring that 50% or more of the candidates being interviewed for open positions with a salary of $100,000 or more to be “diverse,” meaning non-white or female.

The policy made headlines in June, when The New York Times cited several current and former Wells Fargo staff claiming that the firm instructed staff to interview Black and female candidates for jobs in the wealth management unit that had already been filled.

The Times also reported that month that Wells was facing a criminal investigation by a newly created civil rights unit inside the criminal division of the Manhattan U.S. attorney’s office.

Following those reports, Wells Fargo suspended the policy.

Wells Fargo chief executive officer Charles Scharf wrote in a memo to staff in June that Wells Fargo would temporarily suspend the policy so that executives have time to analyze and make changes, ensuring that “hiring managers, senior leaders and recruiters fully understand how the guidelines should work.”

On Monday, Wells Fargo said that it reinstated the policy after a six-week review of its hiring practices and interviews with the firm’s recruiters and hiring managers.

“We are recommitting to our diverse candidate slate guidelines with changes that will help clarify and simplify the process and lead to a better experience for all candidates, internal and external. We began this exercise knowing that diverse candidate slates work, and that they are a common, good practice across multiple industries,” Bei Ling, Wells Fargo chief human resources officer, said in the statement.

The firm added that it would implement several changes, however, including redefining which positions fall under the policy based on job level rather than compensation.

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Mariner Adds Bank, Credit Union Clients of $8.6B Practice

The latest acquisition is Bloomfield Hills, Michigan-based Heber Fuger Wendin Investment Advisors.

August 4, 2022

Mariner Wealth Advisors says it has acquired another multibillion-dollar wealth management practice.

The latest addition is Bloomfield Hills, Michigan-based Heber Fuger Wendin Investment Advisors, a firm founded in 1934, according to Mariner.

Led by president and chief executive officer Dave Barnes, HFW now oversees $8.6 billion in assets under management for individuals as well as banks and credit unions, insurance companies, hospitals, foundations and manufacturing companies, Mariner says.

HFW’s services include financial planning for individuals, investment advisory services, asset liability management, third-party reviews of asset liability management models, investment portfolio accounting, mortgage servicing rights valuation and more, according to Mariner.

Mariner didn’t disclose the financial terms of the deal, which closed at the end of last month.

As part of the deal, HFW took on the Mariner Wealth Advisors name and will continue operating with its current staff of 11, according to Mariner.

The addition is Mariner’s fourth office in Michigan and second in Bloomfield Hills, the company says. It also expands Mariner’s offerings to banks and credit unions, which was “a previously untapped clientele” for Mariner, according to the firm.

Founded in 2006, Mariner has been on a buying spree this year, announcing acquisitions of Viewpoint Financial Network, Arbor Wealth Management, Emerson Wealth, Taylor Wealth Management Partners and Corbenic Partners. And just two weeks ago, Mariner announced that it’s acquiring The Financial Services Network, which has more than 400 advisors overseeing $26 billion.

Mariner says that the firm and its affiliates now have more than $60 billion in client assets.

Do you have a news tip you’d like to share with FA-IQ? Email us at editorial@financialadvisoriq.com.

Edelman Picks Up $680M RIA Firm in California

The acquisition extends Edelman Financial Engines' presence in the Northwest.

August 4, 2022

Edelman Financial Engines says it has acquired registered investment advisor firm Smart Investor, which has more than $680 million in client assets.

Roseville, California-based Smart Investor serves both individual clients and small businesses, according to Edelman.

The acquisition, which closed on Monday, extends Edelman’s presence in the Northwest, building upon its 2021 acquisition of Viridian Advisors, an $846 million firm based in Washington.

It also gives Edelman five new employees from Smart Investor, including two planners and three support staff — all of whom will remain in its Roseville headquarters and Woodland, California office, according to a spokesperson.

“In our current backdrop of historic inflation, rapidly rising interest rates and market volatility, the need for high-quality, independent financial planning that is centered on the client’s best interests has never been greater,” Jason Van de Loo, head of wealth planning and marketing at Edelman, said in a statement.

“Together with the Smart Investor team, we can help more individuals and families navigate through these uncertain times and build a strong financial future,” Van de Loo added.

Do you have a news tip you’d like to share with FA-IQ? Email us at editorial@financialadvisoriq.com.

On FinancialTimes.com

LPL is Boosting FAs’ Value Proposition to Clients. Here’s How

Fastest-Growing RIA Firms: Assets, Clients, Locations

Video

What Does Freedom Mean for Advisors?

Wells Wins Appeal of Finra Arbitration Collusion Ruling

Finra Proposes Remote Inspections Pilot Program

New Senate Bill Aims to Give Crypto Oversight to CFTC

FAs Weigh In: Estate Plans Aren’t Just for the Rich

Wells Discloses DOJ Probe Into Diverse Hiring Practices

Mariner Adds Bank, Credit Union Clients of $8.6B Practice

Edelman Picks Up $680M RIA Firm in California

Virginia Pension Fund Invests in Crypto Lending in Bid to Boost Returns